Invesco PowerShares, a leading provider of exchange-traded funds
(ETFs), announced the PowerShares Build America Bond Portfolio
began trading today on the NYSE Arca under the ticker symbol BAB.
The portfolio is the first ETF designed to provide investors access
to the Build America Bond program developed as part of the federal
stimulus plan enacted in February 2009.
"With more than $48 billion in Build America Bonds being issued
thus far, we have seen a great deal of interest in the program;
however, retail investors for the most part have had limited access
to this important market," said Ben Fulton, executive vice
president -- global product development of Invesco PowerShares. "We
believe the PowerShares Build America Bond Portfolio provides a
convenient, cost effective way to invest in taxable, investment
grade municipal bonds, which tend to have yields commensurate with
similarly rated corporate bonds. Furthermore, we believe the fund
will bring much-needed liquidity to a market that will be pivotal
in the rebuilding of America's infrastructure." Since 1997, 10-year
AAA-rated taxable municipal bonds have, on average, yielded just
five basis points less than 10-year AAA-rated corporate
bonds.(1)
The PowerShares Build America Bond Portfolio is based on the
BofA Merrill Lynch Build America Bond Index. The Fund will normally
invest at least 80% of its total assets in the securities that
comprise the index. The index is designed to track the performance
of U.S. dollar-denominated investment grade taxable municipal debt
publicly issued under the Build America Bond program in the U.S.
domestic market.
Qualifying securities must have an investment grade rating, a
fixed coupon schedule and a minimum amount outstanding of $1
million. In addition, qualifying securities must be "direct pay"
(i.e., a direct federal subsidy is paid to the issuer). Securities
included in the index are capitalization-weighted based on their
current amount outstanding, and the index is rebalanced on a
monthly basis.
The Build America Bond program was created under the American
Recovery and Reinvestment Act of 2009, which provides for the
issuance of taxable municipal securities on which the issuer
receives federal support of the interest paid. Unlike most other
municipal obligations, interest received on Build America Bonds is
subject to federal income tax. Issuers of "direct pay" Build
America Bonds (i.e., taxable municipal bonds issued to provide
funds for qualified capital expenditures) are entitled to receive
payments from the U.S. Treasury over the life of the bond equal to
35% (or 45% in the case of Recovery Zone Economic Development
Bonds) of the interest paid. The federal interest subsidy continues
for the life of the bonds.
Build America Bonds offer an alternative form of financing to
state and local governments whose primary means for accessing the
capital markets has been through issuance of tax-free municipal
bonds. Issuance of Build America Bonds will cease on Dec. 31, 2010,
unless the relevant provisions of the American Recovery and
Reinvestment Act of 2009 are extended. In the event that the Build
America Bond program is not extended, the portfolio anticipates
changing its investment strategy to invest in an index composed of
taxable municipal securities.
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 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 www.invesco.com.
(1) Source: BofA Merrill Lynch, Bloomberg, as of Oct. 19,
2009
There are risks involved with investing in ETFs including
possible loss of money. The Fund is not actively managed. Ordinary
brokerage commissions apply.
Invesco PowerShares does not offer tax advice. Please consult a
tax advisor for advice regarding your specific situation.
The credit quality of the Fund's holdings represents the
weighted average quality rating of the securities in the portfolio
as assigned by Nationally Recognized Statistical Rating
Organizations based on assessment of the credit worthiness of the
underlying securities. The ratings range from AAA (highest) to D
(lowest).
While it is not Invesco PowerShares' intention, there is no
guarantee that the Funds will not distribute capital gains to their
shareholders. Although we do not intend to distribute capital
gains, investors selling shares in the market may incur capital
gains. Investors should consult their tax advisors regarding their
own tax situations.
Municipal securities are subject to the risk that litigation,
legislation or other political events, local business or economic
conditions or the bankruptcy of the issuer could have a significant
effect on an issuer's ability to make payments of principal and/or
interest. Municipal securities can be significantly affected by
political changes as well as uncertainties in the municipal market
related to taxation, legislative changes or the rights of municipal
security holders. Because many securities are issued to finance
similar projects, especially those relating to education, health
care, transportation and utilities, conditions in those sectors can
affect the overall municipal market. In addition, changes in the
financial condition of an individual municipal insurer can affect
the overall municipal market.
There is no guarantee that municipalities will continue to take
advantage of the Build America Bond (BAB) program in the future and
there can be no assurance that BABs will be actively traded.
Furthermore, under the American Recovery and Reinvestment Act of
2009, the ability of municipalities to issue BABs expires on Dec.
31, 2010. If the BAB program is not extended, the number of BABs
available in the market will be limited. In addition, illiquidity
of the BABs may negatively affect the value of the BABs.
Fixed-income securities are subject to interest rate risk and
credit risk. Generally, the prices of fixed-income securities tend
to fall as interest rates rise. To the extent the Fund invests a
substantial portion of its assets in fixed-income securities with
longer term maturities, rising interest rates may cause the value
of the Fund's investments to decline significantly. If interest
rates fall, it is possible that issuers of callable securities with
high interest coupons will "call" (or prepay) their bonds before
their maturity date. Credit risk refers to the possibility that the
issuer of a security will be unable and/or unwilling to make timely
interest payments and/or repay the principal on its debt, which may
adversely affect the value of the security.
The Shares are subject to market fluctuations caused by such
factors as economic, political, regulatory or market developments,
changes in interest rates and perceived trends in securities
prices.
The Fund's use of a representative sampling approach will result
in its holding a smaller number of securities than are in the
Underlying Index. As a result, an adverse development respecting an
issuer of securities held by the Fund could result in a greater
decline in NAV than would be the case if the Fund held all of the
securities in the Underlying Index. To the extent the assets in the
Fund are smaller, these risks will be greater.
The Fund is non-diversified and can invest a greater portion of
its assets in securities of individual issuers than a diversified
fund.
"BofA Merrill Lynch" and "The BofA Merrill Lynch Build America
Bond Index(SM)" are reprinted with permission. © Copyright 2009
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("BofA
Merrill Lynch"). All rights reserved. "BofA Merrill Lynch" and "The
BofA Merrill Lynch Build America Bond Index(SM)" are service marks
of BofA Merrill Lynch and/or its affiliates and have been licensed
for use for certain purposes by PowerShares on behalf of the
PowerShares Build America Bond Portfolio that is based on the BofA
Merrill Lynch Build America Bond Index(SM), and is not issued,
sponsored, endorsed or promoted by BofA Merrill Lynch and/or BofA
Merrill Lynch's affiliates nor is BofA Merrill Lynch and/or BofA
Merrill Lynch's affiliates an adviser to the PowerShares Build
America Bond Portfolio. BofA Merrill Lynch and BofA Merrill Lynch's
affiliates make no representation, express or implied, regarding
the advisability of investing in the PowerShares Build America Bond
Portfolio or The BofA Merrill Lynch Build America Bond Index(SM)
and do not guarantee the quality, accuracy or completeness of The
BofA Merrill Lynch Build America Bond Index(SM), index values or
any index related data included herein, provided herewith or
derived therefrom and assume no liability in connection with their
use. As the index provider, BofA Merrill Lynch is licensing certain
trademarks, The BofA Merrill Lynch Build America Bond Index(SM) and
trade names which are composed by BofA Merrill Lynch without regard
to PowerShares, the PowerShares Build America Bond Portfolio or any
investor. BofA Merrill Lynch and BofA Merrill Lynch's affiliates do
not provide investment advice to PowerShares or the PowerShares
Build America Bond Portfolio and are not responsible for the
performance of the PowerShares Build America Bond Portfolio.
Invesco Aim Distributors, Inc. is the distributor of the
PowerShares Exchange-Traded Fund Trust II.
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 www.invescopowershares.com for a prospectus. Please read the
prospectus carefully before investing.
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Contact Bill Conboy 303-415-2290 Email Contact
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