InvescoPowerShares.com - What are VRDOs?

What are VRDOs?

Variable Rate Demand Obligations (VRDOs) are high-quality, floating-rate bonds that typically provide investors with tax-exempt income in a short-term time frame.

Interest Rates

The bonds' interest rates generally reset on a daily or weekly basis. VRDOs are issued with long-dated maturities of 30 years, but include short-term demand features.

Minimum Investment

The minimum purchase amount for VRDOs is typically $100,000.

Issuers and Investors

VRDOs are popular with many types of issuers, including state and local governments, health care entities and universities. From an issuer's perspective, VRDOs provide long-term financing at short-term interest rates.

From the other perspective, investors may consider VRDOs as a potential short-term alternative due to their strong liquidity, high quality and tax-exempt status.a Certain limitations may apply.

Liquidity

The terms of the bond include a contractual source of liquidity, also known as a put feature, through either a standby bond purchase agreement (SBPA) or a letter of credit (LOC).

This feature enables investors to sell their VRDOs to a remarketing agent at par plus accrued interest on the next put date.

If the remarketing agent cannot remarket the bonds, they can be tendered with the financial institution providing the SBPA or LOC.

Taxes

Generally, interest from VRDOs is exempt from federal income taxes, and often is exempt from state and local income taxes if you are a resident in the issuing state.

^a There is a risk that the issuer may default on its payment obligation, resulting in a loss.

There are risks involved with investing in ETFs, including possible loss of money. Shares are subject to risks similar to those of investing in any fund of Variable Rate Demand Obligations, including credit, interest rate and general market risks, as well as those risks related to short selling and margin maintenance. Ordinary brokerage commissions apply. Generally, the prices of income securities tend to fall as interest rates rise. 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. Please see the prospectus for more complete information regarding an investment in the Fund.

Note: Not all products are available through all firms.

Investors may lose value in an investment of VRDOs. VRDOs are not federally guaranteed. There may be fees associated with investing in a fund that invests in VRDOs.

The Fund may trade at a premium or a discount to NAV. Although the Fund seeks to preserve the value of your investment, it is possible to lose money by investing in the Fund.

Invesco PowerShares does not offer tax advice. Please consult a tax advisor for advice regarding your specific situation. There is no guarantee the interest generated from the VRDOs held within the Fund will be exempt from state and local taxes.

VRDOs are high-quality, floating-rate bonds that provide investors with tax-exempt income in a short-term time frame. VRDOs are always purchased at par. When they are put back to an investment dealer, the investor receives par plus accrued interest. Yields are generally reset on a weekly basis.

Variable Rate Debt Obligations Risk: There may not be an active secondary market with respect to particular variable rate instruments in which the Fund invests, which could make it difficult for the Fund to dispose of a variable rate instrument if the issuer and/or the Remarketing Agent defaulted on its payment obligation or during periods that the Fund is not entitled to exercise its demand rights, and the Fund could, for these or other reasons, suffer a loss with respect to such instruments. 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. Please see the prospectus for more complete information regarding VRDOs and municipal securities.

The S&P and Moody's credit ratings are designed to rank the credit-worthiness of borrowers using a standardized ratings scale. The Aa2/AA+ average credit rating of the fund's holdings does not eliminate the risk of investment loss.

The average credit quality of the Fund's holdings as of the close of the reporting period 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 quality of the individual securities.

"Thomson" is a service mark of Thomson Financial and has been licensed for use for certain purposes by Invesco PowerShares Capital Management, LLC. The PowerShares VRDO Tax-Free Weekly Portfolio is not sponsored, endorsed, sold or promoted by Thomson or any of its affiliates or subsidiaries. Thomson, as Index Provider, makes no representation, express or implied, regarding the advisability of investing in this product. As the Index Provider, Thomson is licensing certain trademarks, the underlying Index and trade names, which are composed by Thomson without regard to this Index, this product or any investor.

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.

PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC (Invesco PowerShares). Invesco PowerShares Capital Management LLC and Invesco Aim Distributors, Inc. are indirect, wholly owned subsidiaries of Invesco Ltd.

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.

Investment products offered are: Not FDIC Insured • No Bank Guarantee • May Lose Value

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