PARTICIPANT AGREEMENT
POWERSHARES EXCHANGE-TRADED FUND TRUST
This Participant Agreement (this "Agreement") is entered into between
____________________ (the "Distributor"), Spear, Leeds & ▇▇▇▇▇▇▇, ▇.▇. (the
"Participant") and The Bank of New York (the Transfer Agent"). The Transfer
Agent serves as the Transfer Agent of the Trust and is an Index Receipt Agent as
that term is defined in the rules of the National Securities Clearing
Corporation ("NSCC"). The Distributor, the Transfer Agent and the Participant
acknowledge and agree that the PowerShares Exchange-Traded Fund Trust (the
"Trust") shall be a third-party beneficiary of the Agreement and shall receive
the benefits contemplated by the Agreement to the extent specified herein. The
Distributor has been retained to provide certain services with respect to acting
as principal underwriter of the Trust in connection with the sale and
distribution shares of beneficial interest par value 0.01 per share ("Shares")
of the Series of the Trust (each a "Fund") [secured] on Schedule I attached
hereto. As specified in the Trust's Prospectus and Statement of Additional
Information incorporate therein (the "Prospectus") included as part of its
Registration Statement as amended on Form N-1A. Trust Shares may be created or
redeemed only in aggregations of ________________, referred to therein and
herein as a "Creation Unit". Capitalized terms not otherwise defined herein are
used herein as defined in the Trust's Prospectus.
This Agreement is intended to set forth certain premises and the procedures
by which the Participant may create and/or redeem Creation Units (i) through the
Continuous Net Settlement ("CNS") clearing processes of NSCC as such processes
have been enhanced to effect creations and redemptions of Creation Units, such
processes being referred to herein as the "Trust's Clearing Process", or (ii)
outside the Trust's Clearing Process (i.e., through the facilities of the
Depository Trust Company ("DTC" )). The parties hereto in consideration of the
premises and of the agreements contained herein agree as follows:
1. STATUS OF PARTICIPANT. The Participant hereby represents, covenants and
warrants that (i) with respect to orders for the creation or redemption of
Creation Units by means of the Trust's Clearing Process, it is a member of NSCC
and a participant in the CNS System of NSCC (as defined in the Trust's
prospectus, a "Participating Party"); and (ii) with respect to orders for the
creation or redemption of Creation Units outside the Trust's Clearing Process,
it is a DTC Participant (as defined in the Trust's prospectus, a "DTC
Participant"). The Participant may place orders for the creation or redemption
of Creation Units either through the Trust's Clearing Process or outside the
Trust's Clearing Process, subject to the procedures for creation and redemption
referred to in paragraph 2 of this Agreement ("Execution of Orders") and the
procedures described in Attachment A hereto. Any change in the foregoing status
of the Participant shall terminate this Agreement, and the Participant shall
give immediate notice to the Distributor and the Transfer Agent of such change.
The Participant further represents that it is a broker-dealer registered
with the Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD") or is exempt from or
otherwise not required to be licensed as a broker-dealer or a member of the
NASD. The Participant is qualified as a broker or dealer, or otherwise, under
all applicable state laws where it is required to do so in order that Trust
Shares may be sold in such states where the Participant intends to sell Trust
Shares. The Participant agrees to conform to the rules of the NASD (if it is a
member of NASD) and the securities laws of any jurisdiction in which it sells,
directly or indirectly, Trust Shares, to the extent such laws, rules and
regulations relate to the Participant's transactions in, and activities with
respect to the Trust Shares.
The Participant understands and acknowledges that the proposed method by
which Creation Units of Trust Shares will be purchased and traded may raise
certain issues under applicable securities laws. For example, because new
Creation Units of Trust Shares may be
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issued and sold by the Trust on an ongoing basis, the offer and sale of Trust
Shares to investors may involve a "distribution", as such term is used in the
1933 Act. The Participant understands and acknowledges that its offer and sale
of Trust Shares to investors, depending on the circumstances, may result in its
being deemed a participant in a distribution in a manner which could render it a
statutory underwriter and subject it to the prospectus delivery and liability
provisions of the 1933 Act. The Participant also understands and acknowledges
that dealers who are not "underwriters" but are effecting transactions in Trust
Shares, whether or not participating in the distribution of Trust Shares, are
generally required to deliver a Prospectus.
1. EXECUTION OF ORDERS. All orders for the creation or redemption of
Creation Units shall be handled in accordance with the terms of the Trust's
prospectus, and the procedures described in Attachment A to this Agreement. In
the event the procedures include the use of recorded telephone lines, the
Participant hereby consents to such use. The Trust reserves the right to issue
additional or other procedures relating to the manner of creating or redeeming
Creation Units, and the Participant, the Distributor and the Transfer Agent
agree to comply with such procedures as may be issued from time to time, upon
reasonable notice thereof.
2. NSCC. Solely with respect to orders for the creation or redemption of
Creation Units through the Trust's Clearing Process, the Participant as a
Participating Party hereby authorizes the Distributor, or the Transfer Agent as
the case may be to transmit to NSCC on behalf of the Participant such
instructions, including share and cash amounts as are necessary with respect to
the creation and redemption of Creation Units consistent with the instructions
issued by the Participant to the Trust telephone representative identified in
Attachment A hereto (the "Trust Representative"). The Participant agrees to be
bound by the terms of such instructions issued by the Distributor, or the
Transfer Agent as the case may be and reported to NSCC as though such
instructions were issued by the Participant directly to NSCC.
With respect to any Redemption Order, the Participant also acknowledges and
agrees on behalf of itself and any party for which it is acting (regardless of
its capacity) to use its best
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efforts to return to the Trust any dividend, distribution or other corporate
action paid to it or to the party for which it is acting in respect of any
Deposit Security that is transferred to the Participant or any party for which
it is acting that, based on the valuation of such Deposit Security at the time
of transfer, should have been paid to the Trust. With respect to any Redemption
Order, the Participant also acknowledges and agrees on behalf of itself and any
party for which it is acting (regardless of its capacity) that the Trust is
entitled to reduce the amount of money or other proceeds due to the Participant
or any party for which it is acting that, based on the valuation of such Deposit
Security at the time of transfer, should be paid to the Fund. With respect to
any Purchase Order, the Trust acknowledges and agrees to return to the
Participant or any party for which it is acting any dividend, distribution or
other corporate action paid to the Trust in respect of any Deposit Security that
is transferred to the Trust that, based on the valuation of such Deposit
Security at the time of transfer, should have been paid to the Participant or
any party for which it is acting.
3. DEPOSIT SECURITIES. The Participant understands that the number and
names of the designated portfolio of Deposit Securities and relevant cash
amounts to be included in the current Portfolio Deposit for each Fund will be
made available each day that the New York Stock Exchange (the "NYSE") is open
for trading through the facilities of the National Securities Clearing
Corporation ("NSCC"). The Participant will not be responsible for errors in the
information relating to the Deposit Securities to be included in the current
Portfolio Deposit to be transmitted through the facilities of the NSCC in
connection with Redemption Orders and Purchase Orders that are caused by the
Trust, the Distributor or the Transfer Agent.
4. ROLE OF PARTICIPANT. The Participant shall have no authority in any
transaction to act as agent of the Distributor, the Transfer Agent or the Trust.
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(a) In executing this Agreement, the Participant agrees in connection with any
purchase or redemption transactions in which it acts for a customer or for any
other DTC Participant or indirect participant, or any other beneficial owner of
Trust Shares (each a "Beneficial Owner"), that it shall extend to any such party
all of the rights, and shall be bound by all of the obligations, of a DTC
Participant in addition to any obligations that it undertakes hereunder or in
accordance with the Prospectus.
(b) The Participant agrees (i) subject to any privacy obligations or other
obligations arising under the federal or state securities laws it may have to it
customers, to assist the Distributor in ascertaining certain information
regarding sales of Trust Shares made by or through Participant upon the request
of the Trust or the Distributor necessary for the Funds to comply with their
obligations to distribute information to its shareholders as may be required
from time to time under applicable state or federal securities laws, or (ii) in
lieu thereof, and at the option of the Participant, the Participant may
undertake to deliver prospectuses, as may be amended or supplemented from time
to time, proxy material, annual and other reports of the Funds or other similar
information that the Funds are obligated to deliver to their shareholders to the
Participant's customers that custody Fund Shares with the Participant, after
receipt from the Funds or the Distributor of sufficient quantities to allow
mailing thereof to such customers. None of the Distributor, the Trust or any of
their respective affiliates shall use the names and addresses and other
information concerning Participant's customers for any purpose except in
connection with the performance of their duties and responsibilities hereunder
and except for servicing and informational mailings described in this clause (b)
of Section 4, or as may otherwise be required by applicable law.
(c) The Participant affirms that it has procedures in place reasonably
designed to protect the privacy of non-public personal consumer/customer
financial information to the extent required by applicable law, rule and
regulation.
(d) The Participant certifies that it has policies, procedures and internal
controls in place that are reasonably designed to comply with all applicable
anti-money laundering laws and regulations, including applicable provisions of
the USA PATRIOT Act of 2001 and the regulations administered by the U.S.
Department of the Treasury's Office of Foreign Assets Control. To the extent
required by applicable law, rule or regulation, the Participant will
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cooperate with and provide assistance to the Trust and the Distributor, which
may include providing the Trust and Distributor with additional information
regarding transactions in Trust Shares when required to do so under applicable
law, rule, court order or by an administrative or regulatory entity.
Notwithstanding anything in the foregoing to the contrary, Participant's
obligations under this clause (d) shall be subject to any privacy or other
duties Participant may have to its customers arising under federal or state
securities laws.
5. Participant Representations.
(a) The Participant represents, warrants and agrees that it will not make
any representations concerning the Funds, the Creation Units or the Shares other
than those consistent with the Trust's then current Prospectus or any
promotional or sales literature furnished to the Participant by the Distributor
or the Trust, or any such materials permitted by clause (b) of this Section 5.
(b) The Participant agrees not to furnish or cause to be furnished by
Participant or its employees to any person or display or publish any information
or materials relating to the Funds (including, without limitation, promotional
materials and sales literature, advertisements, press releases, announcements,
statements, posters, signs or other similar materials, but not including any
materials prepared and used for Participant's internal use only, any brokerage
communications between employees of Participant and customers or any
communications prepared and directed to registered broker-dealers) (Marketing
Materials), except such Marketing Materials as may be furnished to the
Participant by the Distributor or the Trust and such other Marketing Materials
as are consistent with the Trust's then current Prospectus or otherwise approved
by the Distributor or the Trust; provided that such Marketing Materials [covered
in
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Section 1],clearly indicate that such Marketing Materials are prepared and
distributed by Participant and, upon request, a copy is forwarded to the
Distributor as soon as practicable. (c)
(d) Notwithstanding anything to the contrary in this Agreement, Participant
and its affiliates may prepare and circulate in the regular course of their
businesses (i) research reports that include information, opinions or
recommendations relating to Trust Shares; and (ii) without reference to the
Funds or their prospectus, data and information relating to the various indices
to which the Funds are benchmarked.
[This rep appears in Section 9]
6. Title to Securities: Restricted Shares. The Participant represents on
behalf of itself and any party for which it acts that upon delivery of a
portfolio of Deposit Securities to the Trust's custodian [is this the Transfer
Agent?], the Trust will acquire good and unencumbered title to such securities,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claims, including, without limitation, any restriction
upon the sale or transfer of such securities imposed by (i) any agreement or
arrangement entered into by the Participant or any party for which it is acting
in connection with a Purchase Order or (ii) any provision of the 1933 Act, and
any regulations thereunder (except that portfolio securities of issuers other
than U.S. issuers shall not be required to have been registered under the 1933
Act if exempt from such registration), or of the applicable laws or regulations
of any other applicable jurisdiction and (iii) no such securities are
"restricted securities" as such term is used in Rule 144(a)(3)(i) promulgated
under the ▇▇▇▇ ▇▇▇.
7. FEES. In connection with the creation or redemption of Creation Units,
the Transfer Agent shall charge, and the Participant agrees to pay to the
Transfer Agent, the Transaction Fee
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prescribed in the Trust's prospectus applicable to creations or redemptions
through the Trust's Clearing Process, or the Transaction Fee and such additional
amounts as may be prescribed pursuant to the Trust's prospectus applicable to
(i) creations or redemptions outside the Trust's Clearing Process and (ii)
creations within the Trust's Clearing Process where the cash equivalent value of
one or more Deposit Securities is being deposited in lieu of the inclusion of
such Deposit Security in the securities portion of the Portfolio Deposit because
the Participant is restricted by regulation or otherwise from investing or
engaging in a transaction in such security. The Transaction Fee may be waived or
otherwise adjusted from time to time subject to the provisions relating thereto
and any limitations as prescribed in the Prospectus.
8. AUTHORIZED PERSONS. Concurrently with the execution of this Agreement
and from time to time thereafter, the Participant shall deliver to the
Distributor and the Transfer Agent, duly certified as appropriate by its
secretary or other duly authorized official, a certificate setting forth the
names and signatures of all persons authorized to give instructions relating to
activity contemplated hereby or any other notice, request or instruction on
behalf of the Participant (each, an "Authorized Person"). Such certificate may
be accepted and relied upon by the Distributor and the Transfer Agent as
conclusive evidence of the facts set forth therein and shall be considered to be
in full force and effect until delivery to the Distributor and the Transfer
Agent of a superseding certificate bearing a subsequent date. The Transfer Agent
shall issue to each Authorized Person a unique personal identification number
("PIN Number") by which such Authorized Person and the Participant shall be
identified and instructions issued by the Participant hereunder shall be
authenticated. Upon the termination or revocation of authority of such
Authorized Person by the Participant, the Participant shall give immediate
written notice of such fact to the Distributor and the Transfer Agent and such
notice shall be effective upon receipt by both the Distributor and the Transfer
Agent.
9. REDEMPTION. The Participant represents and warrants that it will not
obtain a Submission Number (as defined in Attachment A) from the Transfer Agent
for the purpose of redeeming a Creation Unit unless it first ascertains that (a)
it or its customer, as the case may be, owns outright or has full legal
authority and legal beneficial right to tender for redemption the requisite
number of Trust Shares of any Fund to be redeemed, and the entire proceeds of
the
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Redemption and (b) such Trust Shares have not been loaned or pledged to
another party nor are the subject of a repurchase agreement, securities lending
agreement or such other arrangement which would preclude the delivery of such
Trust Shares to the Transfer Agent in accordance with the Prospectus or as
otherwise required by the Trust.
7. BENEFICIAL OWNERSHIP. The Participant represents and warrants to the
Distributor and the Trust that it does not hold for the account of any single
Beneficial Owner of Trust Shares, 80 percent (80%) or more of outstanding Trust
Shares so as to cause the Trust to have a basis in the Deposit Securities
deposited with the Trust different from the market value of such Deposit
Securities on the date of such deposit, pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended. The Distributor may request information from
the Participant regarding Trust Share ownership to the extent necessary to make
a determination regarding ownership of 80 percent (80%) or more of outstanding
Trust Shares by a Beneficial Owner as a condition to the acceptance of a
Portfolio Deposit.
8. INDEMNIFICATION
(a) The Participant hereby agrees to indemnify and hold harmless the Distributor
in its capacity as principal underwriter, the Trust, the Transfer Agent, their
respective affiliates, directors, officers, employees and agents, and each
person, if any, who controls such persons within the meaning of Section 15 of
the 1933 Act (each an "Indemnified Party") from and against any loss, liability,
cost and expense (including reasonable attorneys' fees) incurred by such
Indemnified Party as a result of (i) any breach by the Participant of any
provision of this Agreement that relates to the Participant; (ii) any failure on
the part of the Participant to perform any of its obligations set forth in the
Agreement; (iii) any failure by the Participant to comply
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with applicable laws, including rules and regulations of self-regulatory
organizations in relation to the sales, trading or marketing of Trust Shares and
the creation or redemption of or investment in the Trust, except that the
Participant shall not be required to indemnify an Indemnified Party to the
extent that such failure was caused by Participant's adherence to instructions
given or representations made by the Distributor, the Transfer Agent or any
Indemnified Party, as applicable, or; (iv) actions of such Indemnified Party in
reliance upon any instructions issued or representations made in accordance with
Attachment A (as it may be amended from time to time) and reasonably believed by
the Distributor or the Transfer Agent, as applicable, to be genuine and to have
been given by the Participant except to the extent that the Participant had
previously revoked a PIN Number used in giving such instructions or
representations (where applicable) and such revocation was given by the
Participant and received by the Distributor and the Transfer Agent in accordance
with the terms of Section 6 hereto. The Participant and the Distributor
understand and agree that the Trust as a third part beneficiary to this
Agreement is entitled and intends to proceed directly against the Participant in
the event that the Participant fails to honor any of its obligations pursuant to
this Agreement that benefit the Trust.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Participant, its respective subsidiaries, affiliates, directors, officers,
employees and agents, and each person, if any, who controls such persons within
the meaning of Section 15 of the 1933 Act (each an "Indemnified Party") from and
against any loss, liability, cost and expense (including reasonable attorneys'
fees) incurred by such Indemnified Party as a result of (i) any breach by the
Distributor of any provision of this Agreement that relates to the Distributor;
(ii) any failure on the part of the Distributor to perform any of its
obligations set forth in this Agreement; (iii) any failure by the Distributor to
comply with applicable laws, including rules and regulations of self-
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regulatory organizations in relation to its role as Distributor of the Funds,
or; (iv) actions of such Indemnified Party in reliance upon any instructions
issued or representations made in accordance with Attachment A (as it may be
amended from time to time) reasonably believed by the Participant to be genuine
and to have been given by the Distributor or the Transfer Agent; or (v) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement of the Trust as originally filed with the Securities and
Exchange Commission or in any amendment thereof, or in any prospectus or any
statement of additional information, or any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in connection with Participant's acting
in its capacity as an authorized participant.
(c) No party to this Agreement shall be liable to the other party or to any
other person for any damages arising out of mistakes or errors in data provided
to such Indemnified Party by a third party, or out of interruptions or delays of
electronic means of communications with the Indemnified Parties.
9. ACKNOWLEDGMENT. The Participant acknowledges receipt of the Trust's
prospectus and represents it has reviewed such document and understands the
terms thereof.
10. NOTICES. Except as otherwise specifically provided in this Agreement,
all notices required or permitted to be given pursuant to this Agreement shall
be given in writing and delivered by personal delivery or by postage prepaid
registered or certified United States first class mail, return receipt
requested, or by telex, telegram or facsimile or similar means of same day
delivery (with a confirming copy by mail as provided herein). Unless otherwise
notified in writing, all notices to the Transfer Agent shall be given or sent as
follows: The Bank of New
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York, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ETF Services Group.
All notices to the Participant and the Distributor shall be directed to the
address or telephone, facsimile or telex numbers indicated below the signature
line of such party. [What about address for the Trust?]
11. TERMINATION AND AMENDMENT. This Agreement shall become effective in
this form as of the date accepted by the Transfer Agent and may be terminated at
any time by any party upon thirty (30) days prior notice to the other parties
(i) unless earlier terminated by the Transfer Agent in the event of a breach of
this Agreement or the procedures described herein by the Participant or (ii) in
the event that the Trust is terminated pursuant to the Trust Agreement. This
Agreement supersedes any prior agreement between the parties. This Agreement may
be amended by the Transfer Agent from time to time by the following procedure.
The Transfer Agent will mail a copy of the amendment to the Distributor and the
Participant. For the purposes of this Agreement, mail will be deemed received by
the recipient thereof on the third (3rd) day following the deposit of such mail
into the U.S. postal system. If neither the Distributor nor the Participant
objects in writing to the amendment within ten (10) business days after its
receipt, the amendment will become part of this Agreement in accordance with its
terms.
12. PROSPECTUS.
(a) The Distributor will provide to the Participant copies of the then
current prospectus and any printed supplemental information in
reasonable quantities upon request. The Distributor represents,
warrants and agrees that it will notify the Participant when a revised,
supplemented or amended prospectus for any Fund Shares is available and
deliver or otherwise make available to the Participant copies of such
revised, supplemented or amended prospectus at such time and in such
numbers as to enable the Participant to comply with any obligation it
may have to deliver such prospectus to customers. As a general matter,
the Distributor will make such revised, supplemented or amended
prospectus available to the Participant no later than its effective
date. The Distributor shall be deemed to have complied with this
Section 12 when the Participant has receive such revised, supplemented
or amended prospectus by email at ▇▇▇▇▇▇▇▇▇▇-▇▇@▇▇.▇▇▇▇▇.▇▇.▇▇▇, in
printable form, with such number of hard copies as may be agreed from
time to time by the parties promptly thereafter.
(b) Distributor represents and warrants that (i) the registration
statement on Form N-1A (No. 811-21265) and the prospectus contained
therein conforms in all material respects to the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of
the Securities Exchange Commission thereunder and do not and will not,
as of the
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applicable effective date as to the registration statement and any
amendment thereto and as of the applicable filing date as to the
prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; (ii) the sale and distribution of the Trust Shares as
contemplated herein will not conflict with or result in a breach or
violation of any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Trust, any
Fund or the Distributor; and (iii) no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue
and sale of the Trust Shares, except the registration under the Act of
the Trust Shares.
13. COUNTERPARTS. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all shall
constitute but one and the same instrument.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
conflicts of laws provisions thereof.
ALPS DISTRIBUTORS, INC.
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BY:
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NAME:
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TITLE:
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ADDRESS:
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TELEPHONE:
FACSIMILE:
{NAME OF PARTICIPANT}
BY:
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NAME:
--------------------------
TITLE:
--------------------------
ADDRESS:
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TELEPHONE:
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FACSIMILE:
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-▇▇-
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇,
AS TRANSFER AGENT
BY:
NAME: ▇▇▇▇▇▇ ▇▇▇▇▇▇
TITLE: Vice-President
ADDRESS: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
TELEPHONE: (▇▇▇) ▇▇▇-▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
DATED:
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ATTACHMENT A
This document supplements the Trust's Prospectus, and is an attachment to
the Trust Participant Agreement with respect to the procedures to be used by (i)
the Transfer Agent in processing an order for the creation of Trust Shares and
(ii) the Transfer Agent in processing a request for the redemption of Trust
Shares, and (iii) the Participants and the Transfer Agent in delivering or
arranging for the delivery of requisite cash payments, Portfolio Deposits or
Trust Shares, as the case may be, in connection with the submission of orders
for creation or requests for redemption.
A Participant is first required to have signed the Trust
Participant Agreement. Upon acceptance of the Trust Participant Agreement by the
Distributor and the Transfer Agent will assign a personal identification number
to each Authorized Person authorized to act for the Participant. This will allow
a Participant through its Authorized Person(s) to place an order with respect to
Trust Shares.
I. TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF TRUST SHARES
1. Call to Receive a Submission Number. An Authorized Person for the
Participant will call the Trust Telephone Representative at (▇▇▇) ▇▇▇-▇▇▇▇ not
later than the closing time of the regular trading session on The New York Stock
Exchange (the "NYSE Closing Time") (ordinarily 4:00 p.m. New York time) to
receive a Submission Number. In the case of custom orders, the order must be
received by the Transfer Agent no later than 3:00 p.m. ET on the trade date.
Upon verifying the authenticity of the caller (as determined by the use of the
appropriate PIN Number) and the terms of the order for creation or request for
redemption, the Trust Telephone Representative will issue a unique Submission
Number. All orders with respect to the creation or redemption of Trust Shares
are required to be in writing and accompanied by the designated Submission
Number. Incoming telephone calls are queued and will be handled in the sequence
received. Calls placed before the NYSE Closing Time will be processed even if
the call is taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND
REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE CLOSING TIME WILL
NOT BE ACCEPTED.
2. Assemble the Submission. The Authorized Person submitting an order to
create or a request to redeem shall assemble (a) written instructions regarding
such creation order or redemption request, (b) the designated Submission Number
and (c) the PIN Number in one document and transmit such document by facsimile
or telex to the Trust Telephone Representative and the Distributor, as
applicable, according to the procedures set forth below in subsection 3. The
document so transmitted is hereinafter referred to as the "Submission", and the
Business Day on which a Submission is made is hereinafter referred to as the
"Transmittal Date". NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER
IS ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER.
AN ORDER OR REQUEST IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF THE
SUBMISSION.
3. Transmit the Submission. A Submission Number is only valid for a limited
time. The Submission for either creations or redemptions of Trust Shares must be
sent by facsimile or telex to the Trust Telephone Representative, as applicable,
within 15 minutes of the issuance of the Submission Number. In the event that
the Submission is not received within such time period, the Trust Telephone
Representative will attempt to contact the Participant to request immediate
transmission of the Submission.
(a) In the case of a Submission for creation, unless the Submission is
received by the Trust Telephone Representative upon the earlier of within (i) 15
minutes of contact with the Participant or (ii) 45 minutes after the NYSE
Closing Time, the Submission will be deemed invalid.
(b) In the case of a Submission for redemption, unless such Submission is
received by the Trust Telephone Representative within (i) 15 minutes of contact
with the Participant or (ii) 45 minutes after the NYSE Closing Time, whichever
is earlier, such order for redemption contained therein shall be Deemed Received
(as hereinafter defined in Section IV) by the Transfer Agent on the Business Day
following such Transmittal Date in accordance with the procedures set forth in
Section IV(2) and (4) hereof.
4. Await Receipt of Confirmation.
(a) Trust's Clearing Process-Creation Orders. The Transfer Agent shall
issue to both the Participating Party a confirmation of acceptance of an order
to create Trust Shares in Creation Unit size aggregations through the Trust's
Clearing Process within 15 minutes of its receipt of a Submission received in
good form. In the event the Participating Party does not receive a timely
confirmation from the Transfer Agent, it should contact the Distributor and the
Trust Telephone Representative at the business numbers indicated.
(b) Trust's Clearing Process-Requests for Redemptions. The Transfer Agent
shall issue to the Participating Party a confirmation of acceptance of a request
to redeem Trust Shares in Creation Unit size aggregations through the Trust's
Clearing Process within 15 minutes of its receipt of a Submission received in
good form. In the event the Participating Party does not receive a timely
confirmation from the Transfer Agent, it should contact the Transfer Agent
directly at the business number indicated.
(c) Outside the Trust's Clearing Process-Creation Orders. The Transfer
Agent shall issue to the DTC Participant an acknowledgment of receipt of an
order to create Trust Shares in Creation Unit size aggregations outside the
Trust's Clearing Process within 15 minutes of its receipt of a Submission
received in good form. In the event the DTC Participant does not receive a
timely acknowledgment from the Transfer Agent, it should contact the Transfer
Agent at the business numbers indicated.
(d) Outside the Trust's Clearing Process-Requests for Redemption. The
Transfer Agent shall issue to the DTC Participant an acknowledgment of receipt
of an order to redeem Trust Shares in Creation Unit size aggregations outside
the Trust's Clearing Process within 15 minutes of its receipt of a Submission
received in good form. In the event the DTC Participant does not receive a
timely acknowledgment from the Transfer Agent, it should contact the Transfer
Agent directly at the business number indicated.
II. PARTICIPANTS' RESPONSIBILITY FOR DELIVERING OR EFFECTING THE DELIVERY OF
REQUISITE PORTFOLIO DEPOSITS OR TRUST SHARES AND CASH PAYMENTS IN
CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
1. Trust's Clearing Process-Creation Orders. The Participating Party
notified of confirmation of an order to create Trust Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
(a) the requisite Deposit Securities (or contracts to purchase such Deposit
Securities expected to be delivered through NSCC by the "regular way" settlement
date) and (b) the Cash Component, if any, to the Transfer Agent by means of the
Trust's Clearing Process so as to be received no later than on the "regular way"
settlement date following the Business Day on which such order is Deemed
Received by the Transfer Agent as set forth below in Section IV.
2. Trust's Clearing Process - Redemption Requests. The Participating Party
notified of confirmation of a request to redeem Trust Shares through the Trust's
Clearing Process shall be required to transfer or arrange for the transfer of
the requisite Trust Shares and the Cash Redemption Amount, if any, to the
Transfer Agent by means of the Trust's Clearing Process so as to be received no
later than on the "regular way" settlement date following the Business Day on
which such order is Deemed Received by the Transfer Agent as set forth below in
Section IV.
3. Outside the Trust's Clearing Process - Creation Orders. The DTC
Participant notified of acknowledgment of an order to create Trust Shares
outside the Trust's Clearing Process shall be required to effect a transfer to
the Transfer Agent of (a) the requisite Deposit Securities through DTC so as to
be received by the Transfer Agent no later than 11:00 a.m. on the next Business
Day immediately following the Business Day on which such order is Deemed
Received by the Distributor as set forth below in Section IV, in such a way as
to replicate the Portfolio Deposit established on the Transmittal Date by the
Transfer Agent and (b) the Cash Component, if any, through the Federal Reserve
Bank wire system so as to be received by the Transfer Agent by 2:00 p.m. on the
next Business Day immediately following the day such order is Deemed Received.
If the Transfer Agent does not receive the Deposit Securities by 11:00 a.m. and
the Cash Component, if any, by 2:00 p.m. on the Business Day immediately
following the day such order is Deemed Received, the creation order contained in
such Submission shall be canceled. Upon written notice to the Transfer Agent,
the DTC Participant may resubmit such canceled order on the following Business
Day using a Portfolio Deposit as newly constituted.
4. Purchase of Creation Unit Aggregations Prior to Receipt of Deposit
Securities. Creation Unit Aggregations may be created in advance of receipt by
the Trust of all or a portion of the applicable Deposit Securities as described
below. In these circumstances, the initial deposit will have a value greater
than the NAV of the Fund Shares on the date the order is placed in proper form
since, in addition to available Deposit Securities, cash must be deposited in an
amount equal to the sum of (i) the Cash Component, plus (ii) 115% of the market
value of the undelivered Deposit Securities (the "Additional Cash Deposit"). The
order shall be deemed to be received on the Business Day on which the order is
placed provided that the order is placed in proper form prior to 4:00 p.m.,
Eastern time, on such date, and federal funds in the appropriate amount are
deposited with the Transfer Agent by 11:00 a.m., Eastern time, the following
Business Day. If the order is not placed in proper form by 4:00 p.m. or federal
funds in the appropriate amount are not received by 11:00 a.m. the next Business
Day, then the order may be deemed to be canceled and the Authorized Participant
shall be liable to the Fund for losses, if any, resulting therefrom. An
additional amount of cash shall be required to be deposited with the Trust,
pending delivery of the missing Deposit Securities to the extent necessary to
maintain the Additional Cash Deposit with the Trust in an amount at least equal
to 115% of the daily marked to market value of the missing Deposit Securities.
5. Outside the Trust's Clearing Process - Redemption Requests. The DTC
Participant notified of acknowledgment of a request to redeem Trust Shares
outside the Trust's Clearing Process shall be required to effect a transfer to
the Transfer Agent (a) the requisite number of Trust Shares through DTC no later
than the NYSE Closing Time on the Business Day on which such order is Deemed
Received by the Transfer Agent and (b) the Cash Redemption Amount, if any,
through the Federal Reserve Bank wire system by no later than 2:00 p.m. on the
next Business Day immediately following the Business Day on which such order is
Deemed Received by the Transfer Agent.
6. Transaction Fee. In connection with the creation or redemption of
Creation Units, the Transfer Agent shall charge, and the Participant agrees to
pay to the Transfer Agent, the Transaction Fee prescribed in the Trust's
prospectus applicable to (i) creations or redemptions through the Trust's
Clearing Process, or the Transaction Fee and such additional amounts as may be
prescribed pursuant to the Trust's prospectus applicable to creations or
redemptions outside the Trust's Clearing Process and (ii) creations within the
Trust's Clearing Process where the cash equivalent value of one or more Deposit
Securities is being deposited in lieu of the inclusion of such Deposit Security
in the securities portion of the Portfolio Deposit because the Participant is
restricted by regulation or otherwise from investing or engaging in a
transaction in such security. Such Transaction Fee and additional amounts, if
any, shall be included in the calculation of the Cash Component or Cash
Redemption Amount payable or to be received, as the case may be, by the
Participant in connection with the creation or redemption order.
III. CUSTODIAN'S RESPONSIBILITY FOR EFFECTING DELIVERY OF REQUISITE TRUST
SHARES OR SECURITIES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR
CREATION OR REQUESTS FOR REDEMPTION.
1. Trust's Clearing Process - Creation Order. After the Transfer Agent has
received notification of a Submission from the Participant for a creation order
for Trust Shares through the Trust's Clearing Process which has been Deemed
Received by the Transfer Agent as set forth below in Section IV, the Transfer
Agent shall initiate procedures to transfer the requisite Trust Shares and the
Cash Component, if any, through the Trust's Clearing Process so as to be
received by the creator no later than on the "regular way" settlement date
following the Business Day on which the Submission is Deemed Received by the
Transfer Agent
2. Trust's Clearing Process - Redemption Requests. After the Transfer Agent
has received a Submission for a redemption request for Trust Shares through the
Trust's Clearing Process and Deemed Received such submission as set forth below
in Section IV, the Transfer Agent shall initiate procedures to transfer the
requisite securities (or contracts to purchase such securities expected to be
delivered through NSCC by the "regular way" settlement date) and the Cash
Redemption Amount, if any, through the Trust's Clearing Process so as to be
received by the Beneficial Owner no later than on the "regular way" settlement
date following the Business Day on which the Submission is Deemed Received by
the Transfer Agent.
3. Outside the Trust's Clearing Process-Creation Orders. After the Transfer
Agent has received notification of a Submission from the Participant for a
creation order for Trust Shares outside the Trust's Clearing Process which has
been Deemed Received by the Transfer Agent as set forth below in Section IV, the
Transfer Agent shall initiate procedures to transfer the requisite Trust Shares
through DTC and the DTC Participants and the Cash Component, if any, through the
Federal Reserve Bank wire system so as to be received by the creator no later
than on the third (3rd) Business Day following the Business Day on which the
Submission is Deemed Received by the Transfer Agent.
4. Outside the Trust's Clearing Process-Redemption Requests. After the
Transfer Agent has received a Submission for a redemption request for Trust
Shares outside the Trust's Clearing Process and Deemed Received such submission
as set forth below in Section IV, the Transfer Agent shall initiate procedures
to transfer the requisite securities (or contracts to purchase such securities
expected to be delivered within three Business Days) through DTC and the DTC
Participants and the Cash Redemption Amount, if any, through the Federal Reserve
Bank wire system so as to be received by the Beneficial Owner no later than on
the third (3rd) Business Day following the Business Day on which the Submission
is Deemed Received by the Transfer Agent.
IV. PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO REDEEM SHALL BE
"DEEMED RECEIVED."
1. Trust's Clearing Process-Creation Orders. An order to create Trust
Shares through the Trust's Clearing Process shall be "Deemed Received" by the
Transfer Agent on the Transmittal Date only if (a) the Submission containing
such order is in proper form and (b) such Submission is received by the Transfer
Agent no later than the time on such Transmittal Date as set forth in Section
I(3)(a) hereof. Orders to create Trust Shares contained in Submissions
transmitted after such time on a Transmittal Date shall be deemed invalid.
2. Trust's Clearing Process-Redemption Requests. A request to redeem Trust
Shares through the Trust's Clearing Process shall be Deemed Received by the
Transfer Agent on the Transmittal Date only if (a) the Submission containing
such request is in proper order and (b) such Submission is received by the
Transfer Agent no later than the time on such Transmittal Date as set forth in
Section I(3)(b) hereof. Requests to redeem Trust Shares contained in Submissions
transmitted after such time on a Transmittal Date shall be "Deemed Received" by
the Trustee on the next Business Day immediately following such Transmittal
Date.
3. Outside the Trust's Clearing Process-Creation Orders. An order to create
Trust Shares outside the Trust's Clearing Process shall be Deemed Received by
the Transfer Agent on the Transmittal Date only if: (a) the Submission
containing such order is in proper form, (b) such Submission is received by the
Transfer Agent no later than the time on such
Transmittal Date as set forth in Section I(3)(a) hereof, (c) the requisite
number of Deposit Securities is transferred through DTC to the account of the
Trust no later than 11:00 a.m. on the Business Day next following the
Transmittal Date and (d) the cash equal to the Cash Component, if any, is
transferred via the Federal Reserve Bank wire system to the account of the Trust
by no later than 2:00 p.m. on the Business Day next following the Transmittal
Date. If either the Submission, the requisite Deposit Securities or the cash
equal to the Cash Component is not received by the Trustee within the time
periods set forth above, such order shall be deemed invalid.
4. Outside the Trust's Clearing Process - Redemption Requests. A request to
redeem Trust Shares outside the Trust's Clearing Process shall be Deemed
Received by the Transfer Agent the Transmittal Date only if (a) the Submission
containing such request is in proper form, (b) such Submission is received by
the Trust no later than the time as set forth in Section I(3)(b) hereof, (c) the
requisite number of Trust Shares is transferred via DTC to the account of the
Transfer Agent by the NYSE Closing Time on such Transmittal Date and (d) the
Cash Redemption Amount owed to the Trust, if any, is received by the Transfer
Agent no later than 2:00 p.m. of the Business Day next following such
Transmittal Date. If either the Submission, the Trust Shares or cash equal to
the Cash Redemption Amount, if any, is not received by the Trust within the time
periods set forth above, such redemption request shall be Deemed Received by the
Transfer Agent on the Business Day on which both the Submission and the
requisite number of Trust Shares are delivered to the Transfer Agent within the
proper time periods as set forth above; provided that the Cash Redemption
Amount, if any, is then paid on the next Business Day within the time period set
forth above.
5. Ambiguous Instructions. In the event that a Submission contains terms
that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Telephone Representative will
attempt to contact the Participant to request confirmation of the terms of the
order. If an Authorized Person confirms the terms as they appear in the
Submission then the Submission will be accepted and processed. If an Authorized
Person contradicts its terms, the Submission will be deemed invalid, and a
corrected Submission must be received by the Transfer Agent, as applicable, not
later than the earlier of (i)
within 15 minutes of such contact with the Participant or (ii) 45 minutes after
the NYSE Closing Time. If the Trust Telephone Representative is not able to
contact an Authorized Person, then the Submission shall be accepted and
processed in accordance with its terms notwithstanding any inconsistency from
the terms of the telephone information. In the event that a Submission contains
terms that are illegible, the Submission will be deemed invalid and the Trust
Telephone Representative will attempt to contact the Participant to request
retransmission of the Submission. A corrected Submission must be received by the
Transfer Agent, as applicable, not later than the earlier of (i) within 15
minutes of such contact with the Participant or (ii) 45 minutes after the Nasdaq
Closing Time.
6. Suspension or Rejection of an Order. The Distributor or Transfer Agent
reserves the right to suspend a Submission in the event that its acceptance
would appear to result in the Participant or a Beneficial Owner owning 80
percent (80%) or more of all outstanding Trust Shares and if pursuant to Section
351 of the Internal Revenue Code of 1986, as amended, such a circumstance would
result in the Trust having a basis in the securities deposited different from
the market value of such securities on the date of deposit. In such event, the
Distributor or the Trust Telephone Representative will attempt to contact an
Authorized Person for purposes of confirmation of the fact that with respect to
such Participant no Beneficial Owner would own 80 percent (80%) or more of all
outstanding Trust Shares upon execution of the Submission or that such a
circumstance would not result in the Trust having a basis in the securities
deposited different from the market value of such securities on the date of
deposit. In the event that (i) the Distributor or the Trust Telephone
Representative is unable to contact an Authorized Person or (ii) the Participant
fails to transmit an identical Submission containing a representation and
warranty as to such fact, then the Submission shall be deemed invalid.
The Trust reserves the absolute right to reject a creation order
transmitted to it by the Distributor in respect of a Fund if: (i) the order is
not in proper form; (ii) the investor(s), upon obtaining the Fund Shares
ordered, would own 80% or more of the currently outstanding shares of any Fund;
(iii) the Deposit Securities delivered are not as disseminated for that date by
the Custodian, as described above; (iv) acceptance of the Deposit Securities
would have certain adverse tax consequences to the Fund; (v) acceptance of the
Fund Deposit would, in the opinion
of counsel, be unlawful; (vi) acceptance of the Fund Deposit would otherwise, in
the discretion of the Trust or the Adviser, have an adverse effect on the Trust
or the rights of beneficial owners; or (vii) in the event that circumstances
outside the control of the Trust, the Transfer Agent, the Distributor and the
Adviser make it for all practical purposes impossible to process creation
orders. Examples of such circumstances include acts of God; public service or
utility problems such as fires, floods, extreme weather conditions and power
outages resulting in telephone, telecopy and computer failures; market
conditions or activities causing trading halts; systems failures involving
computer or other information systems affecting the Trust, the Adviser, the
Distributor, DTC, NSCC, the Transfer Agent, the Custodian or sub-custodian or
any other participant in the creation process, and similar extraordinary events.
The Transfer Agent shall notify immediately a prospective creator of a Creation
Unit and/or the Authorized Participant acting on behalf of such prospective
creator of its rejection of the order of such person. The Trust, the Custodian,
any sub-custodian and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall any of them incur any liability for the failure to give any such
notification.
Procedures for custom baskets?
V. TELEPHONE, FACSIMILE, AND TELEX NUMBERS
____________________________ TELEPHONE: ________________
FACSIMILE: ________________
TRUST TELEPHONE REPRESENTATIVE: TELEPHONE: ________________
FACSIMILE: ________________
TRUSTEE: TELEPHONE: ________________
FACSIMILE: ________________
PARTICIPANT: TELEPHONE: ________________
FACSIMILE: ________________
____________________________
BY: ____________________________
TITLE: ____________________________
{NAME OF PARTICIPANT}
____________________________
BY: ____________________________
TITLE: ____________________________
ACCEPTED BY:
THE BANK OF NEW YORK, AS TRUSTEE
BY: ____________________________
TITLE: ____________________________
DATED: ____________________________