UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-22148
PowerShares Actively Managed Exchange-Traded Fund Trust
(Exact name of registrant as specified in charter)
3500 Lacey Road
Downers Grove, IL 60515
(Address of principal executive offices) (Zip code)
Daniel E. Draper
President
3500 Lacey Road
Downers Grove, IL 60515
(Name and address of agent for service)
Registrant’s telephone number, including area code: 800-983-0903
Date of fiscal year end: October 31
Date of reporting period: April 30, 2017
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Registrant’s semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
| April 30, 2017 |
2017 Semi-Annual Report to Shareholders
| PSR | PowerShares Active U.S. Real Estate Fund | |
| PSMB | PowerShares Balanced Multi-Asset Allocation Portfolio | |
| PSMC | PowerShares Conservative Multi-Asset Allocation Portfolio | |
| PSMG | PowerShares Growth Multi-Asset Allocation Portfolio | |
| PSMM | PowerShares Moderately Conservative Multi-Asset Allocation Portfolio | |
| LALT | PowerShares Multi-Strategy Alternative Portfolio | |
| PHDG | PowerShares S&P 500® Downside Hedged Portfolio | |
| VRIG | PowerShares Variable Rate Investment Grade Portfolio | |
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2 |
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PowerShares Active U.S. Real Estate Fund (PSR)
April 30, 2017
(Unaudited)
Schedule of Investments(a)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
3 |
|
PowerShares Active U.S. Real Estate Fund (PSR) (continued)
April 30, 2017
(Unaudited)
| Number of Shares |
Value | |||||||
| Real Estate Investment Trusts (continued) | ||||||||
| Specialized (continued) | ||||||||
| 5,444 | Iron Mountain, Inc. | $ | 189,234 | |||||
| 4,561 | Lamar Advertising Co., Class A | 328,711 | ||||||
| 2,554 | Life Storage, Inc. | 200,208 | ||||||
| 4,349 | Public Storage | 910,594 | ||||||
| 29,156 | Weyerhaeuser Co. | 987,514 | ||||||
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|||||||
| 7,367,209 | ||||||||
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|||||||
| Total Real Estate Investment Trusts (Cost $25,260,993) |
26,969,870 | |||||||
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|||||||
| Money Market Fund—0.0% | ||||||||
| 4,833 | Invesco Premier U.S. Government Money Portfolio—Institutional Class, 0.65%(b) (Cost $4,833) |
4,833 | ||||||
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|
|||||||
| Total Investments (Cost $25,265,826)—100.0% |
26,974,703 | |||||||
| Other assets less liabilities—(0.0)% | (12,046 | ) | ||||||
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|||||||
| Net Assets—100.0% | $ | 26,962,657 | ||||||
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Investment Abbreviations:
REIT—Real Estate Investment Trust
Notes to Schedule of Investments:
| (a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. |
| (b) | The security and the Fund are advised by wholly-owned subsidiaries of Invesco Ltd. and are therefore considered to be affiliated. The rate shown is the 7-day SEC standardized yield as of April 30, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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4 |
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PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB)
April 30, 2017
(Unaudited)
Schedule of Investments
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
5 |
|
PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC)
April 30, 2017
(Unaudited)
Schedule of Investments
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
6 |
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PowerShares Growth Multi-Asset Allocation Portfolio (PSMG)
April 30, 2017
(Unaudited)
Schedule of Investments
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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7 |
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PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM)
April 30, 2017
(Unaudited)
Schedule of Investments
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
8 |
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PowerShares Multi-Strategy Alternative Portfolio (LALT)
April 30, 2017
(Unaudited)
Schedule of Investments(a)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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9 |
|
PowerShares Multi-Strategy Alternative Portfolio (LALT) (continued)
April 30, 2017
(Unaudited)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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10 |
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PowerShares Multi-Strategy Alternative Portfolio (LALT) (continued)
April 30, 2017
(Unaudited)
| Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
| Counterparty |
Contract to | Notional Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
| Settlement Date | Deliver | Receive | ||||||||||||||||||||
| 05/22/2017 | Morgan Stanley | AUD | 1,191,163 | USD | 897,700 | $ | 890,454 | $ | 7,246 | |||||||||||||
| 05/22/2017 | Morgan Stanley | CHF | 1,486,118 | USD | 1,490,800 | 1,495,137 | (4,337 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | EUR | 115,642 | USD | 123,900 | 126,073 | (2,173 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | GBP | 122,985 | USD | 157,100 | 159,215 | (2,115 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | JPY | 31,523,699 | USD | 290,400 | 283,036 | 7,364 | |||||||||||||||
| 05/22/2017 | Morgan Stanley | USD | 370,600 | CAD | 495,221 | 362,306 | (8,294 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | USD | 728,900 | NOK | 6,208,775 | 724,984 | (3,916 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | USD | 1,161,900 | NZD | 1,656,404 | 1,136,549 | (25,351 | ) | ||||||||||||||
| 05/22/2017 | Morgan Stanley | USD | 698,600 | SEK | 6,268,902 | 708,822 | 10,222 | |||||||||||||||
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|||||||||||||||||||||
| Total Forward Foreign Currency Contracts — Currency Risk | $ | (21,354 | ) | |||||||||||||||||||
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Currency Abbreviations:
| Open Futures Contracts |
||||||||||||||
| Number of Contracts |
Expiration |
Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||
| CBOE Volatility Index (VIX) Futures | 13 | June-2017/Short | $ | (170,625 | ) | $ | 14,099 | |||||||
| CBOE Volatility Index (VIX) Futures | 13 | July-2017/Long | 182,000 | (19,605 | ) | |||||||||
| CBOE Volatility Index (VIX) Futures | 13 | August-2017/Long | 188,175 | (6,011 | ) | |||||||||
| S&P 500 E-Mini Futures | 20 | June-2017/Short | (2,380,500 | ) | (17,791 | ) | ||||||||
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|||||||||||||
| Subtotal — Equity Risk |
$ | (29,308 | ) | |||||||||||
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| Eurodollar Futures | 72 | March-2018/Short | (17,717,400 | ) | (30,144 | ) | ||||||||
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|||||||||||||
| Subtotal — Interest Rate Risk |
$ | (30,144 | ) | |||||||||||
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|||||||||||||
| Total Futures Contracts | $ | (59,452 | ) | |||||||||||
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|||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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11 |
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PowerShares S&P 500® Downside Hedged Portfolio (PHDG)
April 30, 2017
(Unaudited)
Schedule of Investments(a)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
12 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
April 30, 2017
(Unaudited)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
13 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
April 30, 2017
(Unaudited)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
14 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
April 30, 2017
(Unaudited)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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15 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
April 30, 2017
(Unaudited)
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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16 |
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PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
April 30, 2017
(Unaudited)
| Open Futures Contracts |
||||||||||||
| Number of Contracts |
Expiration Date/Commitment |
Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||
| CBOE Volatility Index (VIX) Futures | 87 | May-2017/Long | $ | 1,067,925 | $ | (20,540 | ) | |||||
| CBOE Volatility Index (VIX) Futures | 46 | June-2017/Long | 603,750 | 682 | ||||||||
| CBOE Volatility Index (VIX) Futures | 8 | August-2017/Long | 115,800 | (6,639 | ) | |||||||
| CBOE Volatility Index (VIX) Futures | 12 | September-2017/Long | 183,300 | (9,708 | ) | |||||||
| CBOE Volatility Index (VIX) Futures | 12 | October-2017/Long | 188,400 | (10,078 | ) | |||||||
| CBOE Volatility Index (VIX) Futures | 4 | November-2017/Long | 64,300 | (989 | ) | |||||||
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|
|||||||||||
| Total Futures Contracts — Equity Risk | $ | (47,272 | ) | |||||||||
|
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|
|||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
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17 |
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PowerShares Variable Rate Investment Grade Portfolio (VRIG)
April 30, 2017
(Unaudited)
Schedule of Investments
| Principal Amount |
Interest Rate |
Maturity Date |
Value | |||||||||||||
| Corporate Bonds and Notes—34.8% | ||||||||||||||||
| Auto Manufacturers—3.2% | ||||||||||||||||
| $ | 600,000 | Ford Motor Credit Co. LLC(a) | 1.864 | % | 08/12/2019 | $ | 602,594 | |||||||||
| 1,050,000 | Ford Motor Credit Co. LLC, Series 1(a) | 1.950 | 03/12/2019 | 1,053,138 | ||||||||||||
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|
|||||||||||||||
| 1,655,732 | ||||||||||||||||
|
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|
|||||||||||||||
| Banks—16.3% | ||||||||||||||||
| 2,000,000 | Citigroup, Inc.(a) | 2.485 | 09/01/2023 | 2,050,022 | ||||||||||||
| 1,500,000 | Goldman Sachs Group, Inc. (The)(a) | 2.516 | 04/23/2021 | 1,531,062 | ||||||||||||
| 250,000 | Goldman Sachs Group, Inc. (The), GMTN(a) | 2.922 | 10/28/2027 | 258,005 | ||||||||||||
| 1,500,000 | JPMorgan Chase & Co., Series 1 | 7.900 | 10/30/2165 | 1,571,250 | ||||||||||||
| 1,500,000 | Morgan Stanley, GMTN(a) | 2.556 | 04/21/2021 | 1,537,258 | ||||||||||||
| 500,000 | USB Realty Corp.(a)(b) | 2.305 | 12/31/2049 | 427,813 | ||||||||||||
| 1,000,000 | Wells Fargo & Co., Series K(b) | 7.980 | 03/29/2049 | 1,048,750 | ||||||||||||
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|||||||||||||||
| 8,424,160 | ||||||||||||||||
|
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|
|||||||||||||||
| Healthcare-Services—2.1% | ||||||||||||||||
| 1,000,000 | HCA, Inc. | 6.500 | 02/15/2020 | 1,100,060 | ||||||||||||
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|
|||||||||||||||
| Insurance—3.4% | ||||||||||||||||
| 1,750,000 | Chubb Corp. (The) | 3.408 | 04/15/2037 | 1,730,312 | ||||||||||||
|
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|
|||||||||||||||
| Miscellaneous Manufacturing—3.6% | ||||||||||||||||
| 1,750,000 | General Electric Co., Series D(a) | 5.000 | 06/15/2165 | 1,860,119 | ||||||||||||
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|||||||||||||||
| Oil & Gas—3.0% | ||||||||||||||||
| 1,500,000 | ConocoPhillips Co.(a) | 1.939 | 05/15/2022 | 1,526,057 | ||||||||||||
|
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|
|||||||||||||||
| Telecommunications—3.2% | ||||||||||||||||
| 1,500,000 | Sprint Communications, Inc.(b) | 9.000 | 11/15/2018 | 1,644,375 | ||||||||||||
|
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|
|||||||||||||||
| Total Corporate Bonds and Notes (Cost $17,610,871) |
17,940,815 | |||||||||||||||
|
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|
|||||||||||||||
| U.S. Agency Mortgage Credit Risk Transfer—21.8% | ||||||||||||||||
| Structured Agency Credit Risk (STACR)—21.1%(a)(c) | ||||||||||||||||
| 352,518 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2014-HQ1 | 3.491 | 08/25/2024 | 358,473 | ||||||||||||
| 2,000,000 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2014-HQ2 | 3.191 | 09/25/2024 | 2,063,663 | ||||||||||||
| 275,145 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2014-HQ3 | 3.641 | 10/25/2024 | 277,793 | ||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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18 |
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PowerShares Variable Rate Investment Grade Portfolio (VRIG) (continued)
April 30, 2017
(Unaudited)
| Principal Amount |
Interest Rate |
Maturity Date |
Value | |||||||||||||
| U.S. Agency Mortgage Credit Risk Transfer (continued) | ||||||||||||||||
| Structured Agency Credit Risk (STACR) (continued) | ||||||||||||||||
| $ | 1,350,918 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2015-HQ1 | 3.191 | % | 03/25/2025 | $ | 1,369,698 | |||||||||
| 757,470 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2015-HQA1 | 3.641 | 03/25/2028 | 777,926 | ||||||||||||
| 1,243,000 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2016-DNA1 | 3.891 | 07/25/2028 | 1,296,802 | ||||||||||||
| 1,608,000 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2016-HQA1 | 3.741 | 09/25/2028 | 1,674,271 | ||||||||||||
| 1,000,000 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2016-DNA3 | 2.991 | 12/25/2028 | 1,024,241 | ||||||||||||
| 2,000,000 | Federal Home Loan Mortgage Corp. (FHLMC), Class M2, Series 2016-HQA3 | 2.341 | 03/25/2029 | 2,023,460 | ||||||||||||
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|||||||||||||||
| 10,866,327 | ||||||||||||||||
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|
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| Connecticut Avenue Securities (CAS)—0.7%(a)(d) | ||||||||||||||||
| 351,613 | Federal National Mortgage Association (FNMA), Class 2M1, Series 2016-C01 | 3.091 | 08/25/2028 | 355,987 | ||||||||||||
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| Total U.S. Agency Mortgage Credit Risk Transfer (Cost $11,182,980) |
11,222,314 | |||||||||||||||
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|
|||||||||||||||
| U. S. Government Sponsored Agency Mortgage-Backed Securities—16.7%(a) | ||||||||||||||||
| Collateralized Mortgage Obligations—1.9% | ||||||||||||||||
| 978,950 | Federal Home Loan Mortgage Corp. (FHLMC), STRIPS, Class F4, Series 2014-330 | 1.134 | 10/15/2037 | 976,727 | ||||||||||||
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|
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| Federal Home Loan Mortgage Corp. (FHLMC)—6.0% | ||||||||||||||||
| 1,316,608 | Federal Home Loan Mortgage Corp. (FHLMC) | 3.289 | 06/01/2037 | 1,388,338 | ||||||||||||
| 1,594,928 | Federal Home Loan Mortgage Corp. (FHLMC) | 3.090 | 11/01/2038 | 1,686,223 | ||||||||||||
|
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|
|||||||||||||||
| 3,074,561 | ||||||||||||||||
|
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|
|||||||||||||||
| Federal National Mortgage Corp. (FNMA)—8.8% | ||||||||||||||||
| 317,084 | Federal National Mortgage Association (FNMA) | 3.364 | 02/01/2035 | 318,407 | ||||||||||||
| 289,520 | Federal National Mortgage Association (FNMA) | 2.815 | 07/01/2035 | 301,520 | ||||||||||||
| 2,414,648 | Federal National Mortgage Association (FNMA) | 2.915 | 07/01/2035 | 2,569,086 | ||||||||||||
| 1,302,265 | Federal National Mortgage Association (FNMA) | 3.447 | 03/01/2037 | 1,377,675 | ||||||||||||
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|
|||||||||||||||
| 4,566,688 | ||||||||||||||||
|
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|
|||||||||||||||
| Total U.S. Government Sponsored Agency Mortgage-Backed Securities (Cost $8,640,636) |
8,617,976 | |||||||||||||||
|
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|
|||||||||||||||
| Collateralized Mortgage Obligations—2.2%(a) | ||||||||||||||||
| 669,291 | Adjustable Rate Mortgage Trust 2004-2, Class 6A1, Series 2004-2 | 3.391 | 02/25/2035 | 665,231 | ||||||||||||
| 455,748 | Bear Stearns Adjustable Rate Mortgage Trust 2005-2, Class A2, Series 2005-2 | 3.636 | 03/25/2035 | 459,902 | ||||||||||||
|
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|
|||||||||||||||
| Total Collateralized Mortgage Obligations (Cost $1,131,864) |
1,125 ,133 | |||||||||||||||
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|
|
|||||||||||||||
| Commercial Mortgage-Backed Securities—11.7%(a)(b) | ||||||||||||||||
| 2,000,000 | Commercial 2014-FL5 Mortgage Trust, Class B, Series 2014-FL5 | 3.144 | 10/15/2031 | 1,992,648 | ||||||||||||
| 1,000,000 | Prime Finance Partners 2015-2 Ltd., Class AS, Series 2015-2 (Cayman Islands) | 2.994 | 07/14/2034 | 999,415 | ||||||||||||
| 1,500,000 | Wells Fargo — Royal Bank of Scotland Commercial Mortgage Trust 2012-C7, Class AFL, Series 2012-C7 | 2.194 | 06/15/2045 | 1,535,278 | ||||||||||||
| 1,500,000 | Wells Fargo — Royal Bank of Scotland Commercial Mortgage Trust 2012-C8, Class AFL, Series 2012-C8 | 1.994 | 08/15/2045 | 1,517,588 | ||||||||||||
|
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|
|||||||||||||||
| Total Commercial Mortgage-Backed Securities (Cost $5,996,215) |
6,044 ,929 | |||||||||||||||
|
|
|
|||||||||||||||
| U.S. Treasury Securities—9.2%(a) | ||||||||||||||||
| 500,000 | U.S. Treasury Floating Rate Notes | 0.987 | 01/31/2019 | 500,992 | ||||||||||||
| 2,050,000 | U.S. Treasury Floating Rate Notes | 1.037 | 04/30/2018 | 2,053,862 | ||||||||||||
| 2,200,000 | U.S. Treasury Floating Rate Notes | 1.021 | 07/31/2018 | 2,204,919 | ||||||||||||
|
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|
|||||||||||||||
| Total U.S. Treasury Securities (Cost $4,752,253) |
4,759,773 | |||||||||||||||
|
|
|
|||||||||||||||
| Asset-Backed Securities—3.0%(a) | ||||||||||||||||
| 1,000,000 | Capital One Multi-Asset Execution Trust, Class A2, Series 2016-A2 | 1.624 | 02/15/2024 | 1,013,039 | ||||||||||||
| 550,000 | Ford Credit Floorplan Master Owner Trust A, Class A2, Series 2015-2 | 1.564 | 01/15/2022 | 554,503 | ||||||||||||
|
|
|
|||||||||||||||
| Total Asset-Backed Securities (Cost $1,555,789) |
1,567,542 | |||||||||||||||
|
|
|
|||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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19 |
|
PowerShares Variable Rate Investment Grade Portfolio (VRIG) (continued)
April 30, 2017
(Unaudited)
| Number of Shares |
|
|
Value | |||||||||||||
| Money Market Fund—1.1% | ||||||||||||||||
| 561,651 | Invesco Premier U.S. Government Money Portfolio—Institutional Class, 0.65%(e) (Cost $561,651) |
$ | 561,651 | |||||||||||||
|
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|
|||||||||||||||
| Total Investments (Cost $51,432,259)—100.5% |
51,840,133 | |||||||||||||||
| Other assets less liabilities—(0.5)% | (246,235 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Net Assets—100.0% | $ | 51,593,898 | ||||||||||||||
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|
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Investment Abbreviations:
GMTN—Global Medium-Term Note
STRIPS—Separately Traded Registered Interest and Principal Securities
Notes to Schedule of Investments:
| (a) | Interest or dividend rate is predetermined periodically. Rate shown is the rate was in effect at April 30, 2017. |
| (b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at April 30, 2017 was $9,165,867, which represented 17.77% of the Fund’s Net Assets. |
| (c) | Principal payments are determined by the delinquency and principal payment experience on the STACR® reference pool. Freddie Mac transfers credit risk from the mortgages in the reference pool to credit investors who invest in the STACR® debt notes. |
| (d) | CAS notes are bonds issued by Fannie Mae. The amount of periodic principal and ultimate principal paid by Fannie Mae is determined by the performance of a large and diverse reference pool. |
| (e) | The security and the Fund are advised by wholly-owned subsidiaries of Invesco Ltd. and are therefore considered to be affiliated. The rate shown is the 7-day SEC standardized yield as of April 30, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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20 |
|
(This Page Intentionally Left Blank)
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21 |
|
Statements of Assets and Liabilities
April 30, 2017
(Unaudited)
| PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB) |
PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC) |
PowerShares Growth Multi-Asset Allocation Portfolio (PSMG) |
|||||||||||||
| Assets: | ||||||||||||||||
| Unaffiliated investments, at value(a) |
$ | 26,969,870 | $ | — | $ | 125,480 | $ | — | ||||||||
| Affiliated investments, at value |
4,833 | 1,266,033 | 1,137,639 | 1,267,548 | ||||||||||||
|
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|
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|
|
|
|
|||||||||
| Total investments, at value |
26,974,703 | 1,266,033 | 1,263,119 | 1,267,548 | ||||||||||||
| Cash |
— | — | — | — | ||||||||||||
| Cash collateral for futures contracts |
— | — | — | — | ||||||||||||
| Receivables: |
||||||||||||||||
| Dividends and interest |
5,925 | — | — | — | ||||||||||||
| Investments sold |
— | — | — | — | ||||||||||||
| Unrealized appreciation on forward foreign currency contracts outstanding |
— | — | — | — | ||||||||||||
| Unrealized appreciation on futures contracts |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Assets |
26,980,628 | 1,266,033 | 1,263,119 | 1,267,548 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: | ||||||||||||||||
| Due to custodian |
— | 11 | 8 | 6 | ||||||||||||
| Payables: |
||||||||||||||||
| Investments purchased |
— | — | — | — | ||||||||||||
| Unrealized depreciation on forward foreign currency contracts outstanding |
— | — | — | — | ||||||||||||
| Unrealized depreciation on futures contracts |
— | — | — | — | ||||||||||||
| Accrued unitary management fees |
17,971 | 52 | 52 | 52 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Liabilities |
17,971 | 63 | 60 | 58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets | $ | 26,962,657 | $ | 1,265,970 | $ | 1,263,059 | $ | 1,267,490 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets Consist of: | ||||||||||||||||
| Shares of beneficial interest |
$ | 26,177,065 | $ | 1,250,013 | $ | 1,250,013 | $ | 1,250,013 | ||||||||
| Undistributed net investment income (loss) |
(247,840 | ) | 3,112 | 4,740 | 2,168 | |||||||||||
| Undistributed net realized gain (loss) |
(675,445 | ) | 193 | 102 | 197 | |||||||||||
| Net unrealized appreciation (depreciation) |
1,708,877 | 12,652 | 8,204 | 15,112 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets | $ | 26,962,657 | $ | 1,265,970 | $ | 1,263,059 | $ | 1,267,490 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding (unlimited amount authorized, $0.01 par value) |
350,000 | 100,001 | 100,001 | 100,001 | ||||||||||||
| Net asset value |
$ | 77.04 | $ | 12.66 | $ | 12.63 | $ | 12.67 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Market price |
$ | 76.94 | $ | 12.67 | $ | 12.64 | $ | 12.69 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Unaffiliated investments, at cost |
$ | 25,260,993 | $ | 1,253,381 | $ | 125,304 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Affiliated investments, at cost |
$ | 4,833 | $ | — | $ | 1,129,611 | $ | 1,252,436 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total investments, at cost |
$ | 25,265,826 | $ | 1,253,381 | $ | 1,254,915 | $ | 1,252,436 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
22 |
|
| PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM) |
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
PowerShares Variable Rate Investment Grade Portfolio (VRIG) |
|||||||||||
| $ | 62,616 | $ | 2,366,740 | $ | 87,005,659 | $ | 51,278,482 | |||||||
| 1,203,127 | 3,981,650 | 5,364,358 | 561,651 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 1,265,743 | 6,348,390 | 92,370,017 | 51,840,133 | |||||||||||
| — | 71,220 | 4,043 | — | |||||||||||
| — | 294,264 | 3,595,072 | — | |||||||||||
| — | 3,273 | 86,143 | 258,002 | |||||||||||
| — | — | — | 135,160 | |||||||||||
| — |
|
24,832 |
|
— | — | |||||||||
| — | 14,099 | 682 | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 1,265,743 | 6,756,078 | 96,055,957 | 52,233,295 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| — | — | — | 125,768 | |||||||||||
| — | — | 6,686,520 | 501,071 | |||||||||||
| — |
|
46,186 |
|
— | — | |||||||||
| — | 73,551 | 47,954 | — | |||||||||||
| 51 | 4,772 | 28,469 | 12,558 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 51 | 124,509 | 6,762,943 | 639,397 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 1,265,692 | $ | 6,631,569 | $ | 89,293,014 | $ | 51,593,898 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 1,250,013 | $ | 7,956,893 | $ | 169,807,006 | $ | 51,250,755 | |||||||
| 3,988 | (9,313 | ) | 103,443 | (2,855 | ) | |||||||||
| 164 | (1,291,059 | ) | (90,649,376 | ) | (61,876 | ) | ||||||||
| 11,527 | (24,952 | ) | 10,031,941 | 407,874 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 1,265,692 | $ | 6,631,569 | $ | 89,293,014 | $ | 51,593,898 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
100,001 |
|
300,000 | 3,550,000 | 2,050,001 | |||||||||
| $ | 12.66 | $ | 22.11 | $ | 25.15 | $ | 25.17 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 12.67 | $ | 22.21 | $ | 25.18 | $ | 25.23 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 62,528 | $ | 2,310,886 | $ | 76,926,259 | $ | 50,870,608 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 1,191,688 | $ | 3,981,650 | $ | 5,364,545 | $ | 561,651 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ | 1,254,216 | $ | 6,292,536 | $ | 82,290,804 | $ | 51,432,259 | |||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
23 |
|
For the six months ended April 30, 2017
(Unaudited)
| PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB)(a) |
PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC)(a) |
PowerShares Growth Multi-Asset Allocation Portfolio (PSMG)(a) |
|||||||||||||
| Investment Income: | ||||||||||||||||
| Unaffiliated dividend income |
$ | 231,950 | $ | — | $ | — | $ | — | ||||||||
| Affiliated dividend income |
71 | 3,227 | 4,855 | 2,283 | ||||||||||||
| Unaffiliated interest income |
— | — | — | — | ||||||||||||
| Foreign withholding tax |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Income |
232,021 | 3,227 | 4,855 | 2,283 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: | ||||||||||||||||
| Unitary management fees |
104,966 | 115 | 115 | 115 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less: Waivers |
(40 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Expenses |
104,926 | 115 | 115 | 115 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Investment Income (Loss) |
127,095 | 3,112 | 4,740 | 2,168 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Realized and Unrealized Gain (Loss): | ||||||||||||||||
| Net realized gain (loss) from: |
||||||||||||||||
| Investment securities |
(20,187 | ) | 193 | 102 | 197 | |||||||||||
| In-kind redemptions |
— | — | — | — | ||||||||||||
| Forward foreign currency contracts |
— | — | — | — | ||||||||||||
| Futures contracts |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net realized gain (loss) |
(20,187 | ) | 193 | 102 | 197 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Change in net unrealized appreciation (depreciation) on: |
||||||||||||||||
| Investment securities |
996,717 | 12,652 | 8,204 | 15,112 | ||||||||||||
| Forward foreign currency contracts |
— | — | — | — | ||||||||||||
| Futures contracts |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net change in unrealized appreciation (depreciation) |
996,717 | 12,652 | 8,204 | 15,112 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net realized and unrealized gain (loss) |
976,530 | 12,845 | 8,306 | 15,309 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 1,103,625 | $ | 15,957 | $ | 13,046 | $ | 17,477 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | For the period February 21, 2017 (commencement of investment operations) through April 30, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
24 |
|
| PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM)(a) |
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
PowerShares Variable Rate Investment Grade Portfolio (VRIG) |
|||||||||||
| $ | — | $ | 18,682 | $ | 853,767 | $ | — | |||||||
| 4,103 | 247 | 3,590 | 542 | |||||||||||
| — | 8,880 | — | 655,473 | |||||||||||
| — | (104 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 4,103 | 27,705 | 857,357 | 656,015 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 115 | 32,057 | 179,074 | 74,754 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| — | (2,623 | ) | (1,063 | ) | (222 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 115 | 29,434 | 178,011 | 74,532 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 3,988 | (1,729 | ) | 679,346 | 581,483 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 164 | 94,676 | (392,135 | ) | (48,984 | ) | |||||||||
| — | — | 2,003,941 | — | |||||||||||
| — | 2,807 | — | — | |||||||||||
| — | (268,157 | ) | (3,144,225 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 164 | (170,674 | ) | (1,532,419 | ) | (48,984 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 11,527 | 129,673 | 8,642,230 | 428,513 | |||||||||||
| — | (25,647 | ) | — | — | ||||||||||
| — | (119,064 | ) | (105,548 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 11,527 | (15,038 | ) | 8,536,682 | 428,513 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| 11,691 | (185,712 | ) | 7,004,263 | 379,529 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||
| $ |
15,679 |
|
$ | (187,441 | ) | $ | 7,683,609 | $ | 961,012 | |||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
25 |
|
Statements of Changes in Net Assets
For the six months ended April 30, 2017 and the year ended October 31, 2016
(Unaudited)
| PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB) |
PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC) |
||||||||||||||
| April 30, 2017 | October 31, 2016 | April 30, 2017(a) | April 30, 2017(a) | |||||||||||||
| Operations: | ||||||||||||||||
| Net investment income (loss) |
$ | 127,095 | $ | 820,817 | $ | 3,112 | $ | 4,740 | ||||||||
| Net realized gain (loss) |
(20,187 | ) | 1,035,636 | 193 | 102 | |||||||||||
| Net change in unrealized appreciation (depreciation) |
996,717 | (1,983,830 | ) | 12,652 | 8,204 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
1,103,625 | (127,377 | ) | 15,957 | 13,046 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions to Shareholders from: | ||||||||||||||||
| Net investment income |
(590,499 | ) | (967,706 | ) | — | — | ||||||||||
| Net realized gains |
— | (621,532 | ) | — | — | |||||||||||
| Return of capital |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(590,499 | ) | (1,589,238 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shareholder Transactions: | ||||||||||||||||
| Proceeds from shares sold |
— | — | 1,250,013 | 1,250,013 | ||||||||||||
| Value of shares repurchased |
— | (26,902,972 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from shares transactions |
— | (26,902,972 | ) | 1,250,013 | 1,250,013 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Increase (Decrease) in Net Assets |
513,126 | (28,619,587 | ) | 1,265,970 | 1,263,059 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets: | ||||||||||||||||
| Beginning of period |
26,449,531 | 55,069,118 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 26,962,657 | $ | 26,449,531 | $ | 1,265,970 | $ | 1,263,059 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income (loss) at end of period |
$ | (247,840 | ) | $ | 215,564 | $ | 3,112 | $ | 4,740 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Changes in Shares Outstanding: | ||||||||||||||||
| Shares sold |
— | — | 100,001 | 100,001 | ||||||||||||
| Shares repurchased |
— | (400,000 | ) | — | — | |||||||||||
| Shares outstanding, beginning of period |
350,000 | 750,000 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding, end of period |
350,000 | 350,000 | 100,001 | 100,001 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | For the period February 21, 2017 (commencement of investment operations) through April 30, 2017. |
| (b) | For the period September 20, 2016 (commencement of investment operations) through October 31, 2016. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
26 |
|
| PowerShares Growth Multi-Asset Allocation Portfolio (PSMG) |
PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM) |
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
PowerShares Variable Rate Investment Grade Portfolio (VRIG) |
||||||||||||||||||||||||||
| April 30, 2017(a) | April 30, 2017(a) | April 30, 2017 | October 31, 2016 | April 30, 2017 | October 31, 2016 | April 30, 2017 | October 31, 2016(b) | |||||||||||||||||||||||
| $ | 2,168 | $ | 3,988 | $ | (1,729 | ) | $ | 15,431 | $ | 679,346 | $ | 3,775,167 | $ | 581,483 | $ | 109,554 | ||||||||||||||
| 197 | 164 | (170,674 | ) | (815,582 | ) | (1,532,419 | ) | 14,514,678 | (48,984 | ) | (12,892 | ) | ||||||||||||||||||
| 15,112 | 11,527 | (15,038 | ) | 880,424 | 8,536,682 | (23,182,958 | ) | 428,513 | (20,639 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| |
17,477 |
15,679 | (187,441 | ) | 80,273 | 7,683,609 | (4,893,113 | ) | 961,012 | 76,023 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | — | (103,497 | ) | — | (1,097,280 | ) | (4,842,506 | ) | (584,338 | ) | (109,554 | ) | ||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| — | — | — | — | — | — | — | (86 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | — | (103,497 | ) | — | (1,097,280 | ) | (4,842,506 | ) | (584,338 | ) | (109,640 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1,250,013 | 1,250,013 | — | — | — | 24,288,532 | 1,261,284 | 49,989,557 | |||||||||||||||||||||||
| — | — | — | (9,008,881 | ) | (23,866,986 | ) | (324,960,014 | ) | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| |
1,250,013 |
1,250,013 | — | (9,008,881 | ) | (23,866,986 | ) | (300,671,482 | ) | 1,261,284 | 49,989,557 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1,267,490 | 1,265,692 | (290,938 | ) | (8,928,608 | ) | (17,280,657 | ) | (310,407,101 | ) | 1,637,958 | 49,955,940 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | — | 6,922,507 | 15,851,115 | 106,573,671 | 416,980,772 | 49,955,940 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | 1,267,490 | $ | 1,265,692 | $ | 6,631,569 | $ | 6,922,507 | $ | 89,293,014 | $ | 106,573,671 | $ | 51,593,898 | $ | 49,955,940 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | 2,168 | $ | 3,988 | $ | (9,313 | ) | $ | 95,913 | $ | 103,443 | $ | 521,377 | $ | (2,855 | ) | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 100,001 | 100,001 | — | — | — | 1,000,000 | 50,000 | 2,000,001 | |||||||||||||||||||||||
| — | — | — | (400,000 | ) | (1,000,000 | ) | (13,200,000 | ) | — | — | ||||||||||||||||||||
| — | — | 300,000 | 700,000 | 4,550,000 | 16,750,000 | 2,000,001 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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| 100,001 | 100,001 | 300,000 | 300,000 | 3,550,000 | 4,550,000 | 2,050,001 | 2,000,001 | |||||||||||||||||||||||
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27 |
|
PowerShares Active U.S. Real Estate Fund (PSR)
| Six Months Ended April 30, 2017 (Unaudited) |
Year Ended October 31, | |||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||
| Per Share Operating Performance: | ||||||||||||||||||||||||
| Net asset value at beginning of period |
$ | 75.57 | $ | 73.43 | $ | 70.66 | $ | 60.33 | $ | 55.99 | $ | 50.32 | ||||||||||||
| Net investment income(a) |
0.36 | 1.73 | 1.51 | 0.92 | 0.93 | 0.77 | ||||||||||||||||||
| Net realized and unrealized gain on investments |
2.80 | 3.04 | 2.51 | 10.33 | 4.20 | 5.82 | ||||||||||||||||||
| Total from investment operations |
3.16 | 4.77 | 4.02 | 11.25 | 5.13 | 6.59 | ||||||||||||||||||
| Distributions to shareholders from: |
||||||||||||||||||||||||
| Net investment income |
(1.69 | ) | (1.80 | ) | (1.25 | ) | (0.92 | ) | (0.79 | ) | (0.84 | ) | ||||||||||||
| Net realized gains |
— | (0.83 | ) | — | — | — | (0.08 | ) | ||||||||||||||||
| Total distributions |
(1.69 | ) | (2.63 | ) | (1.25 | ) | (0.92 | ) | (0.79 | ) | (0.92 | ) | ||||||||||||
| Net asset value at end of period |
$ | 77.04 | $ | 75.57 | $ | 73.43 | $ | 70.66 | $ | 60.33 | $ | 55.99 | ||||||||||||
| Market price at end of period(b) |
$ | 76.94 | $ | 75.55 | $ | 73.49 | $ | 70.63 | $ | 60.35 | $ | 55.94 | ||||||||||||
| Net Asset Value Total Return(c) | 4.27 | % | 6.65 | % | 5.72 | % | 18.95 | % | 9.23 | % | 13.22 | % | ||||||||||||
| Market Price Total Return(c) | 4.16 | % | 6.53 | % | 5.85 | % | 18.86 | % | 9.37 | % | 13.03 | % | ||||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||||||
| Net assets at end of period (000’s omitted) |
$ | 26,963 | $ | 26,450 | $ | 55,069 | $ | 42,396 | $ | 33,180 | $ | 22,394 | ||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||||||
| Expenses, after Waivers |
0.80 | %(d) | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||||
| Expenses, prior to Waivers |
0.80 | %(d) | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||||
| Net investment income |
0.97 | %(d) | 2.34 | % | 2.09 | % | 1.46 | % | 1.56 | % | 1.42 | % | ||||||||||||
| Portfolio turnover rate(e) |
78 | % | 192 | % | 199 | % | 169 | % | 131 | % | 33 | % | ||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | The mean between the last bid and ask price. |
| (c) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (d) | Annualized. |
| (e) | Portfolio turnover rate is not annualized for periods less than one year, if applicable, and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
28 |
|
Financial Highlights (continued)
PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB)
| For the Period February 21, 2017(a) Through April 30, 2017 (Unaudited) |
||||
| Per Share Operating Performance: | ||||
| Net asset value at beginning of period |
$ | 12.50 | ||
| Net investment income(b) |
0.03 | |||
| Net realized and unrealized gain on investments |
0.13 | |||
| Total from investment operations |
0.16 | |||
| Net asset value at end of period |
$ | 12.66 | ||
| Market price at end of period(c) |
$ | 12.67 | ||
| Net Asset Value Total Return(d) | 1.28 | %(e) | ||
| Market Price Total Return(d) | 1.36 | %(e) | ||
| Ratios/Supplemental Data: | ||||
| Net assets at end of period (000’s omitted) |
$ | 1,266 | ||
| Ratio to average net assets of: |
||||
| Expenses(f) |
0.05 | %(g) | ||
| Net investment income |
1.32 | %(g) | ||
| Portfolio turnover rate(h) |
2 | % | ||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask prices. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (February 23, 2017, the first day of trading on the Exchange) to April 30, 2017 was 1.44%. The market price total return from Fund Inception to April 30, 2017 was 1.36%. |
| (f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
29 |
|
Financial Highlights (continued)
PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC)
| For the Period February 21, 2017(a) Through April 30, 2017 (Unaudited) |
||||
| Per Share Operating Performance: | ||||
| Net asset value at beginning of period |
$ | 12.50 | ||
| Net investment income(b) |
0.05 | |||
| Net realized and unrealized gain on investments |
0.08 | |||
| Total from investment operations |
0.13 | |||
| Net asset value at end of period |
$ | 12.63 | ||
| Market price at end of period(c) |
$ | 12.64 | ||
| Net Asset Value Total Return(d) | 1.04 | %(e) | ||
| Market Price Total Return(d) | 1.12 | %(e) | ||
| Ratios/Supplemental Data: | ||||
| Net assets at end of period (000’s omitted) |
$ | 1,263 | ||
| Ratio to average net assets of: |
||||
| Expenses(f) |
0.05 | %(g) | ||
| Net investment income |
2.00 | %(g) | ||
| Portfolio turnover rate(h) |
1 | % | ||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask prices. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (February 23, 2017, the first day of trading on the Exchange) to April 30, 2017 was 1.12%. The market price total return from Fund Inception to April 30, 2017 was 1.04%. |
| (f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
30 |
|
Financial Highlights (continued)
PowerShares Growth Multi-Asset Allocation Portfolio (PSMG)
| For the Period February 21, 2017(a) Through April 30, 2017 (Unaudited) |
||||
| Per Share Operating Performance: | ||||
| Net asset value at beginning of period |
$ | 12.50 | ||
| Net investment income(b) |
0.02 | |||
| Net realized and unrealized gain on investments |
0.15 | |||
| Total from investment operations |
0.17 | |||
| Net asset value at end of period |
$ | 12.67 | ||
| Market price at end of period(c) |
$ | 12.69 | ||
| Net Asset Value Total Return(d) | 1.36 | %(e) | ||
| Market Price Total Return(d) | 1.52 | %(e) | ||
| Ratios/Supplemental data: | ||||
| Net assets at end of period (000’s omitted) |
$ | 1,267 | ||
| Ratio to average net assets of: |
||||
| Expenses(f) |
0.05 | %(g) | ||
| Net investment income |
0.92 | %(g) | ||
| Portfolio turnover rate(h) |
2 | % | ||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask prices. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (February 23, 2017, the first day of trading on the Exchange) to April 30, 2017 was 1.52%. The market price total return from Fund Inception to April 30, 2017 was 1.60%. |
| (f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
31 |
|
Financial Highlights (continued)
PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM)
| For the Period February 21, 2017(a) Through April 30, 2017 (Unaudited) |
||||
| Per Share Operating Performance: | ||||
| Net asset value at beginning of period |
$ | 12.50 | ||
| Net investment income(b) |
0.04 | |||
| Net realized and unrealized gain on investments |
0.12 | |||
| Total from investment operations |
0.16 | |||
| Net asset value at end of period |
$ | 12.66 | ||
| Market price at end of period(c) |
$ | 12.67 | ||
| Net Asset Value Total Return(d) | 1.28 | %(e) | ||
| Market Price Total Return(d) | 1.36 | %(e) | ||
| Ratios/Supplemental Data: | ||||
| Net assets at end of period (000’s omitted) |
$ | 1,266 | ||
| Ratio to average net assets of: |
||||
| Expenses(f) |
0.05 | %(g) | ||
| Net investment income |
1.68 | %(g) | ||
| Portfolio turnover rate(h) |
2 | % | ||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask prices. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (February 23, 2017, the first day of trading on the Exchange) to April 30, 2017 was 1.36%. The market price total return from Fund Inception to April 30, 2017 was 1.28%. |
| (f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
32 |
|
Financial Highlights (continued)
PowerShares Multi-Strategy Alternative Portfolio (LALT)
| Six Months Ended April 30, 2017 (Unaudited) |
Year Ended October 31, | For the Period May 27, 2014(a) Through October 31, 2014 |
||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Per Share Operating Performance: | ||||||||||||||||
| Net asset value at beginning of period |
$ | 23.08 | $ | 22.59 | $ | 24.60 | $ | 25.00 | ||||||||
| Net investment income (loss)(b) |
(0.01 | ) | 0.03 | (0.04 | ) | 0.01 | ||||||||||
| Net realized and unrealized gain (loss) on investments |
(0.62 | ) | 0.46 | (1.97 | ) | (0.41 | ) | |||||||||
| Total from investment operations |
(0.63 | ) | 0.49 | (2.01 | ) | (0.40 | ) | |||||||||
| Distributions to shareholders from: |
||||||||||||||||
| Net investment income |
(0.34 | ) | — | — | — | |||||||||||
| Net asset value at end of period |
$ | 22.11 | $ | 23.08 | $ | 22.59 | $ | 24.60 | ||||||||
| Market price at end of period(c) |
$ | 22.21 | $ | 23.05 | $ | 22.60 | $ | 24.55 | ||||||||
| Net Asset Value Total Return(d) | (2.75 | )% | 2.17 | % | (8.17 | )% | (1.60 | )%(e) | ||||||||
| Market Price Total Return(d) | (2.18 | )% | 1.99 | % | (7.94 | )% | (1.80 | )%(e) | ||||||||
| Ratios/Supplemental Data: | ||||||||||||||||
| Net assets at end of period (000’s omitted) |
$ | 6,632 | $ | 6,923 | $ | 15,812 | $ | 22,140 | ||||||||
| Ratio to average net assets of: |
||||||||||||||||
| Expenses, after Waivers(f) |
0.87 | %(g) | 0.89 | % | 0.93 | % | 0.90 | %(g) | ||||||||
| Expenses, prior to Waivers(f) |
0.95 | %(g) | 0.95 | % | 0.95 | % | 0.95 | %(g) | ||||||||
| Net investment income (loss), after Waivers |
(0.05 | )%(g) | 0.14 | % | (0.15 | )% | 0.08 | %(g) | ||||||||
| Portfolio turnover rate(h) |
89 | % | 163 | % | 154 | % | 63 | % | ||||||||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask price. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (May 29, 2014, the first day of trading on the exchange) to October 31, 2014 was (1.64)%. The market price total return from Fund Inception to October 31, 2014 was (1.92)%. |
| (f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized for periods less than one year, if applicable, and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
33 |
|
Financial Highlights (continued)
PowerShares S&P 500® Downside Hedged Portfolio (PHDG)
| Six Months Ended April 30, 2017 (Unaudited) |
Year Ended October 31, | For the
Period December 4, 2012(a) Through October 31, 2013 |
||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||
| Per Share Operating Performance: | ||||||||||||||||||||
| Net asset value at beginning of period |
$ | 23.42 | $ | 24.89 | $ | 29.50 | $ | 27.15 | $ | 25.00 | ||||||||||
| Net investment income(b) |
0.18 | 0.37 | 0.33 | 0.33 | 0.33 | |||||||||||||||
| Net realized and unrealized gain (loss) on investments |
1.82 | (1.37 | ) | (3.39 | ) | 2.49 | 2.04 | |||||||||||||
| Total from investment operations |
2.00 | (1.00 | ) | (3.06 | ) | 2.82 | 2.37 | |||||||||||||
| Distributions to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.27 | ) | (0.47 | ) | (0.32 | ) | (0.47 | ) | (0.22 | ) | ||||||||||
| Net realized gains |
— | — | (1.23 | ) | — | — | ||||||||||||||
| Total distributions |
(0.27 | ) | (0.47 | ) | (1.55 | ) | (0.47 | ) | (0.22 | ) | ||||||||||
| Net asset value at end of period |
$ | 25.15 | $ | 23.42 | $ | 24.89 | $ | 29.50 | $ | 27.15 | ||||||||||
| Market price at end of period(c) |
$ | 25.18 | $ | 23.45 | $ | 24.92 | $ | 29.49 | $ | 27.23 | ||||||||||
| Net Asset Value Total Return(d) | 8.60 | % | (4.10 | )% | (10.83 | )% | 10.50 | % | 9.51 | %(e) | ||||||||||
| Market Price Total Return(d) | 8.59 | % | (4.09 | )% | (10.69 | )% | 10.14 | % | 9.83 | %(e) | ||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Net assets at end of period (000’s omitted) |
$ | 89,293 | $ | 106,574 | $ | 416,981 | $ | 529,465 | $ | 89,582 | ||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Expenses, after Waivers |
0.39 | %(f)(g) | 0.37 | %(g) | 0.35 | %(g) | 0.36 | %(g) | 0.38 | %(f) | ||||||||||
| Expenses, prior to Waivers |
0.39 | %(f)(g) | 0.39 | %(g) | 0.39 | %(g) | 0.39 | %(g) | 0.39 | %(f) | ||||||||||
| Net investment income, after Waivers |
1.48 | %(f) | 1.52 | % | 1.23 | % | 1.16 | % | 1.37 | %(f) | ||||||||||
| Portfolio turnover rate(h) |
35 | % | 373 | % | 478 | % | 58 | % | 99 | % | ||||||||||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | The mean between the last bid and ask price. |
| (d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (e) | The net asset value total return from Fund Inception (December 6, 2012, the first day of trading on the exchange) to October 31, 2013 was 8.99%. The market price total return from Fund Inception to October 31, 2013 was 9.26%. |
| (f) | Annualized. |
| (g) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment companies’ expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Fund invests in. The effect of the estimated investment companies’ expenses that the Fund bears indirectly is included in the Fund’s total return. |
| (h) | Portfolio turnover rate is not annualized for periods less than one year, if applicable, and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
|
34 |
|
Financial Highlights (continued)
PowerShares Variable Rate Investment Grade Portfolio (VRIG)
| Six Months Ended April 30, 2017 (Unaudited) |
For the Period September 20, 2016(a) Through October 31, 2016 |
|||||||
| Per Share Operating Performance: | ||||||||
| Net asset value at beginning of period |
$ | 24.98 | $ | 25.00 | ||||
| Net investment income(b) |
0.29 | 0.06 | ||||||
| Net realized and unrealized gain (loss) on investments |
0.19 | (0.03 | ) | |||||
| Total from investment operations |
0.48 | 0.03 | ||||||
| Distributions to shareholders from: |
||||||||
| Net investment income |
(0.29 | ) | (0.05 | ) | ||||
| Return of capital |
— | (0.00 | )(c) | |||||
| Total distributions |
(0.29 | ) | (0.05 | ) | ||||
| Net asset value at end of period |
$ | 25.17 | $ | 24.98 | ||||
| Market price at end of period(d) |
$ | 25.23 | $ | 25.04 | ||||
| Net Asset Value Total Return(e) | 1.94 | % | 0.14 | %(f) | ||||
| Market Price Total Return(e) | 1.93 | % | 0.38 | %(f) | ||||
| Ratios/Supplemental Data: | ||||||||
| Net assets at end of period (000’s omitted) |
$ | 51,594 | $ | 49,956 | ||||
| Ratio to average net assets of: |
||||||||
| Expenses, after Waivers |
0.30 | %(g) | 0.30 | %(g) | ||||
| Expenses, prior to Waivers |
0.30 | %(g) | 0.30 | %(g) | ||||
| Net investment income, after Waivers |
2.33 | %(g) | 2.03 | %(g) | ||||
| Portfolio turnover rate(h) |
7 | % | 2 | % | ||||
| (a) | Commencement of investment operations. |
| (b) | Based on average shares outstanding. |
| (c) | Amount represents less than $(0.005). |
| (d) | The mean between the last bid and ask price. |
| (e) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
| (f) | The net asset value total return from Fund Inception (September 22, 2016, the first day of trading on the exchange) to October 31, 2016 was 0.18%. The market price total return from Fund Inception to October 31, 2016 was 0.22%. |
| (g) | Annualized. |
| (h) | Portfolio turnover rate is not annualized for periods less than one year, if applicable, and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
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PowerShares Actively Managed Exchange-Traded Fund Trust
April 30, 2017
(Unaudited)
Note 1. Organization
PowerShares Actively Managed Exchange-Traded Fund Trust (the “Trust”) was organized as a Delaware statutory trust on November 6, 2007 and is authorized to have multiple series of portfolios. The Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of April 30, 2017, the Trust offered eight portfolios:
| Full Name |
Short Name | |
| PowerShares Active U.S. Real Estate Fund (PSR) | “Active U.S. Real Estate Fund” | |
| PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB)* | “Balanced Multi-Asset Allocation Portfolio” | |
| PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC)* | “Conservative Multi-Asset Allocation Portfolio” | |
| PowerShares Growth Multi-Asset Allocation Portfolio (PSMG)* | “Growth Multi-Asset Allocation Portfolio” | |
| PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (PSMM)* | “Moderately Conservative Multi-Asset Allocation Portfolio” | |
| PowerShares Multi-Strategy Alternative Portfolio (LALT) | “Multi-Strategy Alternative Portfolio” | |
| PowerShares S&P 500® Downside Hedged Portfolio (PHDG) | “S&P 500® Downside Hedged Portfolio” | |
| PowerShares Variable Rate Investment Grade Portfolio (VRIG) | “Variable Rate Investment Grade Portfolio” |
| * | Commenced operations on February 21, 2017. |
Each portfolio (each, a “Fund”, and collectively, the “Funds”) represents a separate series of the Trust. The shares of the Funds are referred to herein as “Shares” or “Fund’s Shares.” Each Fund’s Shares are listed and traded on the following exchanges:
| Fund |
Exchange | |
| Active U.S. Real Estate Fund | NYSE Arca, Inc. | |
| Balanced Multi-Asset Allocation Portfolio | Bats BZX Exchange, Inc. | |
| Conservative Multi-Asset Allocation Portfolio | Bats BZX Exchange, Inc. | |
| Growth Multi-Asset Allocation Portfolio | Bats BZX Exchange, Inc. | |
| Moderately Conservative Multi-Asset Allocation Portfolio | Bats BZX Exchange, Inc. | |
| Multi-Strategy Alternative Portfolio | The NASDAQ Stock Market LLC | |
| S&P 500® Downside Hedged Portfolio | NYSE Arca, Inc. | |
| Variable Rate Investment Grade Portfolio | The NASDAQ Stock Market LLC |
The market price of each Share may differ to some degree from the Fund’s net asset value (“NAV”). Unlike conventional mutual funds, each Fund issues and redeems Shares on a continuous basis, at NAV, only in a large specified number of Shares, each called a “Creation Unit.” Creation Units for Active U.S. Real Estate Fund, Balanced Multi-Asset Allocation Portfolio, Conservative Multi-Asset Allocation Portfolio, Growth Multi-Asset Allocation Portfolio and Moderately Conservative Multi-Asset Allocation Portfolio are issued and redeemed principally in exchange for the deposit or delivery of a basket of securities (“Deposit Securities”). Creation Units for Multi-Strategy Alternative Portfolio are issued and redeemed principally in exchange for the deposit or delivery of cash. Creation Units for S&P 500® Downside Hedged Portfolio and Variable Rate Investment Grade Portfolio are issued and redeemed partially in exchange for the deposit or delivery of cash and partially in exchange for Deposit Securities. Except when aggregated in Creation Units by Authorized Participants, the Shares are not individually redeemable securities of the Funds.
The investment objective for Active U.S. Real Estate Fund is high total return through growth of capital and current income. The investment objective for Balanced Multi-Asset Allocation Portfolio is to seek to provide current income and capital appreciation. The investment objective for Conservative Multi-Asset Allocation Portfolio is to seek total return consistent with a lower level of risk relative to the broad stock market. The investment objective for Growth Multi-Asset Allocation Portfolio is to seek to provide long-term capital appreciation. The investment objective for Moderately Conservative Multi-Asset Allocation Portfolio is to seek to provide current income and some capital appreciation. The investment objective for Multi-Strategy Alternative Portfolio is to seek a positive total return that has a low correlation to the broader securities markets. The investment objective for S&P 500® Downside Hedged Portfolio is to achieve positive total returns in rising or falling markets that are not directly correlated to broad equity or fixed income market returns. The investment objective for Variable Rate Investment Grade Portfolio is to generate current income while maintaining low portfolio duration as a primary objective and capital appreciation as a secondary objective.
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Note 2. Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Funds in preparation of the financial statements.
Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services—Investment Companies.
A. Security Valuation
Securities, including restricted securities, are valued according to the following policies:
Securities, including restricted securities in a fund that are held as investments (the “Underlying Fund”) of a Fund, are valued in accordance with the Underlying Fund’s valuation policy. The policies of Underlying Funds affiliated with the Funds as a result of having the same investment adviser are the same as those set forth below.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter (“OTC”) market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining NAV per Share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (“NYSE”).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day NAV per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Securities with a demand feature exercisable within one to seven days are valued at par. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities’ (including foreign exchange contracts’) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the London world markets. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that Invesco PowerShares Capital Management LLC (the “Adviser”) determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities’ prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved by the Board of Trustees. Issuer-specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security’s fair value.
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Each Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors, including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. Other Risks
Active Trading Risk. Active trading of portfolio securities may result in added expenses, a lower return and increased tax liability.
Equity Risk. Equity risk is the risk that the value of the securities that each Fund (except Variable Rate Investment Grade Portfolio) holds will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities that a Fund holds participate or factors relating to specific companies in which the Fund invests. For example, an adverse event, such as an unfavorable earnings report, may depress the value of securities a Fund holds; the price of securities may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the securities a Fund holds. In addition, securities of an issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition.
REIT Risk. For Active U.S. Real Estate Fund, although the Fund will not invest in real estate directly, the REITs in which the Fund invests are subject to risks inherent in the direct ownership of real estate. These risks include, but are not limited to, a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages and changes in neighborhood values and appeal to purchasers.
Non-Diversified Fund Risk. Because each Fund (except S&P 500® Downside Hedged Portfolio) is non-diversified and can invest a greater portion of its assets in securities of individual issuers than diversified funds, changes in the market value of a single investment could cause greater fluctuations in Share price than would occur in a diversified fund. This may increase each Fund’s volatility and cause the performance of a relatively small number of issuers to have a greater impact on each Fund’s performance.
Management Risk. The Funds are subject to management risk because they are actively managed portfolios. In managing a Fund’s portfolio securities, the Adviser or a sub-adviser (as applicable and as set forth below), applies investment techniques and risk analyses in making investment decisions, but there can be no guarantee that these will produce the desired results.
Cash Transaction Risk. Unlike most exchange-traded funds (“ETFs”), Multi-Strategy Alternative Portfolio currently effects creations and redemptions principally for cash and S&P 500® Downside Hedged Portfolio and Variable Rate Investment Grade Portfolio currently effect creations and redemptions partially for cash and partially in-kind, rather than primarily in-kind, because of the nature of each of these Funds’ investments. As such, investments in each Fund’s Shares may be less tax efficient than investments in shares of conventional ETFs that utilize an entirely in-kind redemption process.
Portfolio Turnover Risk. A Fund may engage in frequent and active trading of its portfolio securities, resulting in a high portfolio turnover rate. A portfolio turnover rate of 200%, for example, is equivalent to a Fund buying and selling all of its securities two times during the course of a year. A high portfolio turnover rate (such as 100% or more) may increase a Fund’s transaction costs and may generate a greater amount of taxable capital gain distributions to a Fund’s shareholders.
VIX Index Risk. For Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio, the Chicago Board Options Exchange (“CBOE”) can make methodological changes to the calculation of the Chicago Board Options Exchange Volatility Index (“VIX Index”) that could affect the value of the futures contracts on the VIX Index. There can be no assurance that the CBOE will not change the VIX Index calculation methodology in a way that may affect the value of your investment. Additionally, the CBOE may alter, discontinue or suspend calculation or dissemination of the VIX Index and/or the exercise settlement value. Any of these actions could adversely affect the value of each Fund’s Shares.
Tax Risk. Multi-Strategy Alternative Portfolio may purchase and sell interest rate futures, including Eurodollar interest rate futures or Euro Euribor interest rate futures, and VIX Index futures contracts. S&P 500® Downside Hedged Portfolio will gain most of its exposure to the futures markets by entering into VIX Index futures (and, to a lesser extent, S&P 500® Index futures (“S&P 500 Futures”)). To qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), the Funds must meet a qualifying income test each taxable year. The S&P 500® Downside Hedged Portfolio has received a private letter ruling from the Internal Revenue Service (“IRS”) that income it derives from VIX Index futures contracts will constitute qualifying income for purposes of that test. Multi-Strategy Alternative Portfolio received an opinion of its counsel (which is not binding on the IRS or courts) stating that such income should be qualifying for purposes of that test. Failure to comply with the
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qualifying income test in any taxable year would have significant negative tax consequences to shareholders of the Funds. If the IRS were to determine that the income that the Funds derive from futures did not constitute qualifying income, the Funds likely would be required to reduce their exposure to such investments in order to maintain qualification as a RIC, which may result in difficulty in implementing their investment strategies.
Risk of Investing in Investment Companies. Because Multi-Strategy Alternative Portfolio may invest in other investment companies generally and S&P 500® Downside Hedged Portfolio may invest in other ETFs specifically, each Fund’s investment performance may depend on the investment performance of the funds in which it invests. An investment in an investment company is subject to the risks associated with that investment company. Each Fund will pay indirectly a proportional share of the fees and expenses of the investment companies in which it invests (including costs and fees of the investment companies), while continuing to pay its own management fee to the Adviser. As a result, shareholders will absorb duplicate levels of fees with respect to a Fund’s investments in other investment companies.
Commodity Pool Risk. Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio invest in futures contracts, which cause each to be deemed to be a commodity pool, thereby subjecting each Fund to regulation under the Commodity Exchange Act and rules of the Commodity Futures Trading Commission (“CFTC”). The Adviser is registered as a Commodity Pool Operator (“CPO”) and as a commodity trading advisor (“CTA”), and the Funds will be operated in accordance with CFTC rules. Registration as a CPO or CTA subjects the Adviser to additional laws, regulations and enforcement policies, all of which could increase compliance costs and may affect the operations and financial performance of these Funds. Registration as a commodity pool may have negative effects on the ability of each of these Funds to engage in their respective planned investment program.
Agency Debt Risk. Variable Rate Investment Grade Portfolio invests in debt issued by government agencies, including the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Instruments issued by government agencies generally are backed only by the general creditworthiness and reputation of the government agency issuing the instrument and are not backed by the full faith and credit of the U.S. government. As a result, there is uncertainty as to the current status of many obligations of Fannie Mae, Freddie Mac and other agencies that are placed under conservatorship of the federal government.
Call Risk. For Variable Rate Investment Grade Portfolio, call risk (also termed prepayment risk) is the risk that a borrower repays its debts earlier than expected (especially if interest rates decline), resulting in premature repayment of a debt instrument. If interest rates fall, issuers of callable securities with high interest coupons may “call” (or repay) their bonds before their maturity date in accordance with the terms of the security. If such a repayment were to occur, the Fund would receive the principal (par) amount of the security and would no longer own that security. Any reinvestment of the amount of principal received would be subject to reinvestment risk, and the Fund could be forced to reinvest in a lower yielding security, which could reduce the Fund’s net investment income. If the Fund purchases a debt security at a premium to its par value, and that security is called at par, the Fund can lose money.
Credit Risk. The issuer of instruments in which Variable Rate Investment Grade Portfolio invests may be unable to meet interest and/or principal payments. An issuer’s securities may decrease in value if its financial strength weakens, which may reduce its credit rating and possibly its ability to meet its contractual obligations. Even in the case of collateralized debt obligations, there is no assurance that the sale of collateral would raise enough cash to satisfy an issuer’s payment obligations or that the collateral can or will be liquidated.
Fund of Funds Risk. Because Balanced Multi-Asset Allocation Portfolio, Conservative Multi-Asset Allocation Portfolio, Growth Multi-Asset Allocation Portfolio and Moderately Conservative Multi-Asset Allocation Portfolio invest primarily in other funds, each Fund’s investment performance largely depends on the investment performance of those Underlying Funds. An investment in each Fund is subject to the risks associated with the Underlying Funds that comprise each Underlying Index. There is a risk that each index provider’s evaluations and assumptions regarding the asset classes represented by the Underlying Funds in each Underlying Index at any given time may be incorrect based on actual market conditions. In addition, at times, certain of the segments of the market represented by constituent Underlying Funds in each Underlying Index may be out of favor and underperform other segments. Each Fund indirectly pays a proportional share of the expense of the Underlying Funds in which it invests (including operating expenses and management fees), in addition to the fees and expenses it already pays to the Adviser.
Interest Rate Risk. For Variable Rate Investment Grade Portfolio, interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on their individual characteristics, including duration. “Duration risk” is related to interest rate risk; it refers to the risks associated with the sensitivity of a bond’s price to a one percent change in interest rates. Bonds with longer durations (i.e., a greater length of time until they reach maturity) face greater duration risk, meaning that they tend to exhibit greater volatility and are more sensitive to changes in interest rates than bonds with shorter durations. The Fund seeks to limit its exposure to interest rate risk and duration risk by constructing a portfolio of variable rate instruments that have an average duration of one year or less.
Liquidity Risk. Variable Rate Investment Grade Portfolio may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities. The majority of the Fund’s assets are likely to be invested in securities that
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are less liquid than those traded on national exchanges. The risks of illiquidity are particularly important when the Fund’s operations require cash, and may in certain circumstances require that the Fund borrow to meet short-term cash requirements. Illiquid securities are also difficult to value. In the event the Fund voluntarily or involuntarily liquidates portfolio assets during periods of infrequent trading, it may not receive full value for those assets.
Mortgage- and Asset-Backed Securities Risk. Variable Rate Investment Grade Portfolio may invest in mortgage- and asset-backed securities, which are subject to call (prepayment) risk, reinvestment risk and extension risk. In addition, these securities are susceptible to an unexpectedly high rate of defaults on the mortgages held by a mortgage pool, which may adversely affect their value. The risk of such defaults depends on the quality of the mortgages underlying such security, the credit quality of its issuer or guarantor, and the nature and structure of its credit support. For example, the risk of default generally is higher in the case of mortgage pools that include subprime mortgages, which are loans made to borrowers with weakened credit histories or with lower capacity to make timely mortgage payments.
U.S. Government Obligations Risk. For Variable Rate Investment Grade Portfolio, obligations of U.S. Government agencies and authorities generally are not backed by the full faith and credit of the U.S. Government, and no assurance can be given that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so.
C. Federal Income Taxes
Each Fund intends to comply with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute substantially all of the Fund’s taxable earnings to its shareholders. As such, the Funds will not be subject to federal income taxes on otherwise taxable income (including net realized gains) that is distributed to the shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
Each Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed each Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America (“GAAP”). These differences are primarily due to differing book and tax treatments for in-kind transactions, losses deferred due to wash sales, and passive foreign investment company adjustments, if any.
The Funds file U.S. federal tax returns and tax returns in certain other jurisdictions. Generally, a Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
D. Investment Transactions and Investment Income
Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale or disposition of securities are computed on the specific identified cost basis. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. Interest income is recorded on the accrual basis. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Realized gains, dividends and interest received by a Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.
The Funds may periodically participate in litigation related to each Fund’s investments. As such, the Funds may receive proceeds from litigation settlements. Any proceeds received are included in the Statements of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Corporate actions (including cash dividends) are recorded net of non-reclaimable foreign tax withholdings on the ex-date.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statements of Operations and the Statements of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of each Fund’s net asset value and, accordingly, they reduce each Fund’s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statements of Operations and the Statements of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between each Fund and the Adviser.
E. Country Determination
For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the Adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the
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country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer’s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted.
F. Expenses
Each Fund has agreed to pay an annual unitary management fee to the Adviser. Out of the unitary management fee, the Adviser has agreed to pay for substantially all expenses of the Funds, including payments to the Affiliated Sub-Advisers (as defined below) for each Fund (except S&P 500® Downside Hedged Portfolio), and for each Fund, the cost of transfer agency, custody, fund administration, legal, audit and other services, except for advisory fees, distribution fees, if any, brokerage expenses, taxes, interest, acquired fund fees and expenses, if any, litigation expenses and other extraordinary expenses.
Expenses of the Trust that are excluded from a Fund’s unitary management fee and are directly identifiable to a specific Fund are applied to that Fund. Expenses of the Trust that are excluded from each Fund’s unitary management fee and that are not readily identifiable to a specific Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative net assets of each Fund.
To the extent a Fund invests in other investment companies, the expenses shown in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the investment companies in which it invests. The effects of such investment companies’ expenses are included in the realized and unrealized gain or loss on the investments in the investment companies.
G. Dividends and Distributions to Shareholders
Each Fund (except Multi-Strategy Alternative Portfolio and Variable Rate Investment Grade Portfolio) declares and pays dividends from net investment income, if any, to their shareholders quarterly and record such dividends on ex-dividend date. Multi-Strategy Alternative Portfolio declares and pays dividends from net investment income, if any, to its shareholders annually and records such dividends on ex-dividend date. Variable Rate Investment Grade Portfolio declares and pays dividends from net investment income, if any, to its shareholders monthly and records such dividends on ex-dividend date. Generally, each Fund distributes net realized taxable capital gains, if any, annually in cash and records them on ex-dividend date. Such distributions on a tax basis are determined in conformity with federal income tax regulations which may differ from GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in such Fund’s financial statements as a tax return of capital at fiscal year-end.
H. Accounting Estimates
The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including estimates and assumptions related to taxation. Actual results could differ from these estimates. In addition, the Funds monitor for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print.
I. Commercial Mortgage-Backed Securities
Variable Rate Investment Grade Portfolio may invest in both single and multi-issuer Commercial Mortgage-Backed Securities (the “CMBS”). This includes both investment grade and non-investment grade CMBS as well as other non-rated CMBS. A CMBS is a type of mortgage-backed security that is secured by one or more mortgage loans on interests in commercial real estate property. CMBS differ from conventional debt securities because principal is paid back over the life of the security rather than at maturity. Investments in CMBS are subject to the various risks which relate to the pool of underlying assets in which the CMBS represents an interest. Securities backed by commercial real estate assets are subject to securities market risks as well as risks similar to those of direct ownership of commercial real estate loans. Risks include the ability of a borrower to meet its obligations on the loan which could lead to default or foreclosure of the property. Such actions may impact the amount of proceeds ultimately derived from the loan, and the timing of receipt of such proceeds.
Management estimates future expected cash flows at the time of purchase based on the anticipated repayment dates on the CMBS. Subsequent changes in expected cash flow projection may result in a prospective change in the timing or character of income recognized on these securities, or the amortized cost of these securities. The Fund amortizes premiums and/or accretes discounts based on the projected cash flows. Realized and unrealized gains and losses on CMBS are included in the Statement of Operations as Net realized gain (loss) from investment securities and Change in net unrealized appreciation (depreciation) of investment securities, respectively.
J. Foreign Currency Translations
Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Funds do not separately account for
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the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statements of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on each Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period-end, resulting from changes in exchange rates.
The Funds may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which each Fund invests.
K. Forward Foreign Currency Contracts
Multi-Strategy Alternative Portfolio engages in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis at the rate prevailing in the currency exchange market at the time or through forward foreign currency contracts to manage or minimize currency or exchange rate risk.
The Fund also enters into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to “lock in” the U.S. dollar price of that security, or the Fund also enters into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund sets aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (“Counterparties”) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statements of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statements of Assets and Liabilities.
L. Futures Contracts
Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio entered into futures contracts to simulate full investment in securities or manage exposure to equity and market price movements and/or currency risks and provide exposure to markets and indexes.
A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security or index for a specified price at a future date. Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio will only enter into futures contracts that are traded on a U.S. exchange and that are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant broker. During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as a receivable or payable on the Statements of Assets and Liabilities. When the contracts are closed or expire, each Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statements of Operations.
The primary risks associated with futures contracts are market risk, leverage risk and the absence of a liquid secondary market. If a Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and may be required to continue to maintain the margin deposits on the futures contracts until the position expired or matured. As futures contracts approach expiration, they may be replaced by similar contracts that have a later expiration. This process is referred to as “rolling.” If the market for these contracts is in “contango,” meaning that the prices of futures contracts in the nearer months are lower than the price of contracts in the distant months, the sale of the near-term month contract would be at a lower price than the longer-term contract, resulting in a cost to “roll” the futures contract. The actual realization of a potential roll cost will depend on the difference in price of the near and distant contracts. The contracts included in the VIX Index historically have traded in “contango” markets, resulting in a roll cost, which could adversely affect the value of Shares
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of the S&P 500® Downside Hedged Portfolio. Futures have minimal Counterparty risk since the exchange’s clearinghouse, as Counterparty to all exchange-traded futures contracts, guarantees the futures against default. Risks may exceed amounts recognized in the Statements of Assets and Liabilities.
M. Structured Securities
Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio may invest in structured securities. Structured securities are a type of derivative security whose value is determined by reference to changes in the value of underlying securities, currencies, interest rates, commodities, indices or other financial indicators (“reference instruments”). Most structured securities are fixed-income securities that have maturities of three years or less. Structured securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying reference instrument appreciates) and may have return characteristics similar to direct investments in the underlying reference instrument.
Structured securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference instruments. In addition to the credit risk of structured securities and the normal risks of price changes in response to changes in interest rates, the principal amount of structured notes or indexed securities may decrease as a result of changes in the value of the underlying reference instruments. Changes in the daily value of structured securities are recorded as unrealized gains (losses) in the Statements of Operations. When the structured securities mature or are sold, the Fund recognizes a realized gain (loss) on the Statements of Operations.
Note 3. Investment Advisory Agreement and Other Agreements
The Trust has entered into an Investment Advisory Agreement with the Adviser on behalf of each Fund, pursuant to which the Adviser has overall responsibility for the selection and ongoing monitoring of the Funds’ investments, managing the Funds’ business affairs, providing certain clerical, bookkeeping and other administrative services, and for each Fund (except S&P 500® Downside Hedged Portfolio), oversight of Invesco Advisers, Inc., Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the “Affiliated Sub-Advisers”).
As compensation for its services, each Fund has agreed to pay the Adviser an annual unitary management fee. Out of the unitary management fee, the Adviser has agreed to pay for substantially all expenses of the Funds, including payments to the Affiliated Sub-Advisers for each Fund (except S&P 500® Downside Hedged Portfolio), and for each Fund, the cost of transfer agency, custody, fund administration, legal, audit and other services, except for advisory fees, distribution fees, if any, brokerage expenses, taxes, interest, acquired fund fees and expenses, if any, litigation expenses and other extraordinary expenses. The unitary management fee is paid by each Fund to the Adviser at the following annual rates:
| % of Average Daily Net Assets |
||||
| Active U.S. Real Estate Fund | 0.80 | % | ||
| Balanced Multi-Asset Allocation Portfolio | 0.05 | % | ||
| Conservative Multi-Asset Allocation Portfolio | 0.05 | % | ||
| Growth Multi-Asset Allocation Portfolio | 0.05 | % | ||
| Moderately Conservative Multi-Asset Allocation Portfolio | 0.05 | % | ||
| Multi-Strategy Alternative Portfolio | 0.95 | % | ||
| S&P 500® Downside Hedged Portfolio | 0.39 | % | ||
| Variable Rate Investment Grade Portfolio | 0.30 | % | ||
The Adviser has entered into an Investment Sub-Advisory Agreement with the Affiliated Sub-Advisers for each of Active U.S. Real Estate Fund, Balanced Multi-Asset Allocation Portfolio, Conservative Multi-Asset Allocation Portfolio, Growth Multi-Asset Allocation Portfolio, Moderately Conservative Multi-Asset Allocation Portfolio, Multi-Strategy Alternative Portfolio and Variable Rate Investment Grade Portfolio. The sub-advisory fee for these Funds is paid by the Adviser to the Affiliated Sub-Advisers at 40% of the Adviser’s compensation of the sub-advised assets of each Fund.
Further, through August 31, 2019, the Adviser has contractually agreed to waive a portion of each Fund’s management fee in an amount equal to 100% of the net advisory fees an affiliate of the Adviser receives that are attributable to certain of the Fund’s investments in money market funds managed by that affiliate. The Adviser cannot discontinue this waiver prior to its expiration.
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For the six-month period ended April 30, 2017, the Adviser waived fees for each Fund in the following amounts:
| Active U.S. Real Estate Fund | $ | 40 | ||
| Balanced Multi-Asset Allocation Portfolio | — | |||
| Conservative Multi-Asset Allocation Portfolio | — | |||
| Growth Multi-Asset Allocation Portfolio | — | |||
| Moderately Conservative Multi-Asset Allocation Portfolio | — | |||
| Multi-Strategy Alternative Portfolio | 2,623 | |||
| S&P 500® Downside Hedged Portfolio | 1,063 | |||
| Variable Rate Investment Grade Portfolio | 222 |
The Trust has entered into a Distribution Agreement with Invesco Distributors, Inc. (the “Distributor”), which serves as the distributor of Creation Units for each Fund. The Distributor does not maintain a secondary market in the Shares. The Funds are not charged any fees pursuant to the Distribution Agreement. The Distributor is an affiliate of the Adviser.
The Trust has entered into service agreements whereby The Bank of New York Mellon, a wholly-owned subsidiary of The Bank of New York Mellon Corporation, serves as the administrator, custodian, fund accountant and transfer agent for each Fund.
Note 4. Investments in Affiliates
The Adviser also serves as the adviser for each Underlying Fund listed within the tables below, and therefore the following Underlying Funds are considered to be affiliated with the Funds.
The table below shows Balanced Multi-Asset Allocation Portfolio’s transactions in, and earnings from, its investments in affiliates for the period February 21, 2017 (commencement of investment operations) through April 30, 2017.
Balanced Multi-Asset Allocation Portfolio
| Value February 21, 2017 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation (Depreciation) |
Realized Gain (Loss) |
Value April 30, 2017 |
Dividend Income |
||||||||||||||||||||||
| PowerShares 1-30 Laddered Treasury Portfolio | $ | — | $ | 89,113 | $ | (2,890 | ) | $ | 1,148 | $ | 38 | $ | 87,409 | $ | 306 | |||||||||||||
| PowerShares Emerging Markets Sovereign Debt Portfolio | — | 50,549 | (931 | ) | 964 | 6 | 50,588 | 431 | ||||||||||||||||||||
| PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio | — | 102,179 | (1,875 | ) | 2,794 | 16 | 103,114 | 102 | ||||||||||||||||||||
| PowerShares FTSE RAFI Emerging Markets Portfolio | — | 32,502 | (184 | ) | (754 | ) | (1 | ) | 31,563 | 21 | ||||||||||||||||||
| PowerShares FTSE RAFI US 1000 Portfolio | — | 187,151 | (1,555 | ) | (2,295 | ) | (4 | ) | 183,297 | 136 | ||||||||||||||||||
| PowerShares FTSE RAFI US 1500 Small-Mid Portfolio | — | 58,893 | (239 | ) | (794 | ) | (1 | ) | 57,859 | 14 | ||||||||||||||||||
| PowerShares Fundamental High Yield® Corporate Bond Portfolio | — | 63,596 | (622 | ) | 147 | (3 | ) | 63,118 | 455 | |||||||||||||||||||
| PowerShares Fundamental Investment Grade Corporate Bond Portfolio | — | 88,677 | (1,500 | ) | 401 | 4 | 87,582 | 378 | ||||||||||||||||||||
| PowerShares LadderRite 0-5 Year Corporate Bond Portfolio | — | 177,680 | (1,916 | ) | (691 | ) | (10 | ) | 175,063 | 517 | ||||||||||||||||||
| PowerShares Russell Top 200 Pure Growth Portfolio | — | 126,118 | (4,595 | ) | 6,473 | 62 | 128,058 | 98 | ||||||||||||||||||||
| PowerShares S&P 500® Low Volatility Portfolio | — | 122,870 | (3,366 | ) | 1,933 | 44 | 121,481 | 437 | ||||||||||||||||||||
| PowerShares S&P Emerging Markets Low Volatility Portfolio | — | 18,866 | (689 | ) | 616 | 15 | 18,808 | 33 | ||||||||||||||||||||
| PowerShares S&P International Developed Low Volatility Portfolio | — | 62,638 | (1,775 | ) | 2,549 | 29 | 63,441 | 91 | ||||||||||||||||||||
| PowerShares S&P MidCap Low Volatility Portfolio | — | 57,407 | (552 | ) | 178 | (2 | ) | 57,031 | — | |||||||||||||||||||
| PowerShares Senior Loan Portfolio | — | 37,847 | (209 | ) | (17 | ) | — | 37,621 | 208 | |||||||||||||||||||
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| Total Investments in Affiliates | $ | — | $ | 1,276,086 | $ | (22,898 | ) | $ | 12,652 | $ | 193 | $ | 1,266,033 | $ | 3,227 | |||||||||||||
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The table below shows Conservative Multi-Asset Allocation Portfolio’s transactions in, and earnings from, its investments in affiliates for the period February 21, 2017 (commencement of investment operations) through April 30, 2017.
Conservative Multi-Asset Allocation Portfolio
| Value February 21, 2017 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation (Depreciation) |
Realized Gain (Loss) |
Value April 30, 2017 |
Dividend Income |
||||||||||||||||||||||
| PowerShares 1-30 Laddered Treasury Portfolio | $ | — | $ | 63,418 | $ | (1,527 | ) | $ | 821 | $ | 20 | $ | 62,732 | $ | 220 | |||||||||||||
| PowerShares Emerging Markets Sovereign Debt Portfolio | — | 75,508 | (727 | ) | 1,450 | 4 | 76,235 | 648 | ||||||||||||||||||||
| PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio | — | 32,358 | (840 | ) | 878 | 10 | 32,406 | 32 | ||||||||||||||||||||
| PowerShares FTSE RAFI US 1000 Portfolio | — | 91,328 | (1,346 | ) | (1,099 | ) | (5 | ) | 88,878 | 66 | ||||||||||||||||||
| PowerShares Fundamental High Yield® Corporate Bond Portfolio | — | 101,549 | (359 | ) | 228 | (1 | ) | 101,417 | 730 | |||||||||||||||||||
| PowerShares Fundamental Investment Grade Corporate Bond Portfolio | — | 189,253 | (1,652 | ) | 858 | 3 | 188,462 | 813 | ||||||||||||||||||||
| PowerShares LadderRite 0-5 Year Corporate Bond Portfolio | — | 278,313 | (970 | ) | (1,099 | ) | (6 | ) | 276,238 | 815 | ||||||||||||||||||
| PowerShares Preferred Portfolio | — | 75,199 | (770 | ) | 1,318 | 5 | 75,752 | 706 | ||||||||||||||||||||
| PowerShares Russell Top 200 Pure Growth Portfolio | — | 60,395 | (2,448 | ) | 3,081 | 36 | 61,064 | 47 | ||||||||||||||||||||
| PowerShares S&P 500® Low Volatility Portfolio | — | 55,612 | (1,884 | ) | 868 | 29 | 54,625 | 196 | ||||||||||||||||||||
| PowerShares S&P International Developed Low Volatility Portfolio | — | 18,873 | (550 | ) | 767 | 8 | 19,098 | 27 | ||||||||||||||||||||
| PowerShares Senior Loan Portfolio | — | 101,148 | (372 | ) | (43 | ) | (1 | ) | 100,732 | 555 | ||||||||||||||||||
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| Total Investments in Affiliates | $ | — | $ | 1,142,954 | $ | (13,445 | ) | $ | 8,028 | $ | 102 | $ | 1,137,639 | $ | 4,855 | |||||||||||||
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The table below shows Growth Multi-Asset Allocation Portfolio’s transactions in, and earnings from, its investments in affiliates for the period February 21, 2017 (commencement of investment operations) through April 30, 2017.
Growth Multi-Asset Allocation Portfolio
| Value February 21, 2017 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation (Depreciation) |
Realized Gain (Loss) |
Value April 30, 2017 |
Dividend Income |
||||||||||||||||||||||
| PowerShares 1-30 Laddered Treasury Portfolio | $ | — | $ | 51,049 | $ | (1,883 | ) | $ | 651 | $ | 24 | $ | 49,841 | $ | 176 | |||||||||||||
| PowerShares Emerging Markets Sovereign Debt Portfolio | — | 31,667 | (728 | ) | 599 | 5 | 31,543 | 271 | ||||||||||||||||||||
| PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio | — | 145,734 | (1,708 | ) | 4,009 | 8 | 148,043 | 145 | ||||||||||||||||||||
| PowerShares FTSE RAFI Emerging Markets Portfolio | — | 45,422 | (286 | ) | (1,046 | ) | (2 | ) | 44,088 | 29 | ||||||||||||||||||
| PowerShares FTSE RAFI US 1000 Portfolio | — | 237,675 | (1,557 | ) | (2,940 | ) | (3 | ) | 233,175 | 172 | ||||||||||||||||||
| PowerShares FTSE RAFI US 1500 Small-Mid Portfolio | — | 85,057 | (477 | ) | (1,147 | ) | (2 | ) | 83,431 | 20 | ||||||||||||||||||
| PowerShares Fundamental Investment Grade Corporate Bond Portfolio | — | 66,668 | (1,449 | ) | 299 | 3 | 65,521 | 285 | ||||||||||||||||||||
| PowerShares LadderRite 0-5 Year Corporate Bond Portfolio | — | 104,927 | (1,618 | ) | (406 | ) | (8 | ) | 102,895 | 306 | ||||||||||||||||||
| PowerShares Russell Top 200 Pure Growth Portfolio | — | 157,812 | (4,739 | ) | 8,152 | 60 | 161,285 | 123 | ||||||||||||||||||||
| PowerShares S&P 500® Low Volatility Portfolio | — | 152,289 | (3,273 | ) | 2,413 | 38 | 151,467 | 545 | ||||||||||||||||||||
| PowerShares S&P Emerging Markets Low Volatility Portfolio | — | 28,322 | (1,126 | ) | 921 | 26 | 28,143 | 49 | ||||||||||||||||||||
| PowerShares S&P International Developed Low Volatility Portfolio | — | 87,711 | (2,728 | ) | 3,560 | 49 | 88,592 | 127 | ||||||||||||||||||||
| PowerShares S&P MidCap Low Volatility Portfolio | — | 41,226 | (254 | ) | 126 | (1 | ) | 41,097 | — | |||||||||||||||||||
| PowerShares S&P SmallCap Low Volatility Portfolio | — | 38,767 | (261 | ) | (79 | ) | — | 38,427 | 35 | |||||||||||||||||||
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| Total Investments in Affiliates | $ | — | $ | 1,274,326 | $ | (22,087 | ) | $ | 15,112 | $ | 197 | $ | 1,267,548 | $ | 2,283 | |||||||||||||
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The table below shows Moderately Conservative Multi-Asset Allocation Portfolio’s transactions in, and earnings from, its investments in affiliates for the period February 21, 2017 (commencement of investment operations) through April 30, 2017.
Moderately Conservative Multi-Asset Allocation Portfolio
| Value February 21, 2017 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation (Depreciation) |
Realized Gain (Loss) |
Value April 30, 2017 |
Dividend Income |
||||||||||||||||||||||
| PowerShares 1-30 Laddered Treasury Portfolio | $ | — | $ | 88,699 | $ | (2,211 | ) | $ | 1,149 | $ | 32 | $ | 87,669 | $ | 308 | |||||||||||||
| PowerShares Emerging Markets Sovereign Debt Portfolio | — | 62,898 | (670 | ) | 1,208 | 5 | 63,441 | 539 | ||||||||||||||||||||
| PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio | — | 79,590 | (1,562 | ) | 2,175 | 19 | 80,222 | 79 | ||||||||||||||||||||
| PowerShares FTSE RAFI US 1000 Portfolio | — | 132,271 | (1,346 | ) | (1,606 | ) | (5 | ) | 129,314 | 96 | ||||||||||||||||||
| PowerShares FTSE RAFI US 1500 Small-Mid Portfolio | — | 39,299 | (119 | ) | (528 | ) | — | 38,652 | 9 | |||||||||||||||||||
| PowerShares Fundamental High Yield® Corporate Bond Portfolio | — | 75,970 | (245 | ) | 173 | (1 | ) | 75,897 | 547 | |||||||||||||||||||
| PowerShares Fundamental Investment Grade Corporate Bond Portfolio | — | 163,968 | (1,628 | ) | 744 | 5 | 163,089 | 704 | ||||||||||||||||||||
| PowerShares LadderRite 0-5 Year Corporate Bond Portfolio | — | 189,517 | (722 | ) | (745 | ) | (4 | ) | 188,046 | 555 | ||||||||||||||||||
| PowerShares Preferred Portfolio | — | 50,123 | (594 | ) | 877 | 5 | 50,411 | 470 | ||||||||||||||||||||
| PowerShares Russell Top 200 Pure Growth Portfolio | — | 89,271 | (3,118 | ) | 4,588 | 47 | 90,788 | 70 | ||||||||||||||||||||
| PowerShares S&P 500® Low Volatility Portfolio | — | 87,408 | (2,541 | ) | 1,371 | 39 | 86,277 | 310 | ||||||||||||||||||||
| PowerShares S&P International Developed Low Volatility Portfolio | — | 47,618 | (1,287 | ) | 1,940 | 23 | 48,294 | 69 | ||||||||||||||||||||
| PowerShares S&P MidCap Low Volatility Portfolio | — | 38,413 | (425 | ) | 119 | (1 | ) | 38,106 | — | |||||||||||||||||||
| PowerShares Senior Loan Portfolio | — | 62,976 | (117 | ) | (26 | ) | — | 62,833 | 347 | |||||||||||||||||||
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| Total Investments in Affiliates | $ | — | $ | 1,208,021 | $ | (16,585 | ) | $ | 11,439 | $ | 164 | $ | 1,203,039 | $ | 4,103 | |||||||||||||
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The Adviser is a wholly-owned subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Funds. The table below shows S&P 500® Downside Hedged Portfolio’s transactions in, and earnings from, its investments in affiliates for the six-month period ended April 30, 2017.
S&P 500® Downside Hedged Portfolio
| Value October 31, 2016 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation |
Realized Gain (Loss) |
Value April 30, 2017 |
Dividend Income |
||||||||||||||||||||||
| Invesco Ltd. | $ | 71,152 | $ | — | $ | (22,383 | ) | $ | 13,730 | $ | (2,779 | ) | $ | 59,720 | $ | 1,217 | ||||||||||||
Note 5. Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
| Level 1 — | Prices are determined using quoted prices in an active market for identical assets. |
| Level 2 — | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
| Level 3 — | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect a Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
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Except for the Funds listed below, as of April 30, 2017, all of the securities in each Fund were valued based on Level 1 inputs (see the Schedules of Investments for security categories). The appreciation (depreciation) on futures contracts held in S&P 500® Downside Hedged Portfolio were based on Level 1 inputs. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
| Investments in Securities | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Multi-Strategy Alternative Portfolio | ||||||||||||||||
| Equity Securities |
$ | 6,348,390 | $ | — | $ | — | $ | 6,348,390 | ||||||||
| Forward Foreign Currency Contracts(a) |
— | (21,354 | ) | — | (21,354 | ) | ||||||||||
| Futures(a) |
(59,452 | ) | — | — | (59,452 | ) | ||||||||||
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|||||||||
| Total Investments |
$ | 6,288,938 | $ | (21,354 | ) | $ | — | $ | 6,267,584 | |||||||
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| Variable Rate Investment Grade Portfolio | ||||||||||||||||
| Corporate Bonds and Notes |
$ | — | $ | 17,940,815 | $ | — | $ | 17,940,815 | ||||||||
| U.S. Agency Mortgage Credit Risk Transfer |
— | 11,222,314 | — | 11,222,314 | ||||||||||||
| U. S. Government Sponsored Agency Mortgage-Backed Securities |
— | 8,617,976 | — | 8,617,976 | ||||||||||||
| Collateralized Mortgage Obligations |
— | 1,125,133 | — | 1,125,133 | ||||||||||||
| Commercial Mortgage-Backed Securities |
— | 6,044,929 | — | 6,044,929 | ||||||||||||
| U. S. Treasury Securities |
— | 4,759,773 | — | 4,759,773 | ||||||||||||
| Asset-Backed Securities |
— | 1,567,542 | — | 1,567,542 | ||||||||||||
| Money Market Fund |
561,651 | — | — | 561,651 | ||||||||||||
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|||||||||
| Total Investments |
$ | 561,651 | $ | 51,278,482 | $ | — | $ | 51,840,133 | ||||||||
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| (a) | Unrealized appreciation (depreciation). |
Note 6. Derivative Investments
The Funds may enter into an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) under which a Fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Funds do not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statements of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of each Fund’s derivative investments, detailed by primary risk exposure, held as of April 30, 2017:
| Value | ||||||||||||||||||||||||||||||||
| Multi-Strategy Alternative Portfolio | S&P 500® Downside Hedged Portfolio | |||||||||||||||||||||||||||||||
| Derivative Assets |
Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | ||||||||||||||||||||||||
| Unrealized appreciation on forward foreign currency contracts outstanding (a) | $ | 24,832 | $ | — | $ | — | $ | 24,832 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Unrealized appreciation on futures contracts—Exchange-Traded (b) | — | 14,099 | — | 14,099 | — | 682 | — | 682 | ||||||||||||||||||||||||
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| Total Derivative Assets | $ | 24,832 | $ | 14,099 | $ | — | $ | 38,931 | $ | — | $ | 682 | $ | — | $ | 682 | ||||||||||||||||
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| Derivatives not subject to master netting agreements | — | (14,099 | ) | — | (14,099 | ) | — | (682 | ) | — | (682 | ) | ||||||||||||||||||||
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| Total Derivative Assets subject to master netting agreements | $ | 24,832 | $ | — | $ | — | $ | 24,832 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
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| Value | ||||||||||||||||||||||||||||||||
| Multi-Strategy Alternative Portfolio | S&P 500® Downside Hedged Portfolio | |||||||||||||||||||||||||||||||
| Derivative Liabilities |
Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | ||||||||||||||||||||||||
| Unrealized depreciation forward foreign currency contracts outstanding (a) | $ | (46,186 | ) | $ | — | $ | — | $ | (46,186 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
| Unrealized depreciation on futures contracts—Exchange-Traded (b) | — | (43,407 | ) | (30,144 | ) | (73,551 | ) | — | (47,954 | ) | — | (47,954 | ) | |||||||||||||||||||
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| Total Derivative Liabilities | $ | (46,186 | ) | $ | (43,407 | ) | $ | (30,144 | ) | $ | (119,737 | ) | $ | — | $ | (47,954 | ) | $ | — | $ | (47,954 | ) | ||||||||||
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| Derivatives not subject to master netting agreements | — | 43,407 | 30,144 | 73,551 | — | 47,954 | — | 47,954 | ||||||||||||||||||||||||
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| Total Derivative Liabilities subject to master netting agreements | $ | (46,186 | ) | $ | — | $ | — | $ | (46,186 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
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| (a) | Values are disclosed on the Statements of Assets and Liabilities under the caption Unrealized appreciation on forward foreign currency contracts and Unrealized depreciation on forward foreign currency contracts. |
| (b) | Values are disclosed on the Statements of Assets and Liabilities under the caption Unrealized appreciation on futures currency contracts and Unrealized depreciation on futures contracts. |
Offsetting Assets and Liabilities
The table below reflects the Fund’s exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of April 30, 2017:
Multi-Strategy Alternative Portfolio
| Financial Derivative Assets |
Financial Derivative Liabilities |
Collateral (Received)/Pledged |
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| Counterparty |
Forward foreign currency contracts |
Forward foreign currency contracts |
Net value of derivatives |
Non-Cash | Cash | Net amount | ||||||||||||||||||
| Morgan Stanley | $ | 24,832 | $ | (46,186 | ) | $ | (21,354 | ) | $ | — | $ | — | $ | (21,354 | ) | |||||||||
Effect of Derivative Investments for the Six-Month Period Ended April 30, 2017.
The table below summarizes each Fund’s gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
| Location of Gain (Loss) on Statements of Operations | ||||||||||||||||||||||||||||||||
| Multi-Strategy Alternative Portfolio | S&P 500® Downside Hedged Portfolio | |||||||||||||||||||||||||||||||
| Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | Currency Risk |
Equity Risk |
Interest Rate Risk |
Total | |||||||||||||||||||||||||
| Realized Gain (Loss): | ||||||||||||||||||||||||||||||||
| Forward foreign currency contracts |
$ | 2,807 | $ | — | $ | — | $ | 2,807 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Futures contracts |
— | (232,166 | ) | (35,991 | ) | (268,157 | ) | — | (3,144,225 | ) | — | (3,144,225 | ) | |||||||||||||||||||
| Change in Net Unrealized Appreciation (Depreciation): | — | |||||||||||||||||||||||||||||||
| Forward foreign currency contracts |
(25,647 | ) | — | — | (25,647 | ) | — | — | — | — | ||||||||||||||||||||||
| Futures contracts |
— | (80,472 | ) | (38,592 | ) | (119,064 | ) | — | (105,548 | ) | — | (105,548 | ) | |||||||||||||||||||
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| Total |
$ | (22,840 | ) | $ | (312,638 | ) | $ | (74,583 | ) | $ | (410,061 | ) | $ | — | $ | (3,249,773 | ) | $ | — | $ | (3,249,773 | ) | ||||||||||
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The table below summarizes the average notional value of futures contracts and forward foreign currency contracts outstanding during the period.
| Average Notional Value | ||||||||
| Multi-Strategy Alternative Portfolio |
S&P 500® Downside Hedged Portfolio |
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| Forward foreign currency contracts | $ | 4,257,479 | $ | — | ||||
| Futures contracts | 20,301,357 | 2,273,583 | ||||||
Note 7. Tax Information
The amount and character of income and gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. Reclassifications are made to the Funds’ capital accounts to reflect income and gains available for
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distribution (or available capital loss carryforwards) under federal income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be reported at the Funds’ fiscal year-end.
Capital loss carryforwards are calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforwards actually available for the Funds to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
Funds had capital loss carryforwards as of October 31, 2016, which expire as follows:
| Post-effective/no expiration | Total* | |||||||||||
| Short-Term | Long-Term | |||||||||||
| Active U.S. Real Estate Fund | $ | 319,192 | $ | 20,190 | $ | 339,382 | ||||||
| Multi-Strategy Alternative Portfolio | 303,933 | 739,166 | 1,043,099 | |||||||||
| S&P 500® Downside Hedged Portfolio | 35,034,023 | 52,587,675 | 87,621,698 | |||||||||
| Variable Rate Investment Grade Portfolio | 12,892 | — | 12,892 | |||||||||
| * | Capital loss carryforwards as of the date listed above are reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
Note 8. Investment Transactions
For the six-month period ended April 30, 2017, the cost of securities purchased and proceeds from sales of securities (other than short-term securities, U.S. Treasury obligations, money market funds and in-kind transactions, if any) were as follows:
| Purchases | Sales | |||||||
| Active U.S. Real Estate Fund | $ | 20,656,598 | $ | 20,782,566 | ||||
| Balanced Multi-Asset Allocation Portfolio | 1,276,086 | 22,898 | ||||||
| Conservative Multi-Asset Allocation Portfolio | 1,268,702 | 13,889 | ||||||
| Growth Multi-Asset Allocation Portfolio | 1,274,326 | 22,087 | ||||||
| Moderately Conservative Multi-Asset Allocation Portfolio | 1,270,697 | 16,733 | ||||||
| Multi-Strategy Alternative Portfolio | 2,131,481 | 2,294,081 | ||||||
| S&P 500® Downside Hedged Portfolio | 31,810,437 | 35,531,800 | ||||||
| Variable Rate Investment Grade Portfolio | 4,262,123 | 2,530,535 | ||||||
For the six-month period ended April 30, 2017, the cost of securities purchased and proceeds from sales of U.S. Treasury obligations (other than short-term securities, money market funds and in-kind transactions), for the Variable Rate Investment Grade Portfolio amounted to $501,058 and $801,413, respectively.
For the six-month period ended April 30, 2017, in-kind transactions associated with creations and redemptions were as follows:
| Cost of Securities Received |
Value of Securities Delivered |
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| Active U.S. Real Estate Fund | $ | — | $ | — | ||||
| Balanced Multi-Asset Allocation Portfolio | — | — | ||||||
| Conservative Multi-Asset Allocation Portfolio | — | — | ||||||
| Growth Multi-Asset Allocation Portfolio | — | — | ||||||
| Moderately Conservative Multi-Asset Allocation Portfolio | — | — | ||||||
| Multi-Strategy Alternative Portfolio | — | — | ||||||
| S&P 500® Downside Hedged Portfolio | — | 23,275,732 | ||||||
| Variable Rate Investment Grade Portfolio | — | — | ||||||
Gains (losses) on in-kind transactions are generally not considered taxable gains (losses) for federal income tax purposes.
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At April 30, 2017, the cost of investments on a tax basis includes adjustments for financial reporting purposes, as of the most recently completed federal income tax reporting period-end:
| Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net Unrealized Appreciation |
Cost | |||||||||||||
| Active U.S. Real Estate Fund | $ | 2,305,425 | $ | (912,424 | ) | $ | 1,393,001 | $ | 25,581,702 | |||||||
| Balanced Multi-Asset Allocation Portfolio* | 17,202 | (4,550 | ) | 12,652 | 1,253,381 | |||||||||||
| Conservative Multi-Asset Allocation Portfolio* | 10,444 | (2,240 | ) | 8,204 | 1,254,915 | |||||||||||
| Growth Multi-Asset Allocation Portfolio* | 20,732 | (5,620 | ) | 15,112 | 1,252,436 | |||||||||||
| Moderately Conservative Multi-Asset Allocation Portfolio* | 14,432 | (2,905 | ) | 11,527 | 1,254,216 | |||||||||||
| Multi-Strategy Alternative Portfolio | 175,644 | (137,464 | ) | 38,180 | 6,310,210 | |||||||||||
| S&P 500® Downside Hedged Portfolio | 11,508,104 | (2,865,874 | ) | 8,642,230 | 83,727,787 | |||||||||||
| Variable Rate Investment Grade Portfolio | 446,897 | (39,023 | ) | 407,874 | 51,432,259 | |||||||||||
| * | In the Fund’s initial year of operations, the cost of investments for tax purposes will not reflect any tax adjustments until its fiscal year-end reporting period. |
Note 9. Trustees’ and Officer’s Fees
Trustees’ and Officer’s Fees include amounts accrued by the Funds to pay remuneration to each Trustee who is not an “interested person” as defined in the 1940 Act (an “Independent Trustee”), any Trustee who is not an affiliate of the Adviser or Distributor (or any of their affiliates) and who is otherwise an “interested person” of the Trust under the 1940 Act (an “Unaffiliated Trustee”) and an Officer of the Trust. The Adviser, as a result of each Fund’s unitary management fee, pays for such compensation. The Trustee who is an “interested person” of the Trust does not receive any Trustees’ fees.
The Trust has adopted a deferred compensation plan (the “Plan”). Under the Plan, each Independent Trustee and Unaffiliated Trustee who has executed a Deferred Fee Agreement (a “Participating Trustee”) may defer receipt of all or a portion of his compensation (“Deferral Fees”). Such Deferral Fees are deemed to be invested in select PowerShares Funds. The Deferral Fees payable to the Participating Trustee are valued as of the date such Deferral Fees would have been paid to the Participating Trustee. The value increases with contributions or with increases in the value of the Shares selected, and the value decreases with distributions or with declines in the value of the Shares selected. Obligations under the Plan represent unsecured claims against the general assets of the Funds.
Note 10. Capital
Shares are created and redeemed by each Fund only in Creation Units of (i) 100,000 Shares for Balanced Multi-Asset Allocation Portfolio, Conservative Multi-Asset Allocation Portfolio, Growth Multi-Asset Allocation Portfolio, Moderately Conservative Multi-Asset Allocation Portfolio and Multi-Strategy Alternative Portfolio; and (ii) 50,000 Shares, for Active U.S. Real Estate Fund, S&P 500® Downside Hedged Portfolio and Variable Rate Investment Grade Portfolio . Only Authorized Participants are permitted to purchase or redeem Creation Units from the Funds. For Active U.S. Real Estate Fund, Balanced Multi-Asset Allocation Portfolio, Conservative Multi-Asset Allocation Portfolio, Growth Multi-Asset Allocation Portfolio and Moderately Conservative Multi-Asset Allocation Portfolio, such transactions are principally permitted in exchange for Deposit Securities, with a balancing cash component to equate the transaction to the NAV per Share of the Fund of the Trust on the transaction date. For Multi-Strategy Alternative Portfolio, Creation Units are issued and redeemed principally in exchange for the deposit or delivery of cash. For S&P 500® Downside Hedged Portfolio and Variable Rate Investment Grade Portfolio, Creation Units are issued and redeemed partially in exchange for the deposit or delivery of cash and partially in exchange for Deposit Securities. However, for all Funds, cash in an amount equivalent to the value of certain securities may be substituted, generally when the securities are not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other market circumstances.
To the extent that the Funds permit transactions in exchange for Deposit Securities, each Fund may issue Shares in advance of receipt of Deposit Securities subject to various conditions, including a requirement to maintain on deposit with the Trust cash at least equal to 105% of the market value of the missing Deposit Securities. In accordance with the Trust’s Participant Agreement, Creation Units will be issued to an Authorized Participant, notwithstanding the fact that the corresponding Deposit Securities have not been received in part or in whole, in reliance on the undertaking of the Authorized Participant to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by the Authorized Participant’s delivery and maintenance of collateral consisting of cash in the form of U.S. dollars in immediately available funds having a value (marked-to-market daily) at least equal to 105%, which the Adviser may change from time to time, of the value of the missing Deposit Securities.
Certain transaction fees may be charged by the Funds for creations and redemptions, which are treated as increases in capital.
Transactions in each Fund’s Shares are disclosed in detail in the Statements of Changes in Net Assets.
Note 11. Indemnifications
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. Each Independent Trustee and Unaffiliated Trustee is also indemnified against certain liabilities arising out of the performance of his duties to the Trust pursuant to an Indemnification Agreement between such trustee and the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trust believes the risk of loss to be remote.
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As a shareholder of a Fund of the PowerShares Actively Managed Exchange-Traded Fund Trust, you incur a unitary management fee. In addition to the unitary management fee, a shareholder may pay distribution fees, if any, brokerage expenses, taxes, interest, including acquired fund fees and expenses, if any, litigation expenses and other extraordinary expenses. The expense examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended April 30, 2017.
In addition to the fees and expenses which the PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and the PowerShares S&P 500® Downside Hedged Portfolio (collectively, the “Portfolios”) bear directly, the Portfolios indirectly bear a pro rata share of the fees and expenses of the investment companies in which the Portfolios invest. The amount of fees and expenses incurred indirectly by the Portfolios will vary because the investment companies have varied expenses and fee levels and the Portfolios may own different proportions of the investment companies at different times. Estimated investment companies’ expenses are not expenses that are incurred directly by the Portfolios. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Portfolios invest in. The effect of the estimated investment companies’ expenses that the Portfolios bear indirectly is included in each Portfolio’s total return.
Actual Expenses
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed annualized rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges and brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, expenses shown in the table do not include the expenses of the underlying funds, which are borne indirectly by a Fund. If transaction costs and indirect expenses were included, your costs would have been higher.
| Beginning Account Value November 1, 2016 |
Ending Account Value April 30, 2017 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period(1) |
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| PowerShares Active U.S. Real Estate Fund (PSR) | ||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,042.70 | 0.80 | % | $ | 4.05 | ||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,020.83 | 0.80 | 4.01 | ||||||||||||
| PowerShares Balanced Multi-Asset Allocation Portfolio (PSMB)(2) | ||||||||||||||||
| Actual |
1,000 | 1,014.40 | 0.05 | 0.09 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,024.55 | 0.05 | 0.25 | ||||||||||||
| PowerShares Conservative Multi-Asset Allocation Portfolio (PSMC)(2) | ||||||||||||||||
| Actual |
1,000 | 1,011.20 | 0.05 | 0.09 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,024.55 | 0.05 | 0.25 | ||||||||||||
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Fees and Expenses (continued)
| Beginning Account Value November 1, 2016 |
Ending Account Value April 30, 2017 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period(1) |
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| PowerShares Growth Multi-Asset Allocation Portfolio (PSMG)(2) | ||||||||||||||||
| Actual |
$ | 1,000 | $ | 1,015.20 | 0.05 | % | $ | 0.09 | ||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,024.55 | 0.05 | 0.25 | ||||||||||||
| PowerShares Moderately Conservative Multi-Asset Allocation (PSMM)(2) | ||||||||||||||||
| Actual |
1,000 | 1,013.60 | 0.05 | 0.09 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,024.55 | 0.05 | 0.25 | ||||||||||||
| PowerShares Multi-Strategy Alternative Portfolio (LALT) | ||||||||||||||||
| Actual |
1,000 | 972.50 | 0.87 | 4.25 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,020.48 | 0.87 | 4.36 | ||||||||||||
| PowerShares S&P 500® Downside Hedged Portfolio (PHDG) | ||||||||||||||||
| Actual |
1,000 | 1,086.00 | 0.39 | 2.02 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,022.86 | 0.39 | 1.96 | ||||||||||||
| PowerShares Variable Rate Investment Grade Portfolio (VRIG) | ||||||||||||||||
| Actual |
1,000 | 1,019.40 | 0.30 | 1.50 | ||||||||||||
| Hypothetical (5% return before expenses) |
1,000 | 1,023.31 | 0.30 | 1.51 | ||||||||||||
| (1) | Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six-month period ended April 30, 2017. Expenses are calculated by multiplying the Fund’s annualized expense ratio by the average account value for the period, then multiplying the result by 181/365. |
| (2) | Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the period February 21, 2017 (commencement of investment operations) to April 30, 2017. Expenses are calculated by multiplying the Fund’s annualized expense ratio by the average account value for the period, then multiplying the result by 69/365. Hypothetical expenses are calculated by multiplying the Fund’s annualized expense ratio by the average account value for the period, then multiplying the result by 181/365. |
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Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement for PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Balanced Multi-Asset Allocation Portfolio and PowerShares Growth Multi-Asset Allocation Portfolio
At a meeting held on December 15, 2016, the Board of Trustees of the PowerShares Actively Managed Exchange-Traded Fund Trust (the “Trust”), including the Independent Trustees, approved the Investment Advisory Agreement (the “Advisory Agreement”) between Invesco PowerShares Capital Management LLC (the “Adviser”) and the Trust for PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Balanced Multi-Asset Allocation Portfolio and PowerShares Growth Multi-Asset Allocation Portfolio (each, a “Fund,” and collectively, the “Funds”) and the Investment Sub-Advisory Agreement for each Fund, between the Adviser and the following seven affiliated sub-advisers (the “Sub-Advisory Agreement”): Invesco Advisers, Inc. (as the initial sub-adviser); Invesco Asset Management Deutschland, GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan) Limited; Invesco Hong Kong Limited; Invesco Senior Secured Management, Inc.; and Invesco Trimark Ltd. (each, a “Sub-Adviser,” and collectively, the “Sub-Advisers”).
The Trustees reviewed information provided by the Adviser describing: (i) the nature, extent and quality of services to be provided, (ii) the costs of services to be provided, (iii) the extent to which economies of scale may be realized as each Fund grows, (iv) whether the fee levels reflect any possible economies of scale for the benefit of Fund shareholders, (v) comparisons of services rendered to and amounts paid by other registered investment companies and (vi) any benefits to be realized by the Adviser from its relationship with each Fund.
Advisory Agreement
Nature, Extent and Quality of Services. In evaluating the nature, extent and quality of the Adviser’s services, the Trustees reviewed information concerning the functions to be performed by the Adviser for each Fund, information describing the Adviser’s current organization and staffing, including operational support that would be provided by the Adviser’s parent organization, Invesco Ltd., and the background and experience of the persons who will be responsible for the day-to-day management of the Funds, and they considered the quality of services provided by the Adviser to other exchange-traded funds (“ETFs”). The Trustees also reviewed information related to the Adviser’s portfolio transaction policies and procedures, as well as the performance of other ETFs for which the Adviser serves as investment adviser.
The Trustees also considered the services to be provided by the Adviser in its oversight of the Funds’ administrator, custodian and transfer agent, and its oversight of the Sub-Advisers for the Funds. They noted the significant amount of time, effort and resources that had been devoted to this oversight function for the other ETFs and that was expected to be provided for each Fund.
Based on their review, the Trustees concluded that the nature, extent and quality of the services to be provided by the Adviser to each Fund under the Advisory Agreement were expected to be appropriate and reasonable.
Fees, Expenses and Profitability. The Trustees reviewed and discussed the information provided by the Adviser on each Fund’s proposed advisory fee, as compared to information compiled from Lipper Inc. (“Lipper”) databases on the median net expense ratios of ETF, open-end index and open-end actively managed (non-ETF) peers. The Trustees noted that the comparable fee data provided by the Adviser included only one peer ETF for each Fund. The Trustees also noted that the comparable fee data provided by the Adviser included only two peer open-end index funds for PowerShares Conservative Multi-Asset Allocation Portfolio, only six peer open-end index funds for PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, only four peer open-end index funds for PowerShares Balanced Multi-Asset Allocation Portfolio and only one peer open-end index fund for PowerShares Growth Multi-Asset Allocation Portfolio. The Trustees noted that the proposed annual advisory fee to be charged to each Fund was a unitary fee, and that the Adviser has agreed to pay all other expenses of each Fund except for the fee payment under the Advisory Agreement, payments
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Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement for PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Balanced Multi-Asset Allocation Portfolio and PowerShares Growth Multi-Asset Allocation Portfolio (continued)
under the Fund’s 12b-1 plan, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. The Trustees noted that each Fund’s proposed unitary fee was below the median net expense ratio of its peer groups as shown below:
| Fund |
ETF Peer
Group |
Open-End
Index |
Open-End
Active | |||
| PowerShares Conservative Multi-Asset Allocation Portfolio |
Lower than median (1) | Lower than median (2) | Lower than median (51) | |||
| PowerShares Moderately Conservative Multi-Asset Allocation Portfolio | Lower than median (1) | Lower than median (6) | Lower than median (63) | |||
| PowerShares Balanced Multi-Asset Allocation Portfolio |
Lower than median (1) | Lower than median (4) | Lower than median (57) | |||
| PowerShares Growth Multi-Asset Allocation Portfolio |
Lower than median (1) | Lower than median (1) | Lower than median (34) | |||
The Trustees considered each Fund’s proposed unitary advisory fee in light of the administrative, operational and management oversight costs for the Adviser. The Board concluded that the unitary advisory fee to be charged to each Fund is reasonable and appropriate in light of the services expected to be provided by the Adviser.
In conjunction with their review of the unitary advisory fee, the Trustees also considered information provided by the Adviser on the proposed costs of services for each Fund and the sub-advisory fees to be paid by the Adviser for each Fund. The Adviser did not provide profitability of the Adviser in managing each Fund because the Funds had not yet commenced operations. However, the Trustees considered other information the Board received at its April meeting on the Adviser’s overall profitability from its relationship with other ETFs for which it serves as investment adviser.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. The Trustees reviewed the information provided by the Adviser as to the extent to which economies of scale may be realized as each Fund grows and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees noted that any reduction in fixed costs associated with the management of each Fund would be enjoyed by the Adviser, but that a unitary fee provides a level of certainty in expenses for each Fund. The Trustees considered whether the proposed advisory fee rate for each Fund is reasonable in relation to the proposed services and product strategy of each Fund, and they concluded that the flat advisory fee was reasonable and appropriate.
Fall-Out Benefits. The Trustees noted that the Adviser had not identified any further benefits that it would derive from its relationships with each Fund and had noted that it does not have any soft-dollar arrangements.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the Advisory Agreement for each Fund. No single factor was determinative in the Board’s analysis.
Sub-Advisory Agreement
As noted above, the Board of Trustees of the Trust, including the Independent Trustees, approved the Sub-Advisory Agreement for each Fund at a meeting held on December 15, 2016. The review process followed by the Board is described in detail above. In connection with the review of the Sub-Advisory Agreement, the Board considered the factors described below, among others.
Nature, Extent and Quality of Services. The Trustees considered the nature, extent and quality of services to be provided under the Sub-Advisory Agreement. The Board also considered the benefits described by the Adviser in having multiple affiliated Sub-Advisers, but noted that Invesco Advisers, Inc. (“IAI”) will be the initial sub-adviser. The Board reviewed the qualifications and background of IAI’s portfolio managers and noted the qualifications and background of the other Sub-Advisers and the resources made available to the Sub-Advisers’ personnel.
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Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement for PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Balanced Multi-Asset Allocation Portfolio and PowerShares Growth Multi-Asset Allocation Portfolio (continued)
Based on their review, the Trustees concluded that the nature, extent and quality of services to be provided under the Sub-Advisory Agreement were expected to be appropriate and reasonable.
Fees and Expenses. The Trustees reviewed and discussed the information provided by the Adviser and the Sub-Advisers on the sub-advisory fee rate under the Sub-Advisory Agreement. The Trustees noted that the sub-advisory fee charged by the Sub-Advisers under the Sub-Advisory Agreement is consistent with the compensation structure used throughout Invesco Ltd. when Invesco Ltd.’s affiliates provide sub-advisory services for funds managed by other Invesco Ltd. affiliates. The Board considered how the sub-advisory fees relate to the overall advisory fee for each Fund and noted that the Adviser compensates the Sub-Advisers from its fee.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. As part of their review of the Advisory Agreement, the Trustees considered the extent to which economies of scale may be realized as each Fund grows and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees considered whether the sub-advisory fee rate for each Fund was reasonable in relation to the proposed services and product strategy of the applicable Fund, and they concluded that the flat sub-advisory fee was reasonable and appropriate.
Fall-Out Benefits. The Trustees noted that the Sub-Advisers had not identified any further benefits that they would derive from their relationships with the Funds.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the Sub-Advisory Agreement for each Fund. No single factor was determinative in the Board’s analysis.
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Board Considerations Regarding Continuation of Investment Advisory Agreement and Sub-Advisory Agreement
At a meeting held on April 11, 2017, the Board of Trustees of the PowerShares Actively Managed Exchange-Traded Fund Trust (the “Trust”), including the Independent Trustees, approved the continuation of the following agreements on behalf of PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio, PowerShares S&P 500® Downside Hedged Portfolio and PowerShares Variable Rate Investment Grade Portfolio (each, a “Fund” and together, the “Funds”):
| ● | the Investment Advisory Agreement between Invesco PowerShares Capital Management LLC (the “Adviser”) and the Trust for each Fund; and |
| ● | the Investment Sub-Advisory Agreement between the Adviser and the following seven affiliated sub-advisers for each of PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio (the “Sub-Advisory Agreement”): Invesco Advisers, Inc.; Invesco Asset Management Deutschland, GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan) Limited; Invesco Hong Kong Limited; Invesco Senior Secured Management, Inc.; and Invesco Canada Ltd. (each, a “Sub-Adviser” and collectively, the “Sub-Advisers”). |
Investment Advisory Agreement
The Trustees reviewed information from the Adviser describing: (i) the nature, extent and quality of services provided, (ii) the investment performance of each Fund, as applicable, and the Adviser, (iii) the costs of services provided and estimated profits realized by the Adviser, (iv) the extent to which economies of scale are realized as a Fund grows, (v) whether the fee levels reflect any possible economies of scale for the benefit of Fund shareholders, (vi) comparisons of services rendered to and amounts paid by other registered investment companies and (vii) any benefits realized by the Adviser from its relationship with the Funds.
Nature, Extent and Quality of Services. In evaluating the nature, extent and quality of the Adviser’s services, the Trustees reviewed information concerning the functions performed by the Adviser for the Funds, information describing the Adviser’s current organization and staffing, including operational support provided by the Adviser’s parent organization, Invesco Ltd. (“Invesco”), and the background and experience of the persons responsible for the day-to-day management of the Funds. The Trustees reviewed matters related to the Adviser’s execution and/or oversight of execution of portfolio transactions on behalf of the Funds.
The Trustees also reviewed information on the performance of PowerShares Active U.S. Real Estate Fund, its benchmark index (FTSE NAREIT All Equity REITs Index) and the Fund’s Lipper Inc. (“Lipper”) peer group rankings (the 1st quartile being the best performers and the 4th quartile being the worst performers) for the one-year, three-year, five-year and since-inception (November 20, 2008) periods ended December 31, 2016. Based on the information provided, the Board noted that the Fund outperformed its benchmark for the three-year period and underperformed its benchmark for the one-year, five-year and since-inception periods. The Board also noted that the Fund ranked in the 2nd quartile of its Lipper peer group for the one-year, three-year and five-year periods and the in the 3rd quartile of its Lipper peer group for the since-inception period.
The Trustees also reviewed information on the performance of PowerShares Multi-Strategy Alternative Portfolio, its benchmark indexes (HFRI Macro (Total) Index, Morgan Stanley Multi-Strategy Alternative Index and Bloomberg Barclays U.S. Aggregate Index) and the Fund’s Lipper peer group rankings for the one-year and since-inception (May 29, 2014) periods ended December 31, 2016. Based on the information provided, the Board noted that the Fund outperformed each benchmark for the one-year period and outperformed the Morgan Stanley Multi-Strategy Alternative Index for the since-inception period. The Board noted that the Fund underperformed the HFRI Macro (Total) Index and Bloomberg Barclays U.S. Aggregate Index for the since-inception period. The Board also noted that the Fund ranked in the 2nd quartile of its Lipper peer group for the one-year period and the 4th quartile of its Lipper peer group for the since-inception period. The Board noted the short operating history of the Fund in evaluating the performance of the Adviser.
The Trustees also reviewed information on the performance of PowerShares S&P 500® Downside Hedged Portfolio, its benchmark indexes (S&P 500® Index, S&P 500® Dynamic VEQTOR Index, HFRX Global Hedge Fund Index and U.S. 3-Month Treasury Bill Index) and the Fund’s Lipper peer group rankings for the one-year, three-year and since-inception (December 6, 2012) periods ended December 31, 2016. Based on the information provided, the Board noted that the Fund outperformed the HFRX Global Hedge Fund Index and the U.S. 3-Month Treasury Bill Index for the since-inception period but underperformed each benchmark for the one-year and three-year periods and the since-inception period for the S&P 500® Index and S&P 500® Dynamic VEQTOR Index. The Board also noted
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Board Considerations Regarding Continuation of Investment Advisory Agreement and Sub-Advisory Agreement (continued)
that the Fund ranked in the 3rd quartile of its Lipper peer group for the since-inception period and in the 4th quartile of its Lipper peer group for the one-year and three-year periods. In response to requests from the Independent Trustees, the Adviser provided an overview of absolute and comparative performance for the Fund, reasons for the Fund’s underperformance and information regarding the Fund’s performance with respect to investment expectations and the Fund’s overall investment strategy.
The Trustees also reviewed information on the performance of PowerShares Variable Rate Investment Grade Portfolio, its benchmark index (Bloomberg Barclays US Floating Rate Note Index) and the Fund’s Lipper peer group ranking for the since-inception (September 22, 2016) period ended December 31, 2016. Based on the information provided, the Board noted that the Fund outperformed its benchmark for the since-inception period and ranked in the 1st quartile of its Lipper peer group for the since-inception period. The Board noted the short operating history of the Fund in evaluating the performance of the Adviser.
The Board did not review the performance of PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio and PowerShares Moderately Conservative Multi-Asset Allocation Portfolio for the period ended December 31, 2016 because those Funds had not commenced operations as of that date.
The Trustees also considered the services provided by the Adviser in its oversight of the Funds’ administrator, custodian and transfer agent and, for PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio, their Sub-Advisers. They noted the significant amount of time, effort and resources that had been devoted to this oversight function. They also noted that, unlike most of the other exchange-traded funds (“ETFs”) for which the Adviser serves as investment adviser, the Funds are not designed to track the performance of an index, and investment decisions are the primary responsibility of the Adviser or Sub-Advisers, as applicable.
Based on their review, the Trustees concluded that the nature, extent and quality of services provided or to be provided by the Adviser to the Funds under the Investment Advisory Agreement were or were expected to be appropriate and reasonable, as applicable.
Fees, Expenses and Profitability. The Trustees reviewed and discussed the information provided by the Adviser on each Fund’s net expense ratio and unitary advisory fee, as compared to information compiled by the Adviser from Lipper Inc. databases on the net expense ratios of comparable ETFs, open-end (non-ETF) index funds (except for PowerShares Multi-Strategy Alternative Portfolio) and open-end (non-ETF) actively-managed funds. The Trustees noted that the information provided by the Adviser included two Lipper Inc. peer group classifications, Short U.S. Government and Ultra Short Obligations. The Trustees noted that the annual advisory fee charged to each Fund, as set forth below, is a unitary fee and that the Adviser pays all other operating expenses of each Fund, including the fees payable to the Sub-Advisers, except that each Fund pays its brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
| 0.05% | PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio and PowerShares Moderately Conservative Multi-Asset Allocation Portfolio | |
| 0.17% | PowerShares Government Collateral Pledge Portfolio | |
| 0.30%: | PowerShares Variable Rate Investment Grade Portfolio | |
| 0.39%: | PowerShares S&P 500® Downside Hedged Portfolio | |
| 0.80% | PowerShares Active U.S. Real Estate Fund | |
| 0.95% | PowerShares Multi-Strategy Alternative Portfolio |
The Trustees noted that the Adviser represented that it does not serve as the investment adviser to any clients, other than other ETFs also overseen by the Trustees, with comparable investment objectives and strategies as the Funds. The Trustees noted that:
| ● | the net expense ratio of PowerShares Active U.S. Real Estate Fund was higher than the median net expense ratios of its ETF peer funds and its open-end index peer funds, but was lower than the median net expense ratio of its open-end actively-managed peer funds; |
| ● | the net expense ratio of PowerShares S&P 500® Downside Hedged Portfolio was lower than the median net expense ratios of its ETF peer funds, its open-end index peer funds and its open-end actively-managed peer funds; |
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Board Considerations Regarding Continuation of Investment Advisory Agreement and Sub-Advisory Agreement (continued)
| ● | the net expense ratio of PowerShares Multi-Strategy Alternative Portfolio was higher than the median net expense ratio of its ETF peer funds, but lower than the median net expense ratio of its open-end actively-managed peer funds; |
| ● | the net expense ratio of PowerShares Variable Rate Investment Grade Portfolio was higher than the median net expense ratio of its ETF peer funds and its open-end index peer funds, but lower than the median net expense ratio of its open-end actively-managed peer funds; and |
| ● | the net expense ratios of PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio and PowerShares Moderately Conservative Multi-Asset Allocation Portfolio were lower than the median net expense ratios of each of their ETF peer funds, their open-end index peer funds and their open-end actively-managed peer funds; and |
| ● | the net expense ratio of PowerShares Government Collateral Pledge Portfolio was lower than the median net expense ratios of its ETF peer funds, open-end index peer funds and open-end actively managed peer funds in the Short U.S. Government classification and lower than the median net expense ratios of its ETF peer funds and open-end actively managed peer funds in the Ultra-Short Obligations classification (the Trustees noted that information provided by the Adviser indicated that the Fund did not have any open-end index fund peers in the Ultra-Short Obligation classification. |
The Trustees considered that the Adviser had agreed to waive up to 15 basis points of PowerShares Government Collateral Pledge Portfolio’s unitary advisory fee that corresponds to the advisory fee of the affiliated underlying funds in which the Fund invests, which could result in a net unitary advisory fee, ranging from 2 to 17 basis points.
In response to questions from the Independent Trustees, the Adviser provided supplemental information regarding each of PowerShares Active U.S. Real Estate Fund and PowerShares Multi-Strategy Alternative Portfolio’s advisory fees and total expenses and the Lipper peer data. The Adviser explained in detail its view that it believes that the advisory fees and total expenses for these Funds are competitive and generally in line with other comparable funds in the marketplace, noting, in particular, the unique investment strategy and complexity of each Fund, the limited number of peers in the Lipper data, and/or the differing pricing philosophy of certain of the peers.
The Board concluded that the unitary advisory fee charged to each Fund was reasonable and appropriate in light of the services provided.
In conjunction with their review of the unitary advisory fees, the Trustees also considered information provided by the Adviser on the revenues received by the Adviser under the Investment Advisory Agreement for the Funds. The Trustees reviewed information provided by the Adviser on its overall profitability, as well as the estimated profitability to the Adviser from its relationship to PowerShares Active U.S. Real Estate Fund, PowerShares Multi-Strategy Alternative Portfolio, PowerShares S&P 500® Downside Hedged Portfolio and PowerShares Variable Rate Investment Grade Portfolio. (The Trustees did not consider the estimated profitability of the Adviser in managing PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio and PowerShares Moderately Conservative Multi-Asset Allocation Portfolio because those Funds had not yet commenced operations as of December 31, 2016). The Trustees concluded that the overall and estimated profitability to the Adviser was not unreasonable.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. The Trustees reviewed the information provided by the Adviser as to the extent to which economies of scale are realized as each Fund grows and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees reviewed each Fund’s asset size and expense ratio. The Trustees noted that any reduction in fixed costs associated with the management of the Funds would be enjoyed by the Adviser, but a unitary fee provides a level of certainty in expenses for the Funds. The Trustees considered whether the advisory fee rate for each Fund was reasonable in relation to the asset size of that Fund, and concluded that the flat advisory fee was reasonable and appropriate.
The Trustees noted that the Adviser had not identified any further benefits that it derived from its relationships with the Funds and had noted that it does not have any soft-dollar arrangements.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the continuation of the Investment Advisory Agreement for each Fund. No single factor was determinative in the Board’s analysis.
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Board Considerations Regarding Continuation of Investment Advisory Agreement and Sub-Advisory Agreement (continued)
Investment Sub-Advisory Agreement
As noted above, the Board of Trustees of the Trust, including the Independent Trustees, approved the continuation of the Sub-Advisory Agreement for each of PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio at a meeting held on April 11, 2017. The review process followed by the Board is described in detail above. In connection with the review of the Sub-Advisory Agreement, the Board considered the factors described below, among others.
Nature, Extent and Quality of Services. The Trustees considered the nature, extent and quality of services provided under the Sub-Advisory Agreement. The Board also considered the benefits described by the Adviser in having multiple affiliated Sub-Advisers. The Board reviewed the qualifications and background of each Sub-Adviser, the investment approach of the Sub-Adviser whose investment personnel manage PowerShares Active U.S. Real Estate Fund’s, PowerShares Balanced Multi-Asset Allocation Portfolio’s, PowerShares Conservative Multi-Asset Allocation Portfolio’s, PowerShares Government Collateral Pledge Portfolio’s, PowerShares Growth Multi-Asset Allocation Portfolio’s, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio’s, PowerShares Multi-Strategy Alternative Portfolio’s and PowerShares Variable Rate Investment Grade Portfolio’s assets, the experience and skills of the investment personnel responsible for the day-to-day management of each Fund, and the resources made available to such personnel.
Based on their review, the Trustees concluded that the nature, extent and quality of services provided by the Sub-Advisers to PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio under the Sub-Advisory Agreement were appropriate and reasonable.
Fees, Expenses and Profitability. The Trustees reviewed and discussed the information provided by the Adviser and the Sub-Advisers on the sub-advisory fee rate under the Sub-Advisory Agreement. The Trustees noted that the sub-advisory fees charged by the Sub-Advisers under the Sub-Advisory Agreement are consistent with the compensation structure used throughout Invesco when Invesco’s affiliates provide sub-advisory services for funds managed by other Invesco affiliates. The Board considered how the sub-advisory fees relate to the overall advisory fee for each of PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio and noted that the Adviser compensates the Sub-Advisers from its fee.
The Trustees also considered information provided by Invesco Advisers, Inc. on the revenues it receives under the Sub-Advisory Agreement, as well as any profits or losses realized by the Sub-Adviser from its relationship to PowerShares Active U.S. Real Estate Fund, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio. (The Trustees did not consider the estimated profitability of the Sub-Adviser in managing PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio and PowerShares Moderately Conservative Multi-Asset Allocation Portfolio because those Funds had not yet commenced operations as of December 31, 2016.) The Trustees concluded that the estimated profitability to the Sub-Adviser of the sub-advisory services provided to PowerShares Active U.S. Real Estate Fund, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio was not unreasonable.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. As part of their review of the Investment Advisory Agreement for PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio, the Trustees considered the extent to which economies of scale are realized as the Funds grow and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees considered whether the sub-advisory fee rate for PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio,
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Board Considerations Regarding Continuation of Investment Advisory Agreement and Sub-Advisory Agreement (continued)
PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio was reasonable in relation to the asset size of the Funds, and concluded that the flat sub-advisory fee was reasonable and appropriate.
The Trustees noted that the Sub-Advisers had not identified any further benefits that they derived from their relationships with PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the continuation of the Sub-Advisory Agreement for PowerShares Active U.S. Real Estate Fund, PowerShares Balanced Multi-Asset Allocation Portfolio, PowerShares Conservative Multi-Asset Allocation Portfolio, PowerShares Government Collateral Pledge Portfolio, PowerShares Growth Multi-Asset Allocation Portfolio, PowerShares Moderately Conservative Multi-Asset Allocation Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares Variable Rate Investment Grade Portfolio. No single factor was determinative in the Board’s analysis.
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Proxy Voting Policies and Procedures
A description of the Trust’s proxy voting policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available, without charge and upon request, by calling (800) 983-0903. This information is also available on the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov.
Information regarding how each Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is available, without charge and upon request, by (i) calling (800) 983-0903; or (ii) accessing the Trust’s Form N-PX on the Commission’s website at www.sec.gov.
Quarterly Portfolios
The Trust files its complete schedule of portfolio holdings for the Funds with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Form N-Qs will be available on the Commission’s website at www.sec.gov. The Trust’s Form N-Qs may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Frequency Distribution of Discounts and Premiums
A table showing the number of days the market price of each Fund’s shares was greater than the Fund’s net asset value, and the number of days it was less than the Fund’s net asset value (i.e., premium or discount) for the most recently completed calendar year, and the calendar quarters since that year end (or the life of the Fund, if shorter) may be found at the Fund’s website: www.powershares.com.
| P-PS-SAR-10 |
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| ©2017 Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 Downers Grove, IL 60515 |
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| powershares.com 800 983 0903 |
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@PowerShares | ||||
Item 2. Code of Ethics.
Not required for a semi-annual report.
Item 3. Audit Committee Financial Expert.
Not required for a semi-annual report.
Item 4. Principal Accountant Fees and Services.
PricewaterhouseCoopers LLP (“PwC”) informed the Audit Committee of the Board of the Trust (the “Audit Committee”) that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the “Loan Rule”). The Loan Rule prohibits accounting firms, such as PwC, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm.
The Loan Rule specifically provides that an accounting firm would not be independent if it receives, or certain of its affiliates or covered persons receive, a loan from a lender that is a record or beneficial owner of more than ten percent of an audit client’s equity securities (referred to as a “more than ten percent owner”). For purposes of the Loan Rule, audit clients include the Funds as well as all registered investment companies advised by the Adviser and its affiliates, including other subsidiaries of the Adviser’s parent company, Invesco Ltd. (collectively, the Invesco Fund Complex). PwC informed the Audit Committee that it has, and that certain of its affiliates or covered persons have, relationships with lenders who hold, as record owner, more than ten percent of the shares of certain funds within the Invesco Fund Complex. These relationships call into question PwC’s independence under the Loan Rule with respect to those funds, as well as all other funds in the Invesco Fund Complex, which may implicate the Loan Rule.
On June 20, 2016, the SEC Staff issued a “no-action” letter to another mutual fund complex (see Fidelity Management & Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances.
In an August 18, 2016 letter, and in subsequent communications, PwC affirmed to the Audit Committee that, as of the date of the letter and the subsequent communications, respectively, PwC is an independent accountant with respect to the Trust, within the meaning of PCAOB Rule 3520. In its letter and in its subsequent communications, PwC also informed the Audit Committee that, after evaluating the facts and circumstances and the applicable independence rules, PwC has concluded that with regard to its compliance with the independence criteria set forth in the rules and regulations of the SEC related to the Loan Rule, it believes that it remains objective and impartial despite matters that may ultimately be determined to be inconsistent with these criteria and therefore it can continue to serve as the Trust’s registered public accounting firm. PWC has advised the Audit Committee that this
conclusion is based in part on the following considerations: (1) the lenders to PwC have no influence over any Fund, or other entity within the Invesco Fund Complex, or its investment adviser; (2) none of the officers or trustees of the Invesco Fund Complex whose shares are owned by PwC lenders are associated with those lenders; (3) PwC understands that the shares held by PwC lenders are held for the benefit of and on behalf of its policy owners/end investors; (4) investments in funds such as the Invesco Fund Complex funds are passive; (5) the PwC lenders are part of various syndicates of unrelated lenders; (6) there have been no changes to the loans in question since the origination of each respective note; (7) the debts are in good standing and no lender has the right to take action against PwC, as borrower, in connection with the financings; (8) the debt balances with each lender are immaterial to PwC and to each lender; and (9) the PwC audit engagement team has no involvement in PwC’s treasury function and PwC’s treasury function has no oversight of or ability to influence the PwC audit engagement team. In addition, PwC has communicated that the lending relationships appear to be consistent with the lending relationships described in the no-action letter and that they are not aware of other relationships that would be implicated by the Loan Rule. In addition to relying on PwC’s August 18, 2016 letter and subsequent communications regarding its independence, the Trust intends to rely upon the no-action letter.
If in the future the independence of PwC is called into question under the Loan Rule by circumstances that are not addressed in the SEC’s no-action letter, the Fund may need to take other action in order for the Fund’s filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions could result in additional costs, impair the ability of the Funds to issue new shares or have other material adverse effects on the Funds. In addition, the SEC has indicated that the no-action relief will expire 18 months from its issuance after which the Funds will no longer be able rely on the letter unless it’s term is extended or made permanent by the SEC Staff.
Item 5. Audit Committee of Listed Registrants.
Not required for a semi-annual report.
Item 6. Schedule of Investments.
| (a) | The Schedules of Investments are included as a part of the semi-annual report to shareholders filed under Item 1 of this Form N-CSR. |
| (b) | Not applicable |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
| (a) | Based on their evaluation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the Registrant’s President (principal executive officer) and Treasurer (principal financial officer) have concluded that such disclosure controls and procedures are effective. | |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. | |
Item 12. Exhibits.
| (a)(1) | Code of Ethics | |
| Not required for semi-annual report. | ||
| (a)(2) | Certifications of the Registrant’s President and Treasurer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 and Section 302 of the Sarbanes-Oxley Act of 2002 are attached as Exhibit 99.CERT. | |
| (a)(3) | Not applicable. | |
| (b) | Certifications of the Registrant’s President and Treasurer pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 and Section 906 of the Sarbanes-Oxley Act of 2002 are attached as Exhibit 99.906CERT. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) PowerShares Actively Managed Exchange-Traded Fund Trust
| By: | /s/ Daniel E. Draper |
| Name: | Daniel E. Draper | |
| Title: | President | |
| Date: | 7/5/2017 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ Daniel E. Draper |
| Name: | Daniel E. Draper | |
| Title: | President | |
| Date: | 7/5/2017 | |
| By: | /s/ Steven Hill | |
| Name: | Steven Hill | |
| Title: | Treasurer | |
| Date: | 7/5/2017 | |