Only one PowerShares ETF — the PowerShares NASDAQ-100 BuyWrite Portfolio (PQBW) — realized a small capital gains distribution (see table below), due largely to the unique underlying index methodology, which writes covered calls on the NASDAQ-100 Index. This is the first distribution for any PowerShares equity or fixed-income ETF since the firm’s 2003 inception.
“Our team manages ETF holdings in a manner which minimizes the amount of capital gains incurred by the funds. For the seventh consecutive year, we are very pleased that the process has prevented capital gains distributions for the vast majority of PowerShares ETFs,” said Ben Fulton, Invesco PowerShares managing director of ETFs. “This achievement highlights one of the many advantages ETFs can provide shareholders seeking to maximize real returns. Reducing the impact of taxes can meaningfully improve an investor’s prospects for creating and preserving real wealth.”
“ETFs generally allow investors greater tax planning flexibility compared to other product structures by providing control over the timing of capital gains,” said Fulton. “Similar to shares of common stock, the shareholders of an ETF typically realize taxable consequences only when shares are sold, thereby potentially minimizing or eliminating tax liability. Additionally, the in-kind method utilized by ETF asset managers during the creation and redemption process generally allows portfolios to avoid year-end capital gain payouts.”
The only PowerShares ETF that paid a capital gain distribution for 2009 — PQBW — is unique in the fact that it accounts for its gain or loss on its investments for federal income tax purposes on a daily mark-to-market basis.
Estimated Capital Gain Distributions Short-Term Capital Long-Term Capital Total Capital Gains ($/share) Gains ($/share) Gains PowerShares $0.00 $0.14639 $0.14639 NASDAQ-100 BuyWrite Portfolio
Invesco PowerShares Capital Management LLC is Leading the Intelligent ETF Revolution® through its family of more than 110 domestic and international exchange-traded funds, which seek to outperform traditional benchmark indexes while providing advisors and investors access to an innovative array of focused investment opportunities. With franchise assets of $41 billion as of Sept. 30, 2009, PowerShares ETFs trade on both U.S. stock exchanges. For more information, please visit us at http://www.invescopowershares.com/.
Invesco PowerShares is a wholly owned subsidiary of Invesco Ltd., a leading independent global investment management firm dedicated to helping people worldwide build their financial security. Invesco provides a comprehensive array of enduring investment solutions for retail, institutional and high-net-worth clients around the world. Operating in 20 countries, the firm is listed on the New York Stock Exchange under the symbol “IVZ.” Additional information is available at http://www.invesco.com/.
There are risks involved with investing in ETFs including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply.
There are additional risks involved in writing (selling) covered call options on the stocks of the NASDAQ-100 Index. The Fund, by writing covered call options on this Reference Index, will give up the opportunity to benefit from potential increases in the value of the index stocks above the exercise prices of the options, but will continue to bear the risk of declines in the value of the Reference Index. The premiums received from the options may not be sufficient to offset any losses sustained from the volatility of the Reference Index over time. In addition, exchanges may suspend trading of options in volatile markets. If trading is suspended, the Fund may be unable to write (sell) options at times that may be desirable or advantageous for the Fund to do so. Trading suspensions may limit the Fund’s ability to achieve its investment objectives. The Fund may be required to sell investments from its portfolio to make cash settlement on (or transfer ownership of an Index stock to physically settle) any options that are exercised. Such sales (or transfers) may occur at inopportune times, and the Fund may incur transaction costs that increase its expenses.
Invesco PowerShares does not offer tax advice. Please consult a tax advisor for advice regarding your specific situation.
Invesco Aim Distributors, Inc. is the distributor of the PowerShares Exchange-Traded Fund Trust, the PowerShares Exchange-Traded Fund Trust II, the PowerShares India Exchange-Traded Fund Trust and the PowerShares Actively Managed Exchange-Traded Fund Trust.
PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC. Invesco PowerShares Capital Management LLC and Invesco Aim Distributors, Inc. are indirect, wholly owned subsidiaries of Invesco Ltd.
Shares are not individually redeemable and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 50,000 Shares.
An investor should consider the Fund’s investment objective, risks, charges and expenses carefully before investing. For this and more complete information about the Fund call 800 983 0903 or visit http://www.invescopowershares.com/ for a prospectus. Please read the prospectus carefully before investing.
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