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PVI Home What are VRDOs? Why PVI? PVI Explained Tax & Yield Tools Literature
PVI offers investors exposure to a wide range of benefits, which when combined, make PVI one of the more unique investment products in the market today.
Liquidity
The transparency, liquidity and low cost of an ETF make it an attractive vehicle to access the VRDO market. An investor who wants to sell their VRDO would do so to a remarketing agent. If the remarketing agent is unable to remarket the VRDO to another investor, he would have to go through the process of putting the bond to the liquidity provider.
With an ETF's intraday liquidity, PVI shields investors from these relatively time-intensive and nuanced processes. As publicly traded vehicles, ETF price quotes are easily accessible throughout the trading day through a variety of electronic media.
While the underlying VRDOs are structured for enhanced liquidity, PVI also maintains an average trading spread of $0.01, putting it on par with some of the most liquid securities in the market today.
Access
PVI offers access to the VRDO market that may be more efficient than purchasing VRDOs directly. VRDOs generally have a minimum denomination of $100,000. At this level, most investors don't have the means to construct a VRDO portfolio diversified among several different issuers and liquidity providers. The ability to purchase as little as one share of PVI drastically reduces the price threshold for entry into the VRDO market.
Strong Credit Quality
PVI is typically a low-duration investment vehicle with a strong average credit quality. While in some ways similar, PVI is not a tax-exempt money market fund that seeks to maintain the value of a dollar. Rather, it is a portfolio consisting of VRDOs, which are commonly held in money market fund portfolios.
VRDOs are typically issued with long-dated maturities of 30 years, but are considered short-term investments because of their put feature and frequent rate reset schedule. As of March 31, 2009, the VRDOs in PVI had an average credit quality of Aa2/AA+.
Price Stability
Historically, PVI's NAV has been very stable. From its inception through the end of May 2009, PVI's NAV stayed within a range of $24.97 to $25.10. Its stable NAV is the result of the VRDOs' put feature and their ability to be redeemed at par on a frequent and regular schedule.
The minor fluctuation in PVI's NAV is due to interest accrued from the VRDOs, which is distributed every month. The NAV reverts back to the low end of its $24.97 to $25.10 range each month after the accrued interest is distributed to PVI's shareholders.
Source: Invesco PowerShares, as of May 31, 2009
Yield
PVI distributes interest income in the form of dividends on a monthly basis. The income from PVI is exempt from federal taxes and may be exempt, to some extent, from state and local taxes depending on the residency of the investor.
PVI's 30-day SEC yield at the end of March was 1.83%, which is a taxable equivalent yield of 2.82% for an investor in the 35% federal income tax bracket.a
Standardized Performance as of March 31, 2009
PowerShares VRDO Tax Free Weekly Portfolio Since Inception† 1 Year
NAV 3.04 2.93
After Tax Held 1.94 1.88
After Tax Sold 1.95 1.89
Market Price 3.06 2.89
a Source: Invesco PowerShares, as of March 31, 2009 (35% federal income tax bracket)
†Returns are based on the inception date of the fund.
As stated in the PowerShares VRDO Tax Free Weekly Portfolio's prospectus, the expense ratio of 0.25% is expressed as a unitary fee to cover expenses incurred in connection with managing the portfolio.
Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Past performance is not a guarantee of future results; current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and Shares, when redeemed, may be worth more or less than their original cost. The Shares' performance reflects fee waivers, absent which performance would have been lower. See invescopowershares.com to find the most recent month-end performance numbers. After Tax Held represents total return after taxes on distributions and assumes Shares have not been sold. After Tax Sold represents total return after taxes on distributions and the sale of Fund Shares. After-tax returns reflect the highest federal income tax rate but exclude state and local taxes.
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.
©2009 Invesco PowerShares Capital Management LLC
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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