-- PowerShares Prime Non-Agency RMBS Opportunity Fund
-- PowerShares Alt-A Non-Agency RMBS Opportunity Fund
"We believe that various economic factors have converged to push the prices
of many Prime and Alt-A residential mortgage-backed securities well below
their fundamental values," said Bruce Bond, president and CEO of Invesco
PowerShares. "We are hopeful that these ETFs will provide access and
transparency into these markets along with some of the much needed
additional liquidity originally intended by the TARP."
The Residential Mortgage-Backed Securities (RMBS) Market
Aggressive mortgage lending practices, declining home prices and a
faltering economy have caused mortgage loan performance to deteriorate
significantly over the last two years. Many holders of mortgage related
securities have come under pressure to raise capital and reduce exposure to
RMBS markets, resulting in systematic de-leveraging. Invesco PowerShares
believes that these events have pushed the prices of many residential
mortgage-backed securities well below fundamental values implied by
conservative cash flow projections.
Even the prices of senior and super senior residential mortgage-backed
securities, which generally have first right to principal payments and are
typically the last to sustain losses, have been severely impacted despite
their significant credit enhancement and advantageous position within the
capital structure. As such, Invesco PowerShares believes this may be an
opportunity for investors to recognize above average risk-adjusted returns
by investing in discounted senior and super senior Prime and Alt-A
residential mortgage-backed securities. In addition, Invesco PowerShares
believes these securities should generate current principal and interest
income as well as potential capital gains.
Market Environment Background: The Troubled Asset Relief Program (TARP)
On Sept. 19, 2008, the United States Treasury introduced the Troubled Asset
Relief Program (TARP). "The underlying weakness in our financial system
today is the illiquid mortgage assets that have lost value as the housing
correction has proceeded.... These [assets] are clogging up our financial
system, and undermining the strength of our otherwise sound financial
institutions," said former Treasury Secretary Henry Paulson in a press
release dated Sept. 19, 2008. At the time Mr. Paulson also stated that the
federal government must implement a plan to restore our financial
institutions by creating a program to transition these assets off their
books.
Many of the assets that Invesco PowerShares believes were originally
targeted for purchase by TARP Invesco PowerShares believes are not
particularly "troubled" from a credit perspective, but are depressed in
price due to systemic deleveraging. "What began as a Subprime lending
problem has spread to other, less-risky mortgages," said Paulson.
In addition to cash considerations, the two anticipated ETFs anticipate
allowing Authorized Participants (APs) to contribute specific blocks of
residential mortgage-backed securities (RMBS) to the Funds in exchange for
shares of the ETFs. This in-kind transaction may be advantageous for
organizations seeking increased liquidity and diversification within their
current exposure to RMBS markets. In addition, the Funds may offer
increased flexibility with respect to balance sheet and capital
requirements. As a result, it is anticipated that financial institutions
which otherwise were not participating in the ETF market may find it
advantageous to become an AP to transact directly with the Funds.
Fund Information
The Funds intend to invest primarily in non-agency, residential
mortgage-backed securities. Residential mortgage loans are primarily
classified into one of the following three categories based on the risk
profile of the borrower and the property: Prime, Alt-A and Subprime. Prime
residential mortgage loans are extended to borrowers who represent a
relatively low risk profile through a strong credit history. Subprime loans
are made to borrowers who display poor credit histories and other
characteristics that correlate with higher default risk. Alt-A loans are
made to borrowers whose risk profile falls between Prime and Subprime.
Prime mortgage loans are further categorized as either "agency" or
"non-agency." Agency loans have balances that fall within the limits set by
the Office of Federal Housing Enterprise Oversight (OFHEO) and qualify as
collateral for securities that are issued by Ginnie Mae, Fannie Mae or
Freddie Mac. Non-agency loans have balances that may or may not fall within
the limits set by OFHEO and do not qualify as collateral for securities
that are issued by Ginnie Mae, Fannie Mae or Freddie Mac.
-- The PowerShares Prime Non-Agency RMBS Opportunity Fund will seek to
provide total return by investing, under normal market conditions, at least
80% of its assets in non-agency mortgage-backed securities collateralized
by pools of Prime residential mortgage loans.
-- The PowerShares Alt-A Non-Agency RMBS Opportunity Fund will seek to
provide total return by investing, under normal market conditions, at least
80% of its assets in non-agency mortgage-backed securities collateralized
by pools of Alt-A residential mortgage loans.
The Funds' primary investment sub-advisor is Invesco Institutional (N.A.),
Inc. and the Funds' portfolio holdings will be disclosed daily on the
Funds' website.
If you would like to inquire about the Funds or about how financial
institutions transact with the Funds, please contact
TARP@invescopowershares.com.
Invesco PowerShares Capital Management LLC is leading the intelligent ETF
revolution through its family of more than 130 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 assets under management of
$12 billion as of Sept. 30, 2008, PowerShares ETFs trade on both U.S. stock
exchanges. For more information, please visit us at
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. By delivering the combined power
of our distinctive worldwide investment management capabilities, including
Invesco Aim, Atlantic Trust, Invesco, Invesco Perpetual, Invesco
PowerShares, InvescoTrimark, and WL Ross & Co., LLC, 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 www.invesco.com.
Risks of Owning Actively Managed ETFs
The Funds are subject to management risk because it is an actively managed
portfolio. In managing the Funds' portfolio securities, the Sub-Advisers
will apply investment techniques and risk analyses in making investment
decisions for the Funds, but there can be no guarantee that these will
produce the desired results.
Additionally, there are risks associated with investing in mortgage-backed
securities collateralized by Prime and Alt-A residential mortgage loans.
Recently, the residential mortgage market in the United States has
experienced a variety of difficulties and changed economic conditions that
may adversely affect the value of the Funds' investments. Housing prices in
many states have declined or stopped appreciating, after extended periods
of significant appreciation. As a result of these and other factors, the
value of some mortgage-backed securities has been negatively impacted.
The Funds intend to invest primarily in mortgage securities offered by
non-governmental issuers. These securities carry greater risks than
investments in U.S. government agency securities.
Because the Funds concentrate their investments in mortgage-backed
securities, the value of the Funds' shares may rise and fall more than the
value of shares of a fund that invests in a broader range of securities.
The Funds also may be subject to market risk, interest rate risk, credit
risk, cash redemptions risk and non-diversified fund risk.
Mortgage backed securities are also subject to prepayment or call risk,
which is the risk that payments may be received earlier or later than
expected due to changes in the rate at which the underlying loans are
prepaid and may adversely affect its income and/or market value.
The Funds may also be subject to the risk of deviation between market price
and net asset value (NAV). Actively managed ETFs have a limited trading
history and there can be no assurance as to whether and/or the extent to
which the shares will trade at premiums or discounts to NAV. The deviation
risk is heightened by the fact that the mortgage-backed securities in which
the Funds may invest may be difficult to value. Because mortgage-backed
securities trade infrequently, the most recent trade price may not indicate
their true value. A third-party pricing service is used to value the Funds'
mortgage-backed securities. There can be no guarantee to the extent to
which market participants will view the prices for the Funds' portfolio
securities generated by the pricing service as accurate indications of the
value of the Funds' mortgage-backed securities investments. To the extent
that market participants question the accuracy of the pricing service's
prices, there is a risk of significant deviation between the NAV and market
price of the mortgage-backed securities in which the Funds invest.
Shares are not FDIC insured, may lose value and have no bank guarantee.
On October 13, 2008, the US Treasury Department instituted revisions to the
TARP program to allow for the purchase of preferred stock and warrants of
financial institutions in order to provide such institutions with increased
capital in lieu of the purchase of such institutions' "troubled assets."
Additionally, on December 19, 2008 the Bush administration declared that
TARP funds may be spent on any program the President deems necessary to
avert financial crisis. To the extent that markets do not respond favorably
to TARP or TARP does not function as intended, broad, adverse market
conditions may continue for an indefinite period of time. Moreover, the
implications of government ownership and disposition of troubled assets and
the purchase of equity stakes in financial institutions are unclear, and
such a program may have positive or negative effects on the liquidity,
valuation and performance of the Fund's investments.
Shares are not individually redeemable and owners of the shares may acquire
those shares from the Funds and tender those shares for redemption to the
Funds in Creation Unit aggregations only, typically consisting of 50,000
shares.
Invesco Aim Distributors, Inc. (Invesco Aim) is the distributor of the
PowerShares Actively Managed Exchange-Traded Fund Trust.
PowerShares® is a registered trademark of Invesco PowerShares Capital
Management LLC (Invesco PowerShares). Invesco PowerShares is one of the
investment advisors for the products and services represented by Invesco
Aim; it provides investment advisory services to individual and
institutional clients and does not sell securities. Invesco PowerShares and
Invesco Aim are indirect, wholly owned subsidiaries of Invesco Ltd.
An investor should consider each Fund's investment objective, risks,
charges and expenses carefully before investing. The prospectus contains
this and other information about the Funds. For more complete information
about the Funds or to obtain a prospectus, call 800.983.0903. Please read
the prospectus carefully before investing.
The information in the prospectus is not complete and may be changed. The
Funds may not sell their shares until the registration statement filed with
the Securities and Exchange Commission is effective. The prospectus is not
an offer to sell the Funds' shares, nor are the Funds soliciting an offer
to buy their shares in any jurisdiction where the offer or sale is not
permitted.
Contact Information: Media Contacts: Kristin Sadlon Porter Novelli 212-601-8192 Bill Conboy 303-415-2290