PowerShares XTF™ are a unique, sophisticated investment. They seek to replicate Intellidex™ stock selections inside one of the most tax-efficient, low cost, liquid products ever created, the ETF.

What are Exchange-Traded Funds (ETFs)?

What are PowerShares XTF™?

Why are PowerShares XTF™ So Smart?

The Wisdom of Objective Portfolio Management

What is Dynamic About the Intellidex™?

Risk Managed Design

Tax-Advantaged Product Design

Low Ownership Cost

Transparency

Liquidity and Convenience

What are Exchange-Traded Funds (ETFs)?
ETFs are one of the fastest growing investment products in the worldwide financial marketplace today. As of January, 2007, there are 387 ETFs listed in the U.S. alone, with $422 billion in assets under management. The ETF based on the NASDAQ 100 Index is the number one traded equity security in the world.

ETFs are funds that trade like individual stocks on all of the major exchanges, similar to securities of publicly held companies. They can be bought and sold at any moment during market hours. There are risks involved with investing in ETFs including possible the loss of money. The investment return and principal value of an investment in PowerShares XTF™ will fluctuate so that shares, when sold, may be worth more or less than their original cost.

What are PowerShares XTF™?
Until now, ETFs have been based on benchmark indexes that represent market segment movements. In contrast, PowerShares XTF™ are based on an intelligent index, the Intellidex™.

PowerShares XTF™ are based on Dynamic Indexes that use rules-based quantitative analysis. This Intellidex™ methodology chooses stocks for their capital appreciation potential, evaluating and selecting stocks based on multiple valuation criteria.

The Wisdom of Objective Portfolio Management
PowerShares XTF™ replicate a rules-based Intellidex™, thereby overriding the emotional conflicts that may interfere with sound investment decisions. This eliminates the subjective nature of securities research, which can also cloud the quality of recommendations, stock selection and portfolio management.

Actively-managed money has traditional risks such as Style Drift, Manager Turnover, Window Dressing and Investor/Manager Goal Misalignment. These are rarely concerns when investing in PowerShares XTF™ because of their purely objective, rules-based, transparent and emotion-free management structure.

What is Dynamic About the Intellidex™?
Dynamic Indexing is a rules-based selection process that expands upon traditional benchmark indexing. The Intellidex™ methodology is a sophisticated way of analyzing large groups of stocks in order to select specific stocks that have the potential for capital appreciation, and it provides market exposure to defined segments of the U.S. economy.

To pursue the goal of representing stocks with growth potential, the Intellidex™ utilizes rules-based quantitative analysis to evaluate and select securities using a wide variety of investment value determinants such as fundamental growth, stock valuation, timeliness and risk factors. This process is conducted quarterly to assure a consistent and accurate representation of a specific market segment.

Risk-Managed Design
PowerShares XTF™ are based on the Intellidex™ Index. The methodology of the Intellidex™ is designed to control individual stock risk by ensuring sufficient exposure to several securities within a given industry, sector, style or capitalization depending on the overall focus of the portfolio.

We further attempt to control risk through continual pricing and liquidity and by ensuring access to investor assets during market hours.

In addition, PowerShares XTF™ are exempt from the normal uptick rule on short sales. This allows for sophisticated risk management and hedging strategies not available on most other products.

Tax-Advantaged Product Design
Taxes may be the most overlooked and critical factor in wealth creation over time.

PowerShares XTF™ unique structure allows it to substantially mitigate and or possibly avoid capital gains distributions through an in-kind redemption process. Shareholders may be able to defer some, most or possibly all capital gains until they sell their shares.

PowerShares XTF™ accomplish this through a LI–FO (Lowest In – First Out) in-kind tax management strategy unique to ETFs. This method typically allows the fund manager, during the creation and redemption process, to purge the lowest cost basis stocks through in-kind, non-taxable stock transfers. This unique operational trait leaves the fund with the highest cost basis securities, which systematically reduces tax exposure.

Mutual Funds utilize a HI–FO (Highest In – First Out) pooled tax treatment strategy for managing most portfolios. This method typically creates embedded, unrealized capital-gain exposure and eventual taxable distributions. These distributions are declared and distributed annually and can occur regardless of whether the investor has made or lost money in the fund.

Separately Managed Accounts (SMAs) allow for customized tax planning and properly align a stock’s cost basis to each individual account, which is beneficial for wealthy investors. However, when adjusting their portfolios, SMAs lack an in-kind mechanism by which to purge embedded portfolio gains.

Finally, PowerShares XTF™ are tax efficient because they trade on an exchange— just like a stock where sellers are matched with buyers. These types of transactions between buyers and sellers do not require the fund to sell stock to meet redemptions. This substantially reduces fund expenses, cash on hand and the risk of unwanted capital gain distributions.

Low Ownership Cost
PowerShares XTF™ are able to provide lower ownership costs because of their efficient product structure.

PowerShares XTF™ have an established expense cap that includes expenses associated with the fund to make the cost of ownership clear and straight forward for investors. Usual brokerage commissions apply.

Transparency
With PowerShares XTF™, you always know exactly what securities are in your portfolio. The PowerShares XTF™ portfolio constituents are available on the PowerShares website through the holdings link provided on each product page. The Intellidex™ index holdings are also available at www.amex.com at all times. Knowing what securities are actually in your portfolio provides additional comfort when investing.

Liquidity and Convenience
PowerShares XTF™ trade daily on all U.S. Domestic Stock Exchanges and are listed on the American Stock Exchange, home of the largest and best-known domestic ETFs.

You can buy, sell, use limit orders, buy on margin or sell short on a downtick at any time during the trading day at that moment’s market price. PowerShares XTF™ are subject to risks similar to those of stocks, including those regarding short-selling and margin account maintenance.

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 Units only.

An investment in PowerShares XTF™ may lose value and is not guaranteed or insured by the FDIC, another government agency or any bank. Each fund may engage in active and frequent trading of its portfolio securities, which could result in high brokerage costs and an increase in taxable gains distributions to shareholders. Dividends from net investment income, if any, will be taxable as ordinary income. Ordinary brokerage commissions apply.

Nothing contained on this site constitutes investment, legal, tax or other advice, nor is it to be relied on in making an investment or any other decision. You should consult with your personal tax, legal and investment advisors before making any investment decision.