item 14 principal accountant fees services audit nonaudit fees following table sets forth fees professional services rendered kpmg llp fund’s independent registered public accounting firm approval independent registered public accounting firm services fees managing owner approved services provided kpmg llp fund described managing owner preapproves audit allowed nonaudit services fund’s independent registered public accounting firm including engagement fees terms part iv item 15 item 14 principal accountant fees services audit nonaudit fees following table sets forth fees professional services rendered kpmg llp fund’s independent registered public accounting firm approval independent registered public accounting firm services fees managing owner approved services provided kpmg llp fund described managing owner preapproves audit allowed nonaudit services fund’s independent registered public accounting firm including engagement fees terms part iv item 15 item 14 principal accountant fees services audit nonaudit fees following table sets forth fees professional services rendered kpmg llp fund’s independent registered public accounting firm approval independent registered public accounting firm services fees managing owner approved services provided kpmg llp fund described managing owner preapproves audit allowed nonaudit services fund’s independent registered public accounting firm including engagement fees terms part iv item 15 item 7 management’s discussion analysis financial condition results operations information read conjunction consolidated financial statements notes included item 8 part annual report “report” discussion analysis follows may contain trend analysis forwardlooking statements within meaning section 21e securities exchange act 1934 reflect current views respect future events financial results words “anticipate” “expect” “intend” “plan” “believe” “seek” “outlook” “estimate” well similar words phrases signify forwardlooking statements powershares db us dollar index bearish fund’s forwardlooking statements guarantees future results conditions important factors risks uncertainties may cause actual results differ materially expressed forwardlooking statements place undue reliance forwardlooking statements except expressly required federal securities laws db commodity services llc “managing owner” undertakes obligation publicly update revise forwardlooking statements risks uncertainties factors described report result new information future events changed circumstances reason date report overview introduction master fund invests futures contracts dx contracts view tracking changes whether positive negative level deutsche bank us dollar index usdx® futures index excess return short index short index time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative short positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® usdx® index provides general indication international value us dollar relative six major world currencies index currencies comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc fund master fund establishes short positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund trust agreements trust master trust wilmington trust company trustee trust master trust delegated managing owner exclusive management control aspects business trust fund master trust master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner index sponsor obtains information inclusion use calculation index sources index sponsor considers reliable none index sponsor managing owner trust fund master trust master fund respective affiliates accepts responsibility guarantees accuracy andor completeness index data included index limited shares intended provide investment results generally correspond changes positive negative levels index time value limited shares expected fluctuate relation changes value master fund’s portfolio market price limited shares may identical net asset value per limited share two valuations expected close performance summary report covers three months ended december 31 2007 period february 15 2007 commencement investment operations december 31 2007 herein referred “period ended december 31 2007” fund commenced trading american stock exchange “amex” february 20 2007 performance fund exchange traded limited shares detailed “results operations” past performance fund necessarily indicative future performance index provides general indication international value us dollar relative six major world currencies index currencies comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc deutsche bank us dollar index usdx® futures index total return short index short indextr consists index plus 3month united states treasury bills returns past index results necessarily indicative future changes positive negative index closing levels section “summary deutsche bank us dollar index usdx® futures index total return short index underlying dx contract returns three months ended december 31 2007 period ended december 31 2007” provides overview changes closing levels index disclosing change closing levels index underlying dx contracts index summary deutsche bank us dollar index usdx® futures index total return short index underlying dx contract returns three months ended december 31 2007 period ended december 31 2007 current interest rate environment total return investment fund expected outperform index underperform deutsche bank us dollar index usdx® futures index total return “short index” difference index short index include interest income hypothetical basket fixed income securities short index include component difference index short index attributable entirely hypothetical interest income hypothetical basket fixed income securities fund’s interest income holdings fixedincome securities expected exceed fund’s fees expenses amount excess expected distributed periodically market price limited shares expected closely track index total return investment fund period sum capital appreciation depreciation limited shares period plus amount distributions period consequently current interest rate environment fund’s total return expected outperform index amount excess interest income fees expenses result fund’s fees expenses total return fund expected underperform short index fund’s fees expenses exceed fund’s interest income holdings fixed income securities fund would underperform index net asset value net asset value means total assets master fund including limited futures cash investments less total liabilities master fund determined basis us generally accepted accounting principles consistently applied accrual method accounting particular net asset value includes unrealized appreciation depreciation open currency futures contracts credit debit accruing master fund unpaid received master fund open currency futures contracts calculated current market value based upon settlement price particular currency futures contract traded applicable exchange date respect net asset value determined provided currency futures contract could liquidated day due operation daily limits rules exchange upon position traded otherwise settlement price recent day position could liquidated basis determining market value position day managing owner may discretion extraordinary circumstances including limited periods settlement price futures contract available due exchange limit orders force majeure type events systems failure natural manmade disaster act god armed conflict act terrorism riot labor disruption similar intervening circumstance value asset master fund pursuant principles managing owner deems fair equitable long principles consistent normal industry standards interest earned master fund’s brokerage account accrued monthly amount distribution liability master fund day distribution declared paid fund invests substantially assets master fund masterfeeder structure fund holds investment assets master fund limited units fund majority master fund limited unit owner managing owner holds minority interest master fund limited share issued fund correlates master fund limited unit issued master fund held fund net asset value per master fund limited unit master fund general unit collectively “master fund units” net asset value master fund divided number outstanding master fund units onetoone correlation limited shares master fund units net asset value per limited share net asset value per master fund limited unit equal critical accounting policies fund’s master fund’s critical accounting policies follows preparation financial statements related disclosures conformity us generally accepted accounting principles requires application appropriate accounting rules guidance well use estimates requires management make estimates assumptions affect reported amounts assets liabilities revenue expense related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes fund’s master fund’s application policies involve judgments actual results may differ estimates used master fund holds significant portion assets currency futures contracts united states treasury obligations recorded trade date basis fair value consolidated financial statements changes fair value reported consolidated statement income expenses generally fair values based quoted market closing prices however market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized appreciation depreciation open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively interest income united states treasury obligations recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations market risk trading futures contracts involves master fund entering contractual commitments purchase sell particular currency specified date price market risk associated master fund’s commitments purchase currencies limited gross face amount contracts held master fund’s exposure market risk also influenced number factors including volatility interest rates foreign currency exchange rates liquidity markets contracts traded relationships among contracts held inherent uncertainty master fund’s trading well development drastic market occurrences could ultimately lead loss substantially investors’ capital credit risk master fund enters futures contracts master fund exposed credit risk counterparty contract meet obligations counterparty futures contracts traded united states exchanges clearing house associated particular exchange general clearing houses backed corporate members may required share financial burden resulting nonperformance one members significantly reduce credit risk cases clearing house backed clearing members ie foreign exchanges may backed consortium banks financial institutions assurance counterparty clearing member clearinghouse meet obligations master fund commodity broker acting master fund’s futures commission merchant accepting orders purchase sale domestic futures contracts required cftc regulations separately account segregate belonging master fund assets master fund relating domestic futures trading commodity broker allowed commingle assets commodity broker also see item 1a risk factors “failure futures commission merchants commodity brokers segregate assets may increase losses despite segregation assets master fund remains risk significant losses master fund may receive prorata share assets” liquidity master fund’s source capital derived fund’s offering limited shares authorized participants authorized participants may subsequently redeem limited shares master fund turn allocates net assets currency futures trading significant portion net asset value held united states treasury obligations cash used margin master fund’s trading currency futures percentage united states treasury obligations bear total net assets vary period market values master fund’s currency futures change balance net assets held master fund’s trading account interest earned master fund’s interestbearing funds paid master fund master fund’s currency futures contracts may subject periods illiquidity market conditions regulatory considerations reasons example commodity exchanges generally ability limit fluctuations futures contract prices single day regulations referred “daily limits” single day trades may executed prices beyond daily limit price particular futures contract increased decreased amount equal daily limit positions future neither taken liquidated unless traders willing effect trades within limit although dx contracts master fund invests currently subject daily limits dx contracts held master fund could become subject limits future market conditions could prevent master fund promptly liquidating currency futures positions master fund trades futures contracts capital risk due changes value future contracts market risk inability counterparties including exchange clearinghouses perform terms contracts credit risk business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed dtc’s bookentry system fund later noon new york time business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order cash flows primary cash flow activities fund raise capital authorized participants issuance limited shares fund cash invested master fund used invest united states treasury obligations meet margin requirements result positions taken futures contracts match fluctuations index fund tracking operating activities net cash flow used operating activities 696 million amounts primarily include net purchases sales united states treasury obligations held fair value statement financial condition period ended december 31 2007 1733 million paid purchase united states treasury obligations 1010 million received sales maturing contracts net change unrealized appreciation united states treasury obligations futures decreased 05 million period ended december 31 2007 financing activities fund’s net cash flow provided financing activities 736 million period ended december 31 2007 included 802 million sale limited shares authorized participants year ended december 31 2007 results operations three months ended december 31 2007 period ended december 31 2007 fund launched february 15 2007 2500 per share listed trading amex february 20 2007 fund master fund seek track changes closing levels deutsche bank us dollar index usdx® futures index excess return short index short index time plus excess master fund’s interest income holdings united states treasury obligations high credit quality short term fixed income securities expenses fund master fund following graphs illustrate changes price limited shares reflected graph “udn” ii fund’s nav reflected graph “udnnav” iii closing levels index reflected graph “usddnx” price limited shares generally exceeded levels index primarily limited share price reflects interest income master fund’s collateral holdings whereas index consider interest income assurances price limited shares continue exceed index levels comparison udn udnnav usddnx three months ended december 31 2007 period ended december 31 2007 neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends additional legends deutsche bank us dollar index usdx® futures index excess return short index reflect actual trading ii fees expenses fund’s objective generate profit active portfolio management track index established august 2006 certain information relating index closing levels may considered “hypothetical” hypothetical information may certain inherent limitations described respect index data representation made index likely achieve annual cumulative closing levels consistent similar set forth herein similarly representation made fund generate profits losses similar fund’s past performance historical annual cumulative changes index closing levels fact frequently sharp differences hypothetical results actual results subsequently achieved investment methodologies whether active passive respect index data one limitations hypothetical information generally prepared benefit hindsight extent information presented herein relates period december 1986 july 2006 index closing levels reflect application index’s methodology selection dx contracts hindsight hypothetical record completely account impact financial risk actual trading example numerous factors including described item 1a “risk factors” herein related currencies markets general implementation fund’s efforts track index time cannot accounted preparation index information set forth following pages adversely affect actual performance results fund furthermore index information involve financial risk account impact fees costs associated fund managing owner limited experience trading actual accounts clients limited actual trading results compare index closing levels set forth herein prospective investors particularly wary placing undue reliance annual cumulative index results period ended december 31 2007 fund limited share price performance fund launched february 15 2007 2500 per share listed trading amex february 20 2007 december 28 2007 fund made 040 per share distribution limited shareholders record december 19 2007 period ended december 31 2007 amex market value limited shares increased 1032 2500 per share 2758 per share limited share price low high period ended december 31 2007 related change limited share price february 15 2007 commencement investment operations follows limited shares traded high 2856 per share 1424 november 26 2007 low 2493 per share 028 february 22 2007 total return fund market value basis 1192 including noted distribution period fund limited share net asset performance period ended december 31 2007 net asset value limited share increased 1016 2500 per share 2754 per share december 28 2007 fund made 040 per share distribution limited shareholders record december 19 2007 therefore total return net asset value basis fund including distribution 1176 net income period ended december 31 2007 36 million resulting 15 million interest income supplemented net realized gain 28 million net change unrealized loss 05 million operating expenses 02 million three months ended december 31 2007 fund limited share price performance december 28 2007 fund made 040 per share distribution limited shareholders record december 19 2007 three months ended december 31 2007 amex market value limited shares increased 047 2745 per share 2758 per share limited share price low high three months ended december 31 2007 related change limited share price september 30 2007 follows limited shares traded high 2856 per share 404 november 26 2007 low 2709 per share 131 october 8 2007 december 17 2007 total return fund market value basis 193 including noted distribution three month period fund limited share net asset performance three months ended december 31 2007 net asset value limited share increased 040 2743 per share 2754 per share december 28 2007 fund made 040 per share distribution limited shareholders record december 19 2007 therefore total return net asset value basis fund including noted distribution 186 net income three months ended december 31 2007 06 million resulting 06 million interest income supplemented net realized gain 15 million net unrealized loss 14 million operating expenses 01 million offbalance sheet arrangements contractual obligations normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted may include indemnification provisions related certain risks service providers undertake performing services best interests fund master fund’s master fund’s exposure indemnification provisions cannot estimated general business indemnifications expected material impact either fund’s master fund’s financial position fund master fund’s contractual obligations managing owner commodity broker management fee payments made managing owner calculated fixed percentage master fund’s net asset value commission payments commodity broker contractbycontract roundturn basis managing owner cannot anticipate amount payments required arrangements future periods net asset values known future date agreements effective one year terms renewable automatically additional one year terms unless terminated additionally agreements may terminated either party various reasons item 7a item 7 management’s discussion analysis financial condition results operations information read conjunction consolidated financial statements notes included item 8 part annual report “report” discussion analysis follows may contain trend analysis forwardlooking statements within meaning section 21e securities exchange act 1934 reflect current views respect future events financial results words “anticipate” “expect” “intend” “plan” “believe” “seek” “outlook” “estimate” well similar words phrases signify forwardlooking statements powershares db us dollar index bullish fund’s forwardlooking statements guarantees future results conditions important factors risks uncertainties may cause actual results differ materially expressed forwardlooking statements place undue reliance forwardlooking statements except expressly required federal securities laws db commodity services llc “managing owner” undertakes obligation publicly update revise forwardlooking statements risks uncertainties factors described report result new information future events changed circumstances reason date report overview introduction master fund invests futures contracts “dx contracts” view tracking changes whether positive negative level deutsche bank us dollar index usdx® futures index excess return long index long index time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative long positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® “usdx®” index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc fund master fund establishes long positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund trust agreements trust master trust wilmington trust company trustee trust master trust delegated managing owner exclusive management control aspects business trust fund master trust master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner index sponsor obtains information inclusion use calculation index sources index sponsor considers reliable none index sponsor managing owner trust fund master trust master fund respective affiliates accepts responsibility guarantees accuracy andor completeness index data included index shares intended provide investment results generally correspond changes positive negative levels index time value shares expected fluctuate relation changes value master fund’s portfolio market price shares may identical net asset value per share two valuations expected close performance summary report covers three months ended december 31 2008 2007 herein referred “three months ended december 31 2008” “three months ended december 31 2007” year ended december 31 2008 herein referred “year ended december 31 2008” period february 15 2007 commencement investment operations december 31 2007 herein referred “period ended december 31 2007” fund commenced trading american stock exchange known nyse alternext us llc “nyse alternext” february 20 2007 november 25 2008 listed nyse arca inc “nyse arca” performance fund exchange traded shares detailed “results operations” past performance fund necessarily indicative future performance index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc deutsche bank us dollar index usdx® futures index total return long index long indextr consists index plus 3month united states treasury bills returns past index results necessarily indicative future changes positive negative index closing levels section “summary deutsche bank us dollar index usdx® futures index total return long index underlying dx contract returns three months ended december 31 2008 december 31 2007 year ended december 31 2008 period ended december 31 2007” provides overview changes closing levels index disclosing change closing levels index underlying dx contracts index summary deutsche bank us dollar index usdx® futures index total return long index underlying dx contract returns three months ended december 31 2008 2007 year ended december 31 2008 period ended december 31 2007 fund’s interest income holdings fixed income securities exceed fund’s fees expenses total return investment fund expected outperform index underperform deutsche bank us dollar index usdx® futures index total return “long index” difference index long index include interest income hypothetical basket fixed income securities long index include component difference index long index attributable entirely hypothetical interest income hypothetical basket fixed income securities fund’s interest income holdings fixedincome securities exceeds fund’s fees expenses amount excess expected distributed periodically market price shares expected closely track index total return investment fund period sum capital appreciation depreciation shares period plus amount distributions period consequently fund’s total return expected outperform index amount excess interest income fees expenses result fund’s fees expenses total return fund expected underperform long index fund’s fees expenses exceed fund’s interest income holdings fixed income securities total return investment fund expected underperform index net asset value net asset value means total assets master fund including limited futures cash investments less total liabilities master fund determined basis us generally accepted accounting principles consistently applied accrual method accounting particular net asset value includes unrealized appreciation depreciation open currency futures contracts credit debit accruing master fund unpaid received master fund open currency futures contracts calculated current market value based upon settlement price particular currency futures contract traded applicable exchange date respect net asset value determined provided currency futures contract could liquidated day due operation daily limits rules exchange upon position traded otherwise settlement price recent day position could liquidated basis determining market value position day managing owner may discretion extraordinary circumstances including limited periods settlement price futures contract available due exchange limit orders force majeure type events systems failure natural manmade disaster act god armed conflict act terrorism riot labor disruption similar intervening circumstance value asset master fund pursuant principles managing owner deems fair equitable long principles consistent normal industry standards interest earned master fund’s brokerage account accrued monthly amount distribution liability master fund day distribution declared paid fund invests substantially assets master fund masterfeeder structure fund holds investment assets master fund limited units fund majority master fund limited unit owner managing owner holds minority interest master fund share issued fund correlates master fund limited unit issued master fund held fund net asset value per master fund limited unit master fund general unit collectively “master fund units” net asset value master fund divided number outstanding master fund units onetoone correlation shares master fund limited units net asset value per share net asset value per master fund limited unit equal critical accounting policies fund’s master fund’s critical accounting policies follows preparation financial statements related disclosures conformity us generally accepted accounting principles requires application appropriate accounting rules guidance well use estimates requires management make estimates assumptions affect reported amounts assets liabilities revenue expense related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes fund’s master fund’s application policies involve judgments actual results may differ estimates used master fund holds significant portion assets currency futures contracts united states treasury obligations recorded trade date basis fair value consolidated financial statements changes fair value reported consolidated statement income expenses use fair value measure financial instruments related unrealized gains losses recognized earnings period fundamental fund’s financial statements fair value financial instrument amount would received sell asset paid transfer liability orderly transaction market participants measurement date exit price determining fair value united states treasury obligations currency futures contracts fund uses unadjusted quoted market prices active markets fasb statement 157 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value objective fair value measurement determine price would received sell asset paid transfer liability orderly transaction market participants measurement date exit price hierarchy gives highest priority unadjusted quoted prices identical assets liabilities level 1 measurements lowest priority unobservable inputs level 3 measurements assets liabilities classified entirety based lowest level input significant fair value measurement see note 4c within financial statements item 8 information regarding fasb statement 157 market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized gain loss open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively interest income united states treasury obligations recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations market risk trading futures contracts involves master fund entering contractual commitments purchase sell particular currency specified date price market risk associated master fund’s commitments purchase currencies limited gross face amount contracts held master fund’s exposure market risk also influenced number factors including volatility interest rates foreign currency exchange rates liquidity markets contracts traded relationships among contracts held inherent uncertainty master fund’s trading well development drastic market occurrences could ultimately lead loss substantially investors’ capital credit risk master fund enters futures contracts master fund exposed credit risk counterparty contract meet obligations counterparty futures contracts traded united states exchanges clearing house associated particular exchange general clearing houses backed corporate members may required share financial burden resulting nonperformance one members significantly reduce credit risk cases clearing house backed clearing members ie foreign exchanges may backed consortium banks financial institutions assurance counterparty clearing member clearinghouse meet obligations master fund commodity broker acting master fund’s futures commission merchant accepting orders purchase sale domestic futures contracts required cftc regulations separately account segregate belonging master fund assets master fund relating domestic futures trading commodity broker allowed commingle assets commodity broker also see item 1a risk factors “failure futures commission merchants commodity brokers segregate assets may increase losses despite segregation assets master fund remains risk significant losses master fund may receive prorata share assets” liquidity master fund’s source capital derived fund’s offering shares authorized participants authorized participants may subsequently redeem shares master fund turn allocates net assets currency futures trading significant portion net asset value held united states treasury obligations cash used margin master fund’s trading currency futures percentage united states treasury obligations bear total net assets vary period market values master fund’s currency futures change balance net assets held master fund’s trading account interest earned master fund’s interestbearing funds paid master fund master fund’s currency futures contracts may subject periods illiquidity market conditions regulatory considerations reasons example commodity exchanges may limit fluctuations certain futures contract prices single day regulations referred “daily limits” single day trades may executed prices beyond daily limit price particular futures contract increased decreased amount equal daily limit positions future neither taken liquidated unless traders willing effect trades within limit although dx contracts master fund invests currently subject daily limits dx contracts held master fund could become subject limits future market conditions could prevent master fund promptly liquidating currency futures positions master fund trades futures contracts capital risk due changes value future contracts market risk inability counterparties including exchange clearinghouses perform terms contracts credit risk business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed dtc’s bookentry system fund later noon new york time business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order cash flows primary cash flow activities fund raise capital authorized participants issuance shares cash invested master fund used invest united states treasury obligations meet margin requirements result positions taken futures contracts match fluctuations index fund tracking operating activities net cash flow provided used operating activities 72 million 972 million year ended december 31 2008 period ended december 31 2007 respectively amount primarily includes net purchases sales united states treasury obligations held fair value statement financial condition year ended december 31 2008 18044 million paid purchase united states treasury obligations 17452 million received sales maturing contracts period ended december 31 2007 1555 million paid purchase united states treasury obligations 599 million received sales maturing contracts unrealized appreciation united states treasury obligations futures decreased 163 million increased 04 million year ended december 31 2008 period ended december 31 2007 respectively financing activities fund’s net cash flow provided financing activities 1556 million 999 million year ended december 31 2008 period ended december 31 2007 respectively included 9470 million 1155 million sale shares authorized participants year ended december 31 2008 period ended december 31 2007 respectively results operations three months ended december 31 2008 2007 year ended december 31 2008 period ended december 31 2007 fund launched february 15 2007 2500 per share shares fund traded nyse alternext february 20 2007 november 25 2008 trading nyse arca since november 25 2008 fund master fund seek track changes closing levels deutsche bank us dollar index usdx® futures index excess return long index long index time plus excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund following graphs illustrate changes price shares reflected graph “uup” ii fund’s nav reflected graph “uupnav” iii closing levels index reflected graph “usdupx” price shares generally exceeded levels index primarily share price reflects interest income master fund’s collateral holdings whereas index consider interest income assurances price shares continue exceed index levels comparison uup uupnav usdupx year ended december 31 2008 period ended december 31 2007 three months ended december 31 2008 2007 neither past performance fund prior index levels changes positive negative taken indication fund’s future performance neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends neither past performance fund prior index levels changes positive negative taken indication fund’s future performance neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends additional legends deutsche bank us dollar index usdx® futures index excess return long index reflect actual trading ii fees expenses fund’s objective generate profit active portfolio management track index established august 2006 certain information relating index closing levels may considered “hypothetical” hypothetical information may certain inherent limitations described respect index data representation made index likely achieve annual cumulative closing levels consistent similar set forth herein similarly representation made fund generate profits losses similar fund’s past performance historical annual cumulative changes index closing levels fact frequently sharp differences hypothetical results actual results subsequently achieved investment methodologies whether active passive respect index data one limitations hypothetical information generally prepared benefit hindsight extent information presented herein relates period december 1986 july 2006 index closing levels reflect application index’s methodology selection dx contracts hindsight hypothetical record completely account impact financial risk actual trading example numerous factors including described item 1a “risk factors” herein related currencies markets general implementation fund’s efforts track index time cannot accounted preparation index information set forth following pages adversely affect actual performance results fund furthermore index information involve financial risk account impact fees costs associated fund managing owner limited experience trading actual accounts clients limited actual trading results compare index closing levels set forth herein prospective investors particularly wary placing undue reliance annual cumulative index results year ended december 31 2008 period ended december 31 2007 fund share price performance december 30 2008 fund made 017 per share distribution shareholders record december 17 2008 year ended december 31 2008 nyse arca market value share increased 418 2370 per share 2469 per share price high low year ended december 31 2008 related change share price december 31 2007 follows shares traded high 2708 per share 1426 november 20 2008 low 2223 per share 620 april 16 2008 therefore total return fund market value basis 489 including noted distribution period fund launched february 15 2007 2500 per share listed trading nyse alternext february 20 2007 december 28 2007 fund made 020 per share distribution shareholders record december 19 2007 period ended december 31 2007 nyse alternext market value share decreased 520 2500 per share 2370 per share price low high period ended december 31 2007 related change share price february 15 2007 commencement investment operations follows shares traded high 2523 per share 092 june 14 2007 low 2326 per share 696 november 21 2007 therefore total return fund market value basis 440 including noted distribution period fund share net asset performance year ended december 31 2008 net asset value share increased 417 2373 per share 2472 per share appreciation price long dx contracts year ended december 31 2008 contributed 562 increase level long indextr december 30 2008 fund made 017 per share distribution shareholders record december 17 2008 therefore total return fund net asset value basis including noted distribution 489 net income year ended december 31 2008 512 million resulting 60 million interest income net realized gains 639 million net unrealized losses 163 million operating expenses 24 million period ended december 31 2007 net asset value share decreased 508 2500 per share 2373 per share depreciation price long dx contracts period ended december 31 2007 contributed 421 decrease level long indextr december 28 2007 fund made 020 per share distribution shareholders record december 19 2007 therefore total return fund net asset value basis including noted distribution 428 net loss period ended december 31 2007 02 million resulting 10 million interest income net realized loss 15 million net unrealized gain 04 million operating expenses 01 million three months ended december 31 2008 2007 fund share price performance december 30 2008 fund made 017 per share distribution shareholders record december 17 2008 three months ended december 31 2008 nyse arca market value share increased 102 2444 per share 2469 per share price high low three months ended december 31 2008 related change share price september 30 2008 follows shares traded high 2708 per share 1080 november 20 2008 low 2396 per share 196 december 17 2008 therefore total return fund market value basis 172 including noted distribution period december 28 2007 fund made 020 per share distribution shareholders record december 19 2007 three months ended december 31 2007 nyse alternext market value share decreased 146 2405 per share 2370 per share price low high three months ended december 31 2007 related change share price september 30 2007 follows shares traded high 2438 per share 137 october 8 2007 low 2326 per share 328 november 21 2007 therefore total return fund market value basis 062 including noted distribution period fund share net asset performance three months ended december 31 2008 net asset value share increased 139 2438 per share 2472 per share appreciation price long dx contracts three months ended december 31 2008 contributed 271 increase level long indextr december 30 2008 fund made 017 per share distribution shareholders record december 17 2008 therefore total return net asset value basis fund including noted distribution 209 net income three months ended december 31 2008 180 million resulting 12 million interest income net realized gains 295 million net unrealized losses 118 million operating expenses 09 million three months ended december 31 2007 net asset value share decreased 108 2399 per share 2373 per share depreciation price long dx contracts three months ended december 31 2007 contributed 033 decrease level long indextr december 28 2007 fund made 020 per share distribution shareholders record december 19 2007 therefore total return net asset value basis fund including noted distribution 025 net income three months ended december 31 2007 02 million resulting 04 million interest income supplemented net realized loss 07 million net unrealized gain 06 million operating expenses 01 million offbalance sheet arrangements contractual obligations normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted may include indemnification provisions related certain risks service providers undertake performing services best interests fund master fund’s master fund’s exposure indemnification provisions cannot estimated general business indemnifications expected material impact either fund’s master fund’s financial position fund master fund’s contractual obligations managing owner commodity broker management fee payments made managing owner calculated fixed percentage master fund’s net asset value commission payments commodity broker contractbycontract roundturn basis managing owner cannot anticipate amount payments required arrangements future periods net asset values known future date agreements effective one year terms renewable automatically additional one year terms unless terminated additionally agreements may terminated either party various reasons item 7a item 7 management’s discussion analysis financial condition results operations information read conjunction consolidated financial statements notes included item 8 part annual report “report” discussion analysis follows may contain trend analysis forwardlooking statements within meaning section 21e securities exchange act 1934 reflect current views respect future events financial results words “anticipate” “expect” “intend” “plan” “believe” “seek” “outlook” “estimate” well similar words phrases signify forwardlooking statements powershares db us dollar index bearish fund’s forwardlooking statements guarantees future results conditions important factors risks uncertainties may cause actual results differ materially expressed forwardlooking statements place undue reliance forwardlooking statements except expressly required federal securities laws db commodity services llc “managing owner” undertakes obligation publicly update revise forwardlooking statements risks uncertainties factors described report result new information future events changed circumstances reason date report overviewintroduction master fund establishes short positions certain futures contracts “dx contracts” view tracking changes whether positive negative level deutsche bank short us dollar index usdx® futures indexexcess return “short index” “index” time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative short positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® “usdx®” index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx®euro japanese yen british pound canadian dollar swedish krona swiss franc usdx® mark registered service mark owned ice futures us inc date report dx contracts subject speculative position limits assurance dx contracts become subject speculative position limits fund become subject speculative position limits respect dx contracts holdings fund’s ability issue new baskets fund’s ability reinvest income additional dx contracts may limited extent activities would cause fund exceed potential future position limits limiting size fund may affect correlation price shares traded nyse arca net asset value fund inability create additional baskets could result shares trading premium discount net asset value fund managing owner determines commercially reasonable judgment become impracticable inefficient reason funds gain full partial exposure dx contracts funds may • invest different month dx contract specific dx contract originally required index • invest another futures contract substantially similar dx contracts available • invest futures contracts referencing index currencies • invest forward agreement swap otc derivative referencing index currencies commercially reasonable judgment managing owner instruments tend exhibit trading prices correlate dx contract performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund master fund establishes short positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund index tracking fund utilize trading system whether discretionary systematic otherwise index calculated reflect changes market value time whether positive negative short positions dx contracts turn master fund seeks track index establishing short positions dx contracts accordingly therefore managing owner serves administrative role order ensure fund invests manner seeks track index general amended restated declaration trust agreement trust master trust “trust agreements” wilmington trust company trustee trust master trust delegated managing owner exclusive management control aspects business trust fund master trust master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner index sponsor obtains information inclusion use calculation index sources index sponsor considers reliable none index sponsor managing owner trust fund master trust master fund respective affiliates accepts responsibility guarantees accuracy andor completeness index data included index shares intended provide investment results generally correspond changes positive negative levels index time value shares expected fluctuate relation changes value master fund’s portfolio market price shares may identical net asset value per share two valuations expected close performance summary report covers three months ended december 31 2009 2008 2007 herein referred “three months ended december 31 2009” “three months ended december 31 2008” “three months ended december 31 2007” respectively years ended december 31 2009 2008 period february 15 2007 commencement investment operations december 31 2007 herein referred “year ended december 31 2009” “year ended december 31 2008” “period ended december 31 2007” respectively fund commenced trading american stock exchange known nyse alternext us llc “nyse alternext” february 20 2007 november 25 2008 listed nyse arca inc “nyse arca” performance fund exchange traded shares detailed “results operations” past performance fund necessarily indicative future performance index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx®euro japanese yen british pound canadian dollar swedish krona swiss franc deutsche bank short us dollar index usdx® futures indextotal return short indextr consists index plus 3month united states treasury bills returns past index results necessarily indicative future changes positive negative index closing levels section “summary deutsche bank short us dollar index usdx® futures indextotal return underlying dx contract returns three months ended december 31 2009 2008 2007 years ended december 31 2009 2008 period ended december 31 2007” provides overview changes closing levels index disclosing change closing levels index underlying dx contracts index please note also fund’s objective track index short indextr™ fund attempt outperform underperform index summary deutsche bank short us dollar index usdx® futures indextotal return underlying dx contract returns three months ended december 31 2009 2008 2007 years ended december 31 2009 2008 period ended december 31 2007 fund’s interest income holdings fixed income securities exceed fund’s fees expenses aggregate return investment fund expected outperform index underperform deutsche bank short us dollar index usdx® futures indextotal return “short indextr” difference index short indextr index include interest income hypothetical basket fixed income securities short indextr include component difference index short indextr attributable entirely hypothetical interest income hypothetical basket fixed income securities fund’s interest income holdings fixedincome securities exceeds fund’s fees expenses amount excess expected distributed periodically market price shares expected closely track index aggregate return investment fund period sum capital appreciation depreciation shares period plus amount distributions period consequently fund’s aggregate return expected outperform index amount excess interest income fees expenses result fund’s fees expenses aggregate return fund expected underperform short indextr fund’s fees expenses exceed fund’s interest income holdings fixed income securities aggregate return investment fund expected underperform index net asset value net asset value means total assets master fund including limited futures cash investments less total liabilities master fund determined basis us generally accepted accounting principles consistently applied accrual method accounting particular net asset value includes unrealized appreciation depreciation open currency futures contracts credit debit accruing master fund unpaid received master fund open currency futures contracts calculated current market value based upon settlement price particular currency futures contract traded applicable exchange date respect net asset value determined provided currency futures contract could liquidated day due operation daily limits rules exchange upon position traded otherwise settlement price recent day position could liquidated basis determining market value position day managing owner may discretion extraordinary circumstances including limited periods settlement price futures contract available due exchange limit orders force majeure type events systems failure natural manmade disaster act god armed conflict act terrorism riot labor disruption similar intervening circumstance value asset master fund pursuant principles managing owner deems fair equitable long principles consistent normal industry standards interest earned master fund’s brokerage account accrued monthly amount distribution liability master fund day distribution declared paid fund invests substantially assets master fund masterfeeder structure fund holds investment assets master fund limited units fund majority master fund limited unit owner managing owner holds noncontrolling interest master fund share issued fund correlates master fund limited unit issued master fund held fund net asset value per master fund limited unit master fund general unit collectively “master fund units” net asset value master fund divided number outstanding master fund units onetoone correlation shares master fund limited units net asset value per share net asset value per master fund limited unit equal critical accounting policies fund’s master fund’s critical accounting policies follows preparation financial statements related disclosures conformity us generally accepted accounting principles requires application appropriate accounting rules guidance well use estimates requires management make estimates assumptions affect reported amounts assets liabilities revenue expense related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes fund’s master fund’s application policies involve judgments actual results may differ estimates used master fund holds significant portion assets currency futures contracts united states treasury obligations recorded trade date basis fair value consolidated financial statements changes fair value reported consolidated statement income expenses use fair value measure financial instruments related unrealized gains losses recognized earnings period fundamental fund’s financial statements fair value financial instrument amount would received sell asset paid transfer liability orderly transaction market participants measurement date exit price determining fair value united states treasury obligations currency futures contracts fund uses unadjusted quoted market prices active markets fasb fair value measurement disclosure guidance requires fair value hierarchy prioritizes inputs valuation techniques used measure fair value objective fair value measurement determine price would received sell asset paid transfer liability orderly transaction market participants measurement date exit price hierarchy gives highest priority unadjusted quoted prices identical assets liabilities level 1 measurements lowest priority unobservable inputs level 3 measurements assets liabilities classified entirety based lowest level input significant fair value measurement see note 4c within financial statements item 8 information market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized gain loss open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively interest income united states treasury obligations recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations market risk trading futures contracts involves master fund entering contractual commitments purchase sell particular currency specified date price market risk associated master fund’s commitments purchase currencies limited gross face amount contracts held master fund’s exposure market risk also influenced number factors including volatility interest rates foreign currency exchange rates liquidity markets contracts traded relationships among contracts held inherent uncertainty master fund’s trading well development drastic market occurrences could ultimately lead loss substantially investors’ capital credit risk master fund enters futures contracts master fund exposed credit risk counterparty contract meet obligations counterparty futures contracts traded united states exchanges clearing house associated particular exchange general clearing houses backed corporate members may required share financial burden resulting nonperformance one members significantly reduce credit risk cases clearing house backed clearing members ie foreign exchanges may backed consortium banks financial institutions assurance counterparty clearing member clearinghouse meet obligations master fund commodity broker acting master fund’s futures commission merchant accepting orders purchase sale domestic futures contracts required cftc regulations separately account segregate belonging master fund assets master fund relating domestic futures trading commodity broker allowed commingle assets commodity broker also see item 1arisk factors“failure futures commission merchants commodity brokers segregate assets may increase losses despite segregation assets master fund remains risk significant losses master fund may receive prorata share assets all” addition cftc regulations also require commodity broker hold secure account assets master fund related foreign futures trading liquidity master fund’s source capital derived fund’s offering shares authorized participants authorized participants may subsequently redeem shares master fund turn allocates net assets currency futures trading significant portion net asset value held united states treasury obligations cash used margin master fund’s trading currency futures percentage united states treasury obligations bear total net assets vary period market values master fund’s currency futures change balance net assets held master fund’s trading account interest earned master fund’s interestbearing funds paid master fund master fund’s currency futures contracts may subject periods illiquidity market conditions regulatory considerations reasons example commodity exchanges may limit fluctuations certain futures contract prices single day regulations referred “daily limits” single day trades may executed prices beyond daily limit price particular futures contract increased decreased amount equal daily limit positions future neither taken liquidated unless traders willing effect trades within limit although dx contracts master fund invests currently subject daily limits dx contracts held master fund could become subject limits future market conditions could prevent master fund promptly liquidating currency futures positions business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed dtc’s bookentry system fund later noon new york time business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order cash flows primary cash flow activity fund raise capital authorized participants issuance shares cash invested master fund used invest united states treasury obligations meet margin requirements result positions taken dx contracts match fluctuations index fund tracking operating activities net cash flow used operating activities 1666 million 378 million 696 million years ended december 31 2009 2008 period ended december 31 2007 respectively amount primarily includes net purchases sales united states treasury obligations held fair value statement financial condition year ended december 31 2009 11666 million paid purchase united states treasury obligations 9740 million received sales maturing contracts year ended december 31 2008 3860 million paid purchase united states treasury obligations 3600 million received sales maturing contracts period ended december 31 2007 1733 million paid purchase united states treasury obligations 1010 million received sales maturing contracts unrealized appreciation united states treasury obligations futures decreased 120 million increased 50 million decreased 05 million years ended december 31 2009 2008 period ended december 31 2007 respectively financing activities fund’s net cash flow provided financing activities 1330 million 1009 million 736 million years ended december 31 2009 2008 period ended december 31 2007 respectively included 3486 million 2613 million 802 million sale shares authorized participants years ended december 31 2009 2008 period ended december 31 2007 respectively results operations three months ended december 31 2009 2008 2007 years ended december 31 2009 2008 period ended december 31 2007 fund launched february 15 2007 2500 per share shares traded nyse alternext february 20 2007 november 25 2008 trading nyse arca since november 25 2008 fund master fund seek track changes closing levels deutsche bank short us dollar index usdx® futures indexexcess return “short index” “index” time plus excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund following graphs illustrate changes price shares reflected graph “udn” ii fund’s nav reflected graph “udnnav” iii closing levels index reflected graph “usddnx” whenever interest income earned fund exceeds fund expenses price shares generally exceeds levels index primarily share price reflects interest income master fund’s collateral holdings whereas index consider interest income assurances price shares continue exceed index levels index set rules applied body data represent results actual investment trading index frictionless take account fees expenses associated investing fund also represent actual futures positions index subject take account impact speculative position limits applicable certain similar limitations ability fund trade dx contracts “tr” version index includes assumed amount interest income based prevailing rates adjusted time fund contrast invests actual money trades actual futures contracts result performance fund involves friction fees expenses impose drag performance fund may subject speculative position limits applicable certain limitations ability trade dx contracts may compel fund trade futures instruments dx contracts proxies dx contracts interest rate actually earned fund period may differ assumed amount interest income factored “tr” version index period factors contribute discrepancies changes net asset value per share changes level index period time fees expenses always tend cause changes net asset value per share underperform changes value index given period things equal actual interest income could higher lower assumed interest income factored “tr” version index therefore could cause changes net asset value per share outperform underperform changes value index given period things equal similarly trading futures instruments dx contracts proxies dx contracts could cause changes net asset value per share outperform underperform changes value index given period things equal comparison udn udnnav usddnx years ended december 31 2009 2008 period ended december 31 2007 three months ended december 31 2009 2008 2007 neither past performance fund prior index levels changes positive negative taken indication fund’s future performance neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends neither past performance fund prior index levels changes positive negative taken indication fund’s future performance neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends neither past performance fund prior index levels changes positive negative taken indication fund’s future performance neither past performance fund prior index levels changes positive negative taken indication fund’s future performance see additional legends additional legends deutsche bank short us dollar index usdx® futures indexexcess return index reflect actual trading ii fees expenses fund’s objective generate profit active portfolio management track index established august 2006 certain information relating index closing levels may considered “hypothetical” hypothetical information may certain inherent limitations described respect index data representation made index likely achieve annual cumulative closing levels consistent similar set forth herein similarly representation made fund generate profits losses similar fund’s past performance historical annual cumulative changes index closing levels fact frequently sharp differences hypothetical results actual results subsequently achieved investment methodologies whether active passive respect index data one limitations hypothetical information generally prepared benefit hindsight extent information presented herein relates period december 1986 july 2006 index closing levels reflect application index’s methodology selection dx contracts hindsight hypothetical record completely account impact financial risk actual trading example numerous factors including described item 1a“risk factors” set forth herein related currencies markets general implementation fund’s efforts track index time cannot accounted preparation index information set forth following pages adversely affect actual performance results fund furthermore index information involve financial risk account impact fees costs associated fund managing owner indirect wholly owned subsidiary deutsche bank ag commenced operations january 2006 managing owner managing owner trading principals managing daytoday operations fund related products managing futures accounts limited actual trading results compare index closing levels set forth herein prospective investors particularly wary placing undue reliance annual cumulative index results years ended december 31 2009 2008 period ended december 31 2007 fund share price performance distributions paid shareholders year ended december 31 2009 year ended december 31 2009 nyse arca market value share increased 519 2618 per share 2754 per share price low high year ended december 31 2009 related change share price december 31 2008 follows shares traded low 2417 per share 768 march 2 march 9 2009 high 2886 per share 1024 november 25 2009 therefore total return fund market value basis 519 december 30 2008 fund made 015 per share distribution shareholders record december 17 2008 year ended december 31 2008 nyse arca market value share decreased 508 2758 per share 2618 per share price high low year ended december 31 2008 related change share price december 31 2007 follows shares traded high 2980 per share 805 march 17 2008 low 2420 per share 1226 november 20 2008 therefore total return fund market value basis including noted distribution 453 fund launched february 15 2007 2500 per share listed trading nyse alternext february 20 2007 december 28 2007 fund made 040 per share distribution shareholders record december 19 2007 period ended december 31 2007 nyse alternext market value share increased 1032 2500 per share 2758 per share price low high period ended december 31 2007 related change share price february 15 2007 commencement investment operations follows shares traded low 2493 per share 028 february 22 2007 high 2856 per share 1424 november 26 2007 therefore total return fund market value basis including noted distribution 1192 fund share net asset performance year ended december 31 2009 net asset value share increased 535 2617 per share 2757 per share appreciation price dx contracts year ended december 31 2009 contributed 649 increase level short indextr distributions paid shareholders year ended december 31 2009 therefore total return fund net asset value basis 535 net income year ended december 31 2009 141 million resulting 04 million interest income net realized gains 272 million net unrealized losses 120 million operating expenses 15 million year ended december 31 2008 net asset value share decreased 497 2754 per share 2617 per share appreciation price dx contracts year ended december 31 2008 contributed 422 decrease level short indextr december 30 2008 fund made 015 per share distribution shareholders record december 17 2008 therefore total return fund net asset value basis including noted distribution 443 net loss year ended december 31 2008 53 million resulting 13 million interest income net realized loss 109 million net unrealized gain 50 million operating expenses 07 million period ended december 31 2007 net asset value share increased 1016 2500 per share 2754 per share depreciation price dx contracts period ended december 31 2007 contributed 1230 increase level short indextr december 28 2007 fund made 040 per share distribution shareholders record december 19 2007 therefore total return fund net asset value basis including noted distribution 1176 net income period ended december 31 2007 36 million resulting 15 million interest income supplemented net realized gain 28 million net change unrealized loss 05 million operating expenses 02 million three months ended december 31 2009 2008 2007 fund share price performance distributions paid shareholders year ended december 31 2009 three months ended december 31 2009 nyse arca market value share decreased 140 2793 per share 2754 per share price high low three months ended december 31 2009 related change share price september 30 2009 follows shares traded high 2886 per share 333 november 25 2009 low 2742 per share 183 december 22 2009 therefore total return fund market value basis 140 december 30 2008 fund made 015 per share distribution shareholders record december 17 2008 three months ended december 31 2008 nyse arca market value share decreased 293 2697 per share 2618 per share price high low three months ended december 31 2008 related change share price september 30 2008 follows shares traded high 2695 per share 007 december 17 2008 low 2420 per share 1027 november 20 2008 therefore total return fund market value basis including noted distribution 237 december 28 2007 fund made 040 per share distribution shareholders record december 19 2007 three months ended december 31 2007 nyse alternext market value share increased 047 2745 per share 2758 per share price low high three months ended december 31 2007 related change share price september 30 2007 follows shares traded low 2709 per share 131 october 8 2007 december 17 2007 high 2856 per share 404 november 26 2007 therefore total return fund market value basis including noted distribution 193 fund share net asset performance three months ended december 31 2009 net asset value share decreased 147 2798 per share 2757 per share depreciation price short dx contracts three months ended december 31 2009 contributed 132 decrease level short indextr distributions paid shareholders year ended december 31 2009 therefore total return net asset value basis fund 147 net loss three months ended december 31 2009 56 million resulting 01 interest income net realized gains 49 million net unrealized losses 101 million operating expenses 05 million three months ended december 31 2008 net asset value share decreased 354 2713 per share 2617 per share appreciation price dx contracts three months ended december 31 2008 contributed 311 decrease level short indextr december 30 2008 fund made 015 per share distribution shareholders record december 17 2008 therefore total return net asset value basis fund including noted distribution 299 net loss three months ended december 31 2008 15 million resulting 01 million interest income net realized loss 72 million net unrealized gain 57 million operating expenses 01 million three months ended december 31 2007 net asset value share increased 040 2743 per share 2754 per share depreciation price dx contracts three months ended december 31 2007 contributed 198 increase level short indextr december 28 2007 fund made 040 per share distribution shareholders record december 19 2007 therefore total return net asset value basis fund including noted distribution 186 net income three months ended december 31 2007 06 million resulting 06 million interest income supplemented net realized gain 15 million net unrealized loss 14 million operating expenses 01 million offbalance sheet arrangements contractual obligations normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted may include indemnification provisions related certain risks service providers undertake performing services best interests fund master fund’s master fund’s exposure indemnification provisions cannot estimated general business indemnifications expected material impact either fund’s master fund’s financial position fund master fund’s contractual obligations managing owner commodity broker management fee payments made managing owner calculated fixed percentage master fund’s net asset value commission payments commodity broker contractbycontract roundturn basis managing owner cannot anticipate amount payments required arrangements future periods net asset values known future date agreements effective one year terms renewable automatically additional one year terms unless terminated additionally agreements may terminated either party various reasons item 7a item 7a quantitative qualitative disclosures market risk introduction fund designed replicate positions currency futures index market sensitive instruments held subject risk trading loss unlike operating company risk market sensitive instruments integral incidental fund’s main line business market movements produce frequent changes fair market value fund’s open positions consequently earnings cash flow fund’s market risk primarily influenced changes price currencies value risk measure maximum amount fund could reasonably expected lose given market sector however inherent uncertainty markets fund trades recurrence markets traded fund market movements far exceeding expectations could result actual trading nontrading losses far beyond indicated value risk fund’s experience date ie “risk ruin” light well risks uncertainties intrinsic future projections inclusion quantification included section considered constitute assurance representation fund’s losses market sector limited value risk fund’s attempts manage market risk standard materiality used section “quantitative qualitative disclosures market risk” based assessment reasonably possible market movements potential losses caused movements taking account leverage multiplier features fund’s market sensitive instruments quantifying fund’s trading value risk quantitative forwardlooking statements following quantitative disclosures regarding fund’s market risk exposures contain “forwardlooking statements” within meaning safe harbor civil liability provided statements private securities litigation reform act 1995 set forth section 27a securities act 1933 section 21e securities exchange act 1934 quantitative disclosures section deemed forwardlooking statements purposes safe harbor except statements historical fact dollar amount maintenance margin required market risk sensitive instruments held end reporting period fund’s risk exposure various market sectors traded fund quantified terms value risk exchange maintenance margin requirements used fund measure value risk maintenance margin requirements set exchanges equal exceed 9599 maximum oneday losses fair value given contract incurred time period historical price fluctuations researched purposes establishing margin levels maintenance margin levels established exchanges using historical price studies well assessment current market volatility economic fundamentals provide probabilistic estimate maximum expected nearterm oneday price fluctuation fund’s trading value risk different market sectors following table indicates trading value risk associated fund’s open positions market category december 31 2007 var contract represents one day downside risk normal market conditions 99 confidence level calculated using historical market moves contract uses one year lookback aggregate var fund represents var fund’s open positions across contracts less sum vars individual contract due diversification benefit across contracts nontrading risk fund nontrading market risk result investing shortterm united states treasury obligations market risk represented investments expected immaterial qualitative disclosures regarding primary trading risk exposures following qualitative disclosures regarding fund’s market risk exposures except disclosures statements historical fact constitute forwardlooking statements within meaning section 27a securities act section 21e securities exchange act fund’s primary market risk exposures subject numerous uncertainties contingencies risks government interventions defaults expropriations illiquid markets emergence dominant fundamental factors political upheavals changes historical price relationships influx new market participants increased regulation many factors could result material losses well material changes risk exposures fund assurance fund’s current market exposure change materially investors may lose substantially investment fund several factors may affect price index currencies underlie dx contracts including limited • national debt levels trade deficits including changes balances payments trade • domestic foreign inflation rates investors’ expectations concerning inflation rates • domestic foreign interest rates investors’ expectations concerning interest rates • currency exchange rates • investment trading activities mutual funds hedge funds currency funds • global regional political economic financial events situations • supply demand changes influence foreign exchange rates various currencies • monetary policies governments including exchange control programs restrictions local exchanges markets limitations foreign investment country investment residents country countries trade restrictions currency devaluations revaluations • governmental intervention currency market directly regulation order influence currency prices • expectations among market participants currency’s value soon change qualitative disclosures regarding nontrading risk exposure general fund unaware anticipated known demands commitments capital expenditures ii material trends favorable unfavorable capital resources iii trends uncertainties material effect operations qualitative disclosures regarding means managing risk exposure ordinary circumstances managing owner’s discretionary power limited determining whether fund make distribution emergency extraordinary circumstances managing owner’s discretionary powers increase remain circumscribed special circumstances example include unavailability index certain natural manmade disasters managing owner apply risk management techniques fund initiates positions “short” side market employ “stoploss” techniques item 8 item 7a quantitative qualitative disclosures market risk introduction fund designed replicate positions currency futures index market sensitive instruments held subject risk trading loss unlike operating company risk market sensitive instruments integral incidental fund’s main line business market movements produce frequent changes fair market value fund’s open positions consequently earnings cash flow fund’s market risk primarily influenced changes price currencies value risk measure maximum amount fund could reasonably expected lose given market sector however inherent uncertainty markets fund trades recurrence markets traded fund market movements far exceeding expectations could result actual trading nontrading losses far beyond indicated value risk fund’s experience date ie “risk ruin” light well risks uncertainties intrinsic future projections inclusion quantification included section considered constitute assurance representation fund’s losses market sector limited value risk fund’s attempts manage market risk standard materiality used section “quantitative qualitative disclosures market risk” based assessment reasonably possible market movements potential losses caused movements taking account leverage multiplier features fund’s market sensitive instruments quantifying fund’s trading value risk quantitative forwardlooking statements following quantitative disclosures regarding fund’s market risk exposures contain “forwardlooking statements” within meaning safe harbor civil liability provided statements private securities litigation reform act 1995 set forth section 27a securities act 1933 section 21e securities exchange act 1934 quantitative disclosures section deemed forwardlooking statements purposes safe harbor except statements historical fact dollar amount maintenance margin required market risk sensitive instruments held end reporting period fund’s risk exposure various market sectors traded fund quantified terms value risk exchange maintenance margin requirements used fund measure value risk maintenance margin requirements set exchanges equal exceed 9599 maximum oneday losses fair value given contract incurred time period historical price fluctuations researched purposes establishing margin levels maintenance margin levels established exchanges using historical price studies well assessment current market volatility economic fundamentals provide probabilistic estimate maximum expected nearterm oneday price fluctuation fund’s trading value risk different market sectors following table indicates trading value risk associated fund’s open positions market category december 31 2008 following table indicates trading value risk associated fund’s open positions market category december 31 2007 var contract represents one day downside risk normal market conditions 99 confidence level calculated using historical market moves contract uses one year lookback aggregate var fund represents var fund’s open positions across contracts less sum vars individual contract due diversification benefit across contracts nontrading risk fund nontrading market risk result investing shortterm united states treasury obligations market risk represented investments expected immaterial qualitative disclosures regarding primary trading risk exposures following qualitative disclosures regarding fund’s market risk exposures except disclosures statements historical fact constitute forwardlooking statements within meaning section 27a securities act section 21e securities exchange act fund’s primary market risk exposures subject numerous uncertainties contingencies risks government interventions defaults expropriations illiquid markets emergence dominant fundamental factors political upheavals changes historical price relationships influx new market participants increased regulation many factors could result material losses well material changes risk exposures fund assurance fund’s current market exposure change materially investors may lose substantially investment fund several factors may affect price index currencies underlie dx contracts including limited • national debt levels trade deficits including changes balances payments trade • domestic foreign inflation rates investors’ expectations concerning inflation rates • domestic foreign interest rates investors’ expectations concerning interest rates • currency exchange rates • investment trading activities mutual funds hedge funds currency funds • global regional political economic financial events situations • supply demand changes influence foreign exchange rates various currencies • monetary policies governments including exchange control programs restrictions local exchanges markets limitations foreign investment country investment residents country countries trade restrictions currency devaluations revaluations • governmental intervention currency market directly regulation order influence currency prices • expectations among market participants currency’s value soon change qualitative disclosures regarding nontrading risk exposure general fund unaware anticipated known demands commitments capital expenditures ii material trends favorable unfavorable capital resources iii trends uncertainties material effect operations qualitative disclosures regarding means managing risk exposure ordinary circumstances managing owner’s discretionary power limited determining whether fund make distribution emergency extraordinary circumstances managing owner’s discretionary powers increase remain circumscribed special circumstances example include unavailability index certain natural manmade disasters managing owner apply risk management techniques fund initiates positions “long” side market employ “stoploss” techniques item 8 item 7a quantitative qualitative disclosures market risk introduction fund designed replicate positions currency futures index market sensitive instruments held subject risk trading loss unlike operating company risk market sensitive instruments integral incidental fund’s main line business market movements produce frequent changes fair market value fund’s open positions consequently earnings cash flow fund’s market risk primarily influenced changes price currencies standard materiality used section “quantitative qualitative disclosures market risk” based assessment reasonably possible market movements potential losses caused movements taking account effects margin multiplier features applicable fund’s market sensitive instruments quantifying fund’s trading value risk quantitative forwardlooking statements following quantitative disclosures regarding fund’s market risk exposures contain “forwardlooking statements” within meaning safe harbor civil liability provided statements private securities litigation reform act 1995 set forth section 27a securities act 1933 section 21e securities exchange act 1934 quantitative disclosures section deemed forwardlooking statements purposes safe harbor except statements historical fact dollar amount maintenance margin required market risk sensitive instruments held end reporting period value risk var statistical measure value losses would expected exceeded given time horizon given probability level arising movement underlying risk factors loss measured decline fair value portfolio result changes material variables fair values determined var measured specified holding period 1 day specified level statistical confidence 99th percentile however inherent uncertainty markets fund trades recurrence markets traded fund market movements far exceeding expectations could result actual trading nontrading losses far beyond indicated var fund’s experience date ie “risk ruin” light well risks uncertainties intrinsic future projections inclusion quantification included section considered constitute assurance representation fund’s losses market sector limited var fund’s attempts manage market risk fund’s trading value risk commencing december 31 2009 fund reporting var computed using actual historical market movements fund’s total assets opposed previous methodology using historical market movements dx contracts connection index prior current reporting period historical market movements underlying futures contracts used actual historical market movements fund sufficient following table indicates trading var associated fund’s total assets december 31 2009 var represents one day downside risk normal market conditions 99 confidence level calculated using historical market moves fund’s total assets uses one year lookback following table indicates trading var associated fund’s total assets december 31 2008 var represents one day downside risk normal market conditions 99 confidence level calculated using historical market moves fund’s total assets uses one year lookback following table indicates trading var associated fund’s open positions market category december 31 2008 reported var methodology effect december 31 2008 var contract represents oneday downside risk normal market conditions 99 confidence level calculated using variancecovariance methodology taking historical market moves contract using oneyear lookback aggregate var fund represents var fund’s open positions across contracts less sum vars individual contract due diversification benefit across contracts nontrading risk fund nontrading market risk result investing shortterm united states treasury obligations market risk represented investments expected immaterial qualitative disclosures regarding primary trading risk exposures following qualitative disclosures regarding fund’s market risk exposuresexcept disclosures statements historical factconstitute forwardlooking statements within meaning section 27a securities act section 21e securities exchange act fund’s primary market risk exposures subject numerous uncertainties contingencies risks government interventions defaults expropriations illiquid markets emergence dominant fundamental factors political upheavals changes historical price relationships influx new market participants increased regulation many factors could result material losses well material changes risk exposures fund assurance fund’s current market exposure change materially investors may lose substantially investment fund several factors may affect price index currencies underlie dx contracts including limited • national debt levels trade deficits including changes balances payments trade • domestic foreign inflation rates investors’ expectations concerning inflation rates • domestic foreign interest rates investors’ expectations concerning interest rates • currency exchange rates • investment trading activities mutual funds hedge funds currency funds • global regional political economic financial events situations • supply demand changes influence foreign exchange rates various currencies • monetary policies governments including exchange control programs restrictions local exchanges markets limitations foreign investment country investment residents country countries trade restrictions currency devaluations revaluations • governmental intervention currency market directly regulation order influence currency prices • expectations among market participants currency’s value soon change qualitative disclosures regarding nontrading risk exposure general fund unaware anticipated known demands commitments capital expenditures ii material trends favorable unfavorable capital resources iii trends uncertainties material effect operations qualitative disclosures regarding means managing risk exposure ordinary circumstances managing owner’s discretionary power limited determining whether fund make distribution emergency extraordinary circumstances managing owner’s discretionary powers increase remain circumscribed special circumstances example include unavailability index certain natural manmade disasters managing owner apply risk management techniques fund initiates positions “short” side market employ “stoploss” techniques item 8 item 8 financial statements supplementary data report independent registered public accounting firm board managers db commodity services llc audited accompanying consolidated statement financial condition powershares db us dollar index bearish fund subsidiary fund including consolidated schedule investments december 31 2007 related consolidated statements income expenses changes shareholders’ equity cash flows period february 15 2007 commencement investment operations december 31 2007 also audited accompanying statement financial condition powershares db us dollar index bearish fund december 31 2006 referenced consolidated financial statements powershares db us dollar index bearish fund subsidiary statement financial condition powershares db us dollar index bearish fund responsibility fund’s management responsibility express opinion consolidated financial statements powershares db us dollar index bearish fund subsidiary december 31 2007 period february 15 2007 commencement investment operations december 31 2007 statement financial condition powershares db us dollar index bearish fund december 31 2006 based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements powershares db us dollar index bearish fund subsidiary present fairly material respects financial position powershares db us dollar index bearish fund subsidiary december 31 2007 results operations change shareholders’ equity cash flows period february 15 2007 commencement investment operations december 31 2007 statement financial condition powershares db us dollar index bearish fund presents fairly material respects financial position powershares db us dollar index bearish fund december 31 2006 conformity us generally accepted accounting principles discussed note 1 consolidated financial statements powershares db us dollar index bearish fund subsidiary fund commenced investment operations february 15 2007 initial offering common units beneficial interest certain eligible financial institutions kpmg llp new york new york march 25 2008 powershares db us dollar index bearish fund subsidiary consolidated statements financial condition december 31 2007 2006i see accompanying notes consolidated financial statements represents financial condition powershares db us dollar index bearish fund consolidation db us dollar index bearish master fund occurred upon commencement investment operations february 15 2007 powershares db us dollar index bearish fund subsidiary consolidated schedule investments december 31 2007i portion united states treasury obligations held initial margin open futures contracts noted note 4 see accompanying notes consolidated financial statements positions represents future contracts sold powershares db us dollar index bearish fund subsidiary commenced investment operations february 15 2007 therefore investments held prior date powershares db us dollar index bearish fund subsidiary consolidated statement income expenses period february 15 2007 commencement investment operations december 31 2007i see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary commenced operations february 15 2007 therefore operating results occurred prior date powershares db us dollar index bearish fund subsidiary consolidated statement changes shareholders’ equity period february 15 2007 commencement investment operations december 31 2007i see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary commenced operations february 15 2007 therefore operating results occurred prior date powershares db us dollar index bearish fund subsidiary consolidated statement cash flows period february 15 2007 commencement investment operations december 31 2007i see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary commenced operations february 15 2007 therefore operating results occurred prior date powershares db us dollar index bearish fund subsidiary notes consolidated financial statements december 31 2007 1 organization powershares db us dollar index bearish fund “fund” “fund” may also refer fund master fund collectively context requires separate series powershares db us dollar index trust “trust” delaware statutory trust organized two separate series formed august 3 2006 subsidiary db us dollar index bearish master fund “master fund” separate series db us dollar index bearish master trust “master trust” delaware statutory trust organized two separate series formed august 3 2006 db commodity services llc delaware limited liability company “dbcs” “managing owner” funded fund master fund capital contribution 1000 exchange 40 general shares fund master fund fiscal year end fund december 31st term fund perpetual unless terminated earlier certain circumstances provided amended restated declaration trust agreement trust master trust “trust agreement” fund offers common units beneficial interest “limited shares” certain eligible financial institutions “authorized participants” one blocks 200000 limited shares called basket proceeds offering limited shares invested master fund master fund commenced investment operations february 15 2007 initial offering 1000000 limited shares deutsche bank securities inc initial purchaser fund exchange 25000000 fund commenced trading american stock exchange “amex” february 20 2007 report covers period february 15 2007 commencement investment operations december 31 2007 herein referred “period ended december 31 2007” investment operations occurred prior february 15 2007 therefore 2007 2006 operating results comparable 2 fund investment overview master fund invests futures contracts dx contracts view tracking changes whether positive negative level deutsche bank us dollar index usdx® futures index excess return short index short index time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative short positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® usdx® index provides general indication international value us dollar relative six major world currencies index currencies comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc fund master fund establishes short positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund 3 service providers related party agreements trustee trust agreement fund master fund wilmington trust company “trustee” delegated managing owner exclusive management control aspects business fund master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner managing owner managing owner serves fund master fund commodity pool operator commodity trading advisor managing owner indirect whollyowned subsidiary deutsche bank ag period ended december 31 2007 fund master fund incurred management fees 174173 34492 still payable december 31 2007 commodity broker deutsche bank securities inc delaware corporation serves master fund’s clearing broker “commodity broker” commodity broker indirect whollyowned subsidiary deutsche bank ag capacity clearing broker commodity broker executes clears master fund’s futures transactions performs certain administrative services master fund commodity broker affiliate managing owner period ended december 31 2007 fund master fund incurred brokerage fees 17418 december 31 2007 brokerage fees payable administrator bank new york “administrator” appointed managing owner administrator custodian transfer agent master fund entered separate administrative custodian transfer agency service agreements collectively referred “administration agreement” pursuant administration agreement administrator performs supervises performance services necessary operation administration fund master fund making investment decisions including receiving processing orders authorized participants create redeem baskets net asset value calculations accounting fund administrative services administrator retains certain financial books records including basket creation redemption books records fund accounting records ledgers respect assets liabilities capital income expenses registrar transfer journals related details trading related documents received futures commission merchants administration agreement continue effect commencement trading operations unless terminated least 90 days’ prior written notice either party notwithstanding foregoing administrator may terminate administrative portion administration agreement upon 30 days’ prior written notice fund andor master fund materially failed perform obligations administration agreement distributor alps distributors “distributor” provides certain distribution services fund pursuant distribution services agreement managing owner capacity managing owner fund distributor assists managing owner administrator certain functions duties relating creation redemption baskets distribution services agreement effective two years thereafter continue automatically successive annual periods provided continuance specifically approved least annually managing owner otherwise provided distribution services agreement distribution services agreement terminable without penalty sixty days’ written notice managing owner distributor distribution services agreement automatically terminate event assignment powershares capital management llc license agreement among powershares capital management llc “licensor” managing owner capacity managing owner fund managing owner collectively “licensees” licensor granted licensee nonexclusive license use “powershares®” trademark “trademark” anywhere world solely connection marketing promotion fund use refer trademark connection issuance trading fund necessary distributors inc marketing agreement managing owner distributors inc “aim distributors” affiliate powershares capital management llc powershares managing owner behalf fund master fund appointed aim distributors marketing agent aim distributors assists managing owner administrator certain functions duties providing various educational marketing activities regarding fund primarily secondary trading market activities include limited communicating fund’s name characteristics uses benefits risks consistent prospectus aim distributors open maintain customer accounts handle orders fund aim distributors engages public seminars road shows conferences media interviews field incoming telephone “800” number calls distribute sales literature communications including electronic media regarding fund 4 summary significant accounting policies basis presentation consolidation consolidated financial statements fund prepared using us generally accepted accounting principles include consolidated financial statement balances fund master fund upon initial offering limited shares february 15 2007 capital raised fund used purchase 100 common units beneficial interest master fund “master fund limited units” excluding common units beneficial interest master fund held managing owner “master fund general units” master fund limited units owned fund provide fund investors certain controlling rights abilities master fund consequently financial statement balances master fund consolidated fund’s financial statement balances beginning february 15 2007 commencement investment operations significant intercompany balances transactions eliminated b use estimates preparation consolidated financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities revenue expense related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes actual results could differ estimates c deposits broker fund deposits cash united states treasury obligations commodity broker subject commodity futures trading commission cftc regulations various exchange broker requirements combination fund’s deposits commodity broker cash united states treasury obligations unrealized profit loss open futures contracts variation margin represents fund’s overall equity broker trading account meet fund’s initial margin requirements fund holds united states treasury obligations fund uses cash held commodity broker satisfy variation margin requirements fund earns interest cash deposited commodity broker united states treasury obligations fund records purchases sales united states treasury obligations trade date basis holdings marked market based quoted market closing prices fund holds united states treasury obligations deposit master fund’s commodity broker meet margin requirements trading purposes interest income recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations included united states treasury obligations 1066128 restricted held initial margin open futures contracts e cash held broker fund’s arrangement commodity broker requires fund meet variation margin requirement related price movements positive negative futures contracts held fund keeping cash deposit commodity broker fund defines cash equivalents highly liquid investments original maturities three months less purchased december 31 2007 fund held cash 3993952 549800 deposit satisfy fund’s negative variation margin open futures contracts cash equivalents held fund december 31 2007 f income taxes fund master fund classified partnerships us federal income tax purposes accordingly neither fund master fund incur us federal income taxes provision federal state local income taxes made accompanying consolidated financial statements investors individually liable income taxes allocable share fund’s share master fund’s income gain loss deductions items following major tax jurisdictions fund earliest tax year subject examination g futures contracts commodity futures contracts held used trading purposes commodity futures recorded trade date basis open contracts recorded consolidated statement financial condition fair value last business day period represents market value commodity futures market quotes readily available however market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized appreciation depreciation open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively december 31 2007 futures contracts held fund net unrealized depreciation position 549800 h management fee master fund pays managing owner management fee “management fee” monthly arrears amount equal 050 per annum daily net asset value master fund separate management fee paid fund management fee paid consideration managing owner’s currency futures trading advisory services period ended december 31 2007 management fees amounted 174173 34492 payable managing owner december 31 2007 brokerage commissions fees master fund incurs brokerage commissions including applicable exchange fees nfa fees giveup fees pit brokerage fees transaction related fees expenses charged connection trading activities commodity broker costs recorded brokerage commissions fees consolidated statement income expenses incurred commodity broker’s brokerage commissions trading fees determined contractbycontract basis average total charges paid commodity broker approximately 700 per roundturn trade period ended december 31 2007 period ended december 31 2007 brokerage fees amounted 17418 j routine operational administrative ordinary expenses managing owner assumes routine operational administrative ordinary expenses fund master fund including limited computer services fees expenses trustee legal accounting fees expenses tax preparation expenses filing fees printing mailing duplication costs accordingly expenses reflected consolidated statement income expenses fund additional information see note 8 organizational offering costs k nonrecurring unusual fees expenses master fund pays fees expenses fund master fund nonrecurring unusual nature expenses include legal claims liabilities litigation costs indemnification unanticipated expenses fees expenses nature unpredictable terms timing amount period ended december 31 2007 fund master fund incur expenses 5 financial instrument risk normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts market risk potential changes value financial instruments traded master fund due market changes including fluctuations currency prices entering futures contracts exists market risk futures contracts may significantly influenced conditions resulting futures contracts less valuable markets move futures contracts time master fund could experience substantial losses credit risk possibility loss may occur due failure exchange clearinghouse perform according terms futures contract credit risk respect exchangetraded instruments reduced extent exchange clearing organization acts counterparty transactions master fund’s risk loss event counterparty default typically limited amounts recognized consolidated statement financial condition represented futures contract notional amounts instruments fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted 6 share purchases redemptions purchases limited shares may purchased fund authorized participants one blocks 200000 shares called basket fund issues limited shares baskets authorized participants continuously noon new york time business day immediately following date valid order create basket accepted fund net asset value 200000 limited shares closing time amex last close exchanges master fund’s assets traded whichever later date valid order create basket accepted fund b redemptions business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed depository trust company’s “dtc” book entrysystem fund later noon new york time business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order redemption proceeds fund consist cash redemption amount cash redemption amount equal net asset value number baskets requested authorized participant’s redemption order closing time amex last close exchanges master fund’s assets traded whichever later redemption order date fund distribute cash redemption amount noon new york time business day immediately following redemption order date dtc account authorized participant recorded dtc’s bookentry system redemption proceeds due fund delivered authorized participant noon new york time business day immediately following redemption order date time business day immediately following redemption order date fund’s dtc account credited baskets redeemed fund’s dtc account credited baskets redeemed time redemption proceeds delivered extent whole baskets received remainder redemption proceeds delivered next business day extent remaining whole baskets received managing owner receives fee applicable extension redemption distribution date managing owner may timetotime determine remaining baskets redeemed credited fund’s dtc account noon new york time next business day outstanding amount redemption order canceled managing owner also authorized deliver redemption proceeds notwithstanding baskets redeemed credited fund’s dtc account noon new york time business day immediately following redemption order date authorized participant collateralized obligation deliver baskets dtc’s bookentry system terms managing owner may timetotime agree upon c limited share transactions fund master fund commenced investment operations february 15 2007 initial offering 1000000 limited shares deutsche bank securities inc initial purchaser fund exchange 25000000 fund commenced trading amex february 20 2007 summary limited share transactions period ended december 31 2007 7 profit loss allocations distributions pursuant amended restated declaration trust agreement master trust income expenses allocated pro rata general limited shareholders monthly based respective percentage interests close last trading day preceding month losses allocated managing owner general shares excess managing owner’s capital balance allocated limited shareholders accordance respective interest master fund percentage total shareholders’ equity distributions redemption units may made sole discretion managing owner pro rata basis accordance respective capital balances shareholders distribution 040 per share net investment income declared december 14 2007 limited shareholders record close business december 19 2007 payable december 28 2007 december 28 2007 total distribution 1200000 paid limited shareholders december 28 2007 fund paid 040 per general share total distribution 1600 8 organizational offering costs organizing offering expenses fund master fund incurred assumed managing owner expenses incurred connection continuous offering limited shares commencement master fund’s trading operations also paid managing owner 9 commitments contingencies managing owner either capacity managing owner behalf fund master fund entered various service agreements contain variety representations provide indemnification provisions related certain risks service providers undertake performing services best interests funds december 31 2007 claims received fund master fund therefore possible estimate fund’s master fund’s potential future exposure indemnification provisions 10 net asset value financial highlights fund presenting following net asset value financial highlights related investment performance operations limited share outstanding period ended december 31 2007 net investment income total expense ratios calculated using average net asset value net asset value presentation calculated using daily limited shares outstanding net investment income total expense ratios annualized total return based change net asset value limited shares period individual investor’s return ratios may vary based timing capital transactions percentages annualized percentages annualized calculated based initial offering price upon commencement investment operations 2500 11 recently issued accounting standards september 2006 fasb issued fasb statement 157 fair value measurement statement 157 statement 157 defines fair value establishes framework measurement fair value enhances disclosures fair value measurements statement require new fair value measures statement effective fair value measures already required permitted standards fiscal years beginning november 15 2007 fund required adopt statement 157 beginning january 1 2008 statement 157 required applied prospectively except certain financial instruments transition adjustment recognized adjustment opening retained earnings year adoption fund currently evaluating impact adopting statement 157 financial statements disclosures december 2007 fasb issued fasb statement 160 noncontrolling interests consolidated financial statements amendment arb 51 statement 160 statement 160 requires noncontrolling interests previously referred minority interests reported component equity changes accounting transactions noncontrolling interest holders statement 160 effective periods beginning december 15 2008 earlier adoption prohibited statement 160 applied prospectively noncontrolling interests including arose effective date presentation disclosure requirements shall applied retrospectively periods presented fund currently evaluating impact adopting statement 160 results operations financial position 12 recently adopted accounting standards july 2006 fasb issued fasb interpretation 48 accounting uncertainty income taxes interpretation fasb statement 109 fin 48 clarifies accounting uncertainty income taxes recognized enterprise’s financial statements prescribes threshold morelikelythannot recognition tax benefits uncertain tax positions taken expected taken tax return fin 48 also provides related guidance measurement derecognition classification interest penalties disclosure fund adopted fin 48 january 1 2007 determined application statement impact results operations financial position item 9 item 8 financial statements supplementary data documents page report management internal control financial reporting report independent registered public accounting firm internal control financial reporting report independent registered public accounting firm consolidated financial statements consolidated statements financial condition december 31 2008 2007 consolidated schedule investments december 31 2008 consolidated schedule investments december 31 2007 consolidated statements income expenses year ended december 31 2008 period ended december 31 2007 consolidated statement changes shareholders’ equity year ended december 31 2008 consolidated statement changes shareholders’ equity period ended december 31 2007 consolidated statements cash flows year ended december 31 2008 period ended december 31 2007 notes consolidated financial statements report management internal control financial reporting management db commodity services llc managing owner “managing owner” powershares db us dollar index bullish fund subsidiary “fund” responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f securities exchange act 1934 amended “exchange act” internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance us generally accepted accounting principles internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets fund 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles fund’s receipts expenditures made accordance appropriate authorizations management 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition fund’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements errors fraud also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate kevin rich chief executive officer michael gilligan principal financial officer managing owner assessed effectiveness fund’s internal control financial reporting december 31 2008 making assessment used criteria set forth committee sponsoring organizations treadway commission “coso” internal controlintegrated framework assessment included evaluation design fund’s internal control financial reporting testing operational effectiveness internal control financial reporting based assessment criteria concluded fund maintained effective internal control financial reporting december 31 2008 fund’s independent registered public accounting firm kpmg llp audited fund’s internal control financial reporting december 31 2008 stated report page 34 fund’s annual report form 10k kevin rich name kevin rich title chief executive officer managing owner michael gilligan name michael gilligan title principal financial officer managing owner february 27 2009 report independent registered public accounting firm board managers db commodity services llc shareholders powershares db us dollar index bullish fund subsidiary audited powershares db us dollar index bullish fund subsidiary’s fund internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso fund’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion fund’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion powershares db us dollar index bullish fund subsidiary maintained material respects effective internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated statements financial condition including consolidated schedules investments powershares db us dollar index bullish fund subsidiary december 31 2008 2007 related consolidated statements income expenses changes shareholders’ equity cash flows year ended december 31 2008 period february 15 2007 commencement investment operations december 31 2007 report dated february 27 2009 expressed unqualified opinion consolidated financial statements kpmg llp new york new york february 27 2009 report independent registered public accounting firm board managers db commodity services llc shareholders powershares db us dollar index bullish fund subsidiary audited accompanying consolidated statements financial condition including consolidated schedules investments powershares db us dollar index bullish fund subsidiary fund december 31 2008 2007 related consolidated statements income expenses changes shareholders’ equity cash flows year ended december 31 2008 period february 15 2007 commencement investment operations december 31 2007 consolidated financial statements responsibility fund’s management responsibility express opinion consolidated financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position powershares db us dollar index bullish fund subsidiary december 31 2008 2007 results operations cash flows year ended december 31 2008 period february 15 2007 commencement investment operations december 31 2007 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states powershares db us dollar index bullish fund subsidiary’s internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso report dated february 27 2009 expressed unqualified opinion effectiveness fund’s internal control financial reporting kpmg llp new york new york february 27 2009 powershares db us dollar index bullish fund subsidiary consolidated statements financial condition december 31 2008 2007 see accompanying notes consolidated financial statements powershares db us dollar index bullish fund subsidiary consolidated schedule investments december 31 2008 see accompanying notes consolidated financial statements powershares db us dollar index bullish fund subsidiary consolidated schedule investments december 31 2007 see accompanying notes consolidated financial statements powershares db us dollar index bullish fund subsidiary consolidated statements income expenses year ended december 31 2008 period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bullish fund subsidiary consolidated statement changes shareholders’ equity year ended december 31 2008 see accompanying notes consolidated financial statements powershares db us dollar index bullish fund subsidiary consolidated statement changes shareholders’ equity period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bullish fund subsidiary consolidated statements cash flows year ended december 31 2008 period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bullish fund subsidiary notes consolidated financial statements december 31 2008 1 organization powershares db us dollar index bullish fund “fund” “fund” may also refer fund master fund collectively context requires separate series powershares db us dollar index trust “trust” delaware statutory trust organized two separate series subsidiary db us dollar index bullish master fund “master fund” separate series db us dollar index bullish master trust “master trust” delaware statutory trust organized two separate series formed august 3 2006 db commodity services llc delaware limited liability company “dbcs” “managing owner” funded fund master fund capital contribution 1000 exchange 40 general shares fund master fund fiscal year end fund december 31st term fund perpetual unless terminated earlier certain circumstances provided amended restated declaration trust agreement trust master trust “trust agreement” collectively “trust agreements” fund offers common units beneficial interest “shares” certain eligible financial institutions “authorized participants” one blocks 200000 shares called basket proceeds offering shares invested master fund commenced trading american stock exchange known nyse alternext us llc “nyse alternext” february 20 2007 november 25 2008 listed nyse arca inc “nyse arca” fund master fund commenced investment operations february 15 2007 initial offering 1000000 shares deutsche bank securities inc initial purchaser fund exchange 25000000 initial offering shares additional 3800000 shares issued certain authorized participants 90525280 600000 shares redeemed 14907566 period february 15 2007 commencement investment operations december 31 2007 period january 1 2008 december 31 2008 additional 40600000 shares issued certain authorized participants 946970372 32400000 shares redeemed 788287148 report covers year ended december 31 2008 herein referred “year ended december 31 2008” period february 15 2007 commencement investment operations december 31 2007 herein referred “period ended december 31 2007” 2 fund investment overview master fund invests futures contracts “dx contracts” view tracking changes whether positive negative level deutsche bank us dollar index usdx® futures index excess return long index long index time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative long positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® “usdx®” index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx® euro japanese yen british pound canadian dollar swedish krona swiss franc fund master fund establishes long positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund employ leverage december 31 2008 december 31 2007 fund 311639730 100 99672786 100 respectively holdings cash united states treasury obligations unrealized appreciationdepreciation futures contracts deposit commodity broker 9642500 309 1343832 135 respectively fund’s holdings cash united states treasury obligations required deposited margin support fund’s long futures positions dx contracts additional information please see audited consolidated schedule investments december 31 2008 audited consolidated schedule investments december 31 2007 breakdown fund’s portfolio holdings 3 service providers related party agreements trustee trust agreements wilmington trust company trustee fund master fund delegated managing owner exclusive management control aspects business trust fund master trust master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner managing owner managing owner serves fund master fund commodity pool operator commodity trading advisor managing owner indirect whollyowned subsidiary deutsche bank ag year ended december 31 2008 fund master fund incurred management fees 2088869 180201 payable december 31 2008 period ended december 31 2007 fund master fund incurred management fees 112135 32935 payable december 31 2007 commodity broker deutsche bank securities inc delaware corporation serves master fund’s clearing broker “commodity broker” commodity broker indirect whollyowned subsidiary deutsche bank ag capacity clearing broker commodity broker executes clears master fund’s futures transactions performs certain administrative services master fund commodity broker affiliate managing owner year ended december 31 2008 fund master fund incurred brokerage fees 332809 3336 payable december 31 2008 period ended december 31 2007 fund master fund incurred brokerage fees 11214 december 31 2007 brokerage fees payable administrator bank new york mellon “administrator” appointed managing owner administrator custodian transfer agent master fund entered separate administrative custodian transfer agency service agreements collectively referred “administration agreement” pursuant administration agreement administrator performs supervises performance services necessary operation administration fund master fund making investment decisions including receiving processing orders authorized participants create redeem baskets net asset value calculations accounting fund administrative services administrator retains certain financial books records including basket creation redemption books records fund accounting records ledgers respect assets liabilities capital income expenses registrar transfer journals related details trading related documents received futures commission merchants administration agreement continue effect commencement trading operations unless terminated least 90 days’ prior written notice either party notwithstanding foregoing administrator may terminate administrative portion administration agreement upon 30 days’ prior written notice fund andor master fund materially failed perform obligations administration agreement distributor alps distributors inc “distributor” provides certain distribution services fund pursuant distribution services agreement managing owner capacity managing owner fund distributor assists managing owner administrator certain functions duties relating distribution marketing services fund including reviewing approving marketing materials distribution services agreement terminable without penalty sixty days’ written notice managing owner distributor distribution services agreement automatically terminate event assignment invesco powershares capital management llc license agreement among invesco powershares capital management llc formerly known powershares capital management llc “licensor” managing owner capacity managing owner fund managing owner collectively “licensees” licensor granted licensee nonexclusive license use “powershares®” trademark “trademark” anywhere world solely connection marketing promotion fund use refer trademark connection issuance trading fund necessary invesco aim distributors inc marketing agreement managing owner invesco aim distributors inc formerly known distributors inc “invesco aim distributors” affiliate invesco powershares capital management llc “invesco powershares” managing owner behalf fund master fund appointed invesco aim distributors marketing agent invesco aim distributors assists managing owner administrator certain functions duties providing various educational marketing activities regarding fund primarily secondary trading market activities include limited communicating fund’s name characteristics uses benefits risks consistent prospectus invesco aim distributors open maintain customer accounts handle orders fund invesco aim distributors engages public seminars road shows conferences media interviews distributes sales literature communications including electronic media regarding fund 4 summary significant accounting policies basis presentation consolidation consolidated financial statements fund prepared using us generally accepted accounting principles include consolidated financial statement balances fund master fund upon initial offering shares february 15 2007 capital raised fund used purchase 100 common units beneficial interest master fund “master fund limited units” excluding common units beneficial interest master fund held managing owner “master fund general units” master fund limited units owned fund provide fund investors certain controlling rights abilities master fund consequently financial statement balances master fund consolidated fund’s financial statement balances beginning february 15 2007 commencement investment operations significant intercompany balances transactions eliminated b use estimates preparation consolidated financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities revenues expenses related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes actual results could differ estimates c financial instruments fair value united states treasury obligations commodity futures contracts recorded consolidated statements financial condition trade date basis fair value changes fair value recognized earnings period fair value financial instrument amount would received sell asset paid transfer liability orderly transaction market participants measurement date exit price fund adopted fasb statement 157 “fair value measurements” statement 157 effective january 1 2008 statement 157 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value hierarchy gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 measurements lowest priority unobservable inputs level 3 measurements three levels fair value hierarchy statement 157 described basis fair value measurement level 1 unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities level 2 quoted prices markets active financial instruments significant inputs observable either directly indirectly level 3 prices valuations require inputs significant fair value measurement unobservable financial instrument’s level within fair value hierarchy based lowest level input significant fair value measurement determining fair value united states treasury obligations commodity futures contracts fund uses unadjusted quoted market prices active markets united states treasury obligations commodity futures contracts classified within level 1 fair value hierarchy fund adjust quoted prices united states treasury obligations commodity futures contracts deposits broker fund deposits cash united states treasury obligations commodity broker subject commodity futures trading commission “cftc” regulations various exchange broker requirements combination fund’s deposits commodity broker cash united states treasury obligations unrealized profit loss open futures contracts variation margin represents fund’s overall equity broker trading account meet fund’s initial margin requirements fund holds united states treasury obligations fund uses cash held commodity broker satisfy variation margin requirements fund earns interest cash deposited commodity broker e united states treasury obligations fund records purchases sales united states treasury obligations trade date basis holdings marked market based quoted market closing prices fund holds united states treasury obligations deposit master fund’s commodity broker meet margin requirements trading purposes interest income recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations included united states treasury obligations december 31 2008 9642500 restricted held initial margin open futures contracts included united states treasury obligations december 31 2007 1343832 restricted held initial margin open futures contracts f cash held broker fund’s arrangement commodity broker requires fund meet variation margin requirement related price movements positive negative futures contracts held fund keeping cash deposit commodity broker fund defines cash equivalents highly liquid investments original maturities three months less purchased december 31 2008 fund held cash 165510945 15866250 deposit satisfy fund’s negative variation margin open futures contracts december 31 2007 fund cash held broker 2673775 cash equivalents held fund december 31 2008 2007 respectively g income taxes fund master fund classified partnerships us federal income tax purposes accordingly neither fund master fund incur us federal income taxes provision federal state local income taxes made accompanying consolidated financial statements investors individually liable income taxes allocable share fund’s share master fund’s income gain loss deductions items following major tax jurisdictions fund earliest tax year subject examination h futures contracts currency futures contracts held used trading purposes currency futures recorded trade date basis open contracts recorded consolidated statement financial condition fair value last business day period represents market value currency futures market quotes readily available however market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized appreciation depreciation open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively december 31 2008 2007 futures contracts held fund net unrealized depreciation position 15866250 unrealized appreciation position 428580 respectively management fee master fund pays managing owner management fee “management fee” monthly arrears amount equal 050 per annum daily net asset value master fund separate management fee paid fund management fee paid consideration managing owner’s currency futures trading advisory services j brokerage commissions fees master fund incurs brokerage commissions including applicable exchange fees nfa fees giveup fees pit brokerage fees transaction related fees expenses charged connection trading activities commodity broker costs recorded brokerage commissions fees consolidated statement income expenses incurred commodity broker’s brokerage commissions trading fees determined contractbycontract basis average total charges paid commodity broker less 1000 per roundturn trade year ended december 31 2008 period ended december 31 2007 k routine operational administrative ordinary expenses managing owner assumes routine operational administrative ordinary expenses fund master fund including limited computer services fees expenses trustee legal accounting fees expenses tax preparation expenses filing fees printing mailing duplication costs accordingly expenses reflected consolidated statement income expenses fund l organizational offering costs organizational offering expenses fund master fund incurred assumed managing owner expenses incurred connection continuous offering shares also paid managing owner nonrecurring unusual fees expenses master fund pays fees expenses fund master fund nonrecurring unusual nature expenses include legal claims liabilities litigation costs indemnification unanticipated expenses fees expenses nature unpredictable terms timing amount year ended december 31 2008 period ended december 31 2007 fund master fund incur expenses 5 fair value measurements fund’s assets liabilities recorded fair value categorized based upon fair value hierarchy accordance statement 157 see note 4c discussion fund’s policies regarding hierarchy assets liabilities measured fair value december 31 2008 level 2 level 3 holdings december 31 2008 6 financial instrument risk normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts market risk potential changes value financial instruments traded master fund due market changes including fluctuations currency prices entering futures contracts exists market risk futures contracts may significantly influenced adverse market conditions resulting futures contracts less valuable markets move futures contracts time master fund could experience substantial losses credit risk possibility loss may occur due failure exchange clearinghouse perform according terms futures contract credit risk respect exchangetraded instruments reduced extent exchange clearing organization acts counterparty transactions master fund’s risk loss event counterparty default typically limited amounts recognized consolidated statement financial condition represented futures contract notional amounts instruments fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted 7 share purchases redemptions purchases shares may purchased fund authorized participants one blocks 200000 shares called basket fund issues shares baskets authorized participants continuously noon new york time business day immediately following date valid order create basket accepted fund net asset value 200000 shares closing time nyse arca last close exchanges master fund’s assets traded whichever later date valid order create basket accepted fund b redemptions business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed depository trust company’s “dtc” book entrysystem fund later noon new york time business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order redemption proceeds fund consist cash redemption amount cash redemption amount equal net asset value number baskets requested authorized participant’s redemption order closing time nyse arca last close exchanges master fund’s assets traded whichever later redemption order date fund distribute cash redemption amount noon new york time business day immediately following redemption order date dtc account authorized participant recorded dtc’s bookentry system redemption proceeds due fund delivered authorized participant noon new york time business day immediately following redemption order date time business day immediately following redemption order date fund’s dtc account credited baskets redeemed fund’s dtc account credited baskets redeemed time redemption proceeds delivered extent whole baskets received remainder redemption proceeds delivered next business day extent remaining whole baskets received managing owner receives fee applicable extension redemption distribution date managing owner may timetotime determine remaining baskets redeemed credited fund’s dtc account noon new york time next business day outstanding amount redemption order canceled managing owner also authorized deliver redemption proceeds notwithstanding baskets redeemed credited fund’s dtc account noon new york time business day immediately following redemption order date authorized participant collateralized obligation deliver baskets dtc’s bookentry system terms managing owner may timetotime agree upon december 31 2008 fund payable shares redeemed 4943718 c share transactions shares commenced trading nyse alternext february 20 2007 november 25 2008 listed trading nyse arca symbol “uup” summary share transactions year ended december 31 2008 period ended december 31 2007 8 profit loss allocations distributions pursuant amended restated declaration trust agreement master trust income expenses allocated pro rata managing owner holder general shares shareholders monthly based respective percentage interests close last trading day preceding month losses allocated managing owner general shares excess managing owner’s capital balance allocated shareholders accordance respective interest master fund percentage total shareholders’ equity distributions redemption units may made sole discretion managing owner pro rata basis accordance respective capital balances shareholders distribution 017 per share net investment income declared december 12 2008 shareholders record close business december 17 2008 payable december 30 2008 december 30 2008 total distribution 3060000 paid shareholders december 30 2008 fund paid 017 per general share total distribution 680 distribution 020 per share net investment income declared december 14 2007 shareholders record close business december 19 2007 payable december 28 2007 december 28 2007 total distribution 720000 paid shareholders december 28 2007 fund paid 020 per general share total distribution 800 9 commitments contingencies managing owner either capacity managing owner behalf fund master fund entered various service agreements contain variety representations provide indemnification provisions related certain risks service providers undertake performing services best interests funds december 31 2008 claims received fund master fund therefore possible estimate fund’s master fund’s potential future exposure indemnification provisions 10 net asset value financial highlights fund presenting following net asset value financial highlights related investment performance operations share outstanding year ended december 31 2008 period ended december 31 2007 net investment income total expense ratios calculated using average net asset value net asset value presentation calculated using daily shares outstanding net investment income total expense ratios annualized total return based change net asset value shares period individual investor’s return ratios may vary based timing capital transactions fund invests substantially assets master fund masterfeeder structure fund holds investment assets master fund limited units fund majority master fund limited unit owner managing owner holds minority interest master fund share issued fund correlates master fund limited unit issued master fund held fund net asset value per master fund limited unit master fund general unit collectively “master fund units” net asset value master fund divided number outstanding master fund units onetoone correlation shares master fund limited units net asset value per share net asset value per master fund limited unit equal percentages annualized percentages annualized period ended december 31 2007 calculated based initial offering price upon commencement investment operations 2500 11 recently issued accounting standards december 2007 financial accounting standards board released fasb statement 160 noncontrolling interests consolidated financial statements amendment arb 51 statement 160 statement 160 requires noncontrolling interests previously referred minority interests reported component equity changes accounting transactions noncontrolling interest holders statement 160 effective periods beginning december 15 2008 earlier adoption prohibited statement 160 applied prospectively noncontrolling interests including arose effective date presentation disclosure requirements shall applied retrospectively periods presented march 19 2008 financial accounting standards board released fasb statement 161 disclosures derivative instruments hedging activities statement 161 statement 161 requires qualitative disclosures objectives strategies using derivatives quantitative disclosures fair value amounts gains losses derivative instruments disclosures creditriskrelated contingent features derivative agreements application statement 161 required fiscal years beginning november 15 2008 interim periods within fiscal years time management evaluating implications statements impact financial statements yet determined 12 recently adopted accounting standards september 2006 financial accounting standards board issued fasb statement 157 fair value measurements statement 157 statement 157 defines fair value establishes framework measurement fair value enhances disclosures fair value measurements statement require new fair value measures fund adopted statement 157 january 1 2008 determined application statement impact results operation financial position july 2006 financial accounting standards board issued fasb interpretation 48 accounting uncertainty income taxes interpretation fasb statement 109 fin 48 clarifies accounting uncertainty income taxes recognized enterprise’s financial statements prescribes threshold morelikelythannot recognition tax benefits uncertain tax positions taken expected taken tax return fin 48 also provides related guidance measurement derecognition classification interest penalties disclosure fund adopted fin 48 february 15 2007 determined application statement impact results operations financial position item 9 item 8 financial statements supplementary data report management internal control financial reporting management db commodity services llc managing owner “managing owner” powershares db us dollar index bearish fund subsidiary “fund” responsible establishing maintaining adequate internal control financial reporting defined rules 13a15f 15d15f securities exchange act 1934 amended “exchange act” internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance us generally accepted accounting principles internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets fund 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles fund’s receipts expenditures made accordance appropriate authorizations management 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition fund’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements errors fraud also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate hans ephraimson chief executive officer michael gilligan principal financial officer managing owner assessed effectiveness fund’s internal control financial reporting december 31 2009 making assessment used criteria set forth committee sponsoring organizations treadway commission “coso” internal controlintegrated framework assessment included evaluation design fund’s internal control financial reporting testing operational effectiveness internal control financial reporting based assessment criteria concluded fund maintained effective internal control financial reporting december 31 2009 fund’s independent registered public accounting firm kpmg llp audited fund’s internal control financial reporting december 31 2009 stated report page 38 fund’s annual report form 10k hans ephraimson name hans ephraimson title chief executive officer managing owner michael gilligan name michael gilligan title principal financial officer managing owner february 24 2010 report independent registered public accounting firm board managers db commodity services llc shareholders powershares db us dollar index bearish fund subsidiary audited powershares db us dollar index bearish fund subsidiary’s fund internal control financial reporting december 31 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso fund’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying report management internal control financial reporting responsibility express opinion fund’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion powershares db us dollar index bearish fund subsidiary maintained material respects effective internal control financial reporting december 31 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated statements financial condition including consolidated schedules investments powershares db us dollar index bearish fund subsidiary december 31 2009 2008 related consolidated statements income expenses changes shareholders’ equity cash flows years twoyear period ended december 31 2009 period february 15 2007 commencement investment operations december 31 2007 report dated february 24 2010 expressed unqualified opinion consolidated financial statements kpmg llp new york new york february 24 2010 report independent registered public accounting firm board managers db commodity services llc shareholders powershares db us dollar index bearish fund subsidiary audited accompanying consolidated statements financial condition including consolidated schedules investments powershares db us dollar index bearish fund subsidiary fund december 31 2009 2008 related consolidated statements income expenses changes shareholders’ equity cash flows years twoyear period ended december 31 2009 period february 15 2007 commencement investment operations december 31 2007 consolidated financial statements responsibility fund’s management responsibility express opinion consolidated financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position powershares db us dollar index bearish fund subsidiary december 31 2009 2008 results operations cash flows years twoyear period ended december 31 2009 period february 15 2007 commencement investment operations december 31 2007 conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states powershares db us dollar index bearish fund subsidiary’s internal control financial reporting december 31 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso report dated february 24 2010 expressed unqualified opinion effectiveness fund’s internal control financial reporting kpmg llp new york new york february 24 2010 powershares db us dollar index bearish fund subsidiary consolidated statements financial condition december 31 2009 2008 see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary consolidated schedule investments december 31 2009 net unrealized depreciation comprised entirely unrealized losses 7537165 position represents futures contracts sold see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary consolidated schedule investments december 31 2008 see accompanying notes consolidated financial statements positions represent futures contracts sold powershares db us dollar index bearish fund subsidiary consolidated statements income expenses years ended december 31 2009 2008 period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bearish fund subsidiary consolidated statement changes shareholders’ equity year ended december 31 2009 see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary consolidated statement changes shareholders’ equity year ended december 31 2008 see accompanying notes consolidated financial statements powershares db us dollar index bearish fund subsidiary consolidated statement changes shareholders’ equity period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bearish fund subsidiary consolidated statements cash flows years ended december 31 2009 2008 period ended december 31 2007i see accompanying notes consolidated financial statements period ended december 31 2007 reflects operating results since february 15 2007 date commencement investment operations powershares db us dollar index bearish fund subsidiary notes consolidated financial statements december 31 2009 1 organization powershares db us dollar index bearish fund “fund” “fund” may also refer fund master fund collectively context requires separate series powershares db us dollar index trust “trust” delaware statutory trust organized two separate series subsidiary db us dollar index bearish master fund “master fund” separate series db us dollar index bearish master trust “master trust” delaware statutory trust organized two separate series formed august 3 2006 db commodity services llc delaware limited liability company “dbcs” “managing owner” funded fund master fund capital contribution 1000 exchange 40 general shares fund master fund fiscal year end fund december 31st term fund perpetual unless terminated earlier certain circumstances provided amended restated declaration trust agreement trust master trust “trust agreement” collectively “trust agreements” fund offers common units beneficial interest “shares” certain eligible financial institutions “authorized participants” one blocks 200000 shares called basket proceeds offering shares invested master fund master fund commenced investment operations february 15 2007 fund commenced trading american stock exchange known nyse alternext us llc “nyse alternext” february 20 2007 november 25 2008 listed nyse arca inc “nyse arca” report covers year ended december 31 2009 herein referred “year ended december 31 2009” year ended december 31 2008 herein referred “year ended december 31 2008” period february 15 2007 commencement investment operations december 31 2007 herein referred “period ended december 31 2007” 2 fund investment overview master fund establishes short positions certain futures contracts “dx contracts” view tracking changes whether positive negative level deutsche bank short us dollar index usdx® futures indexexcess return “short index” “index” time fund earns interest income united states treasury obligations high credit quality shortterm fixed income securities index calculated reflect changes market value time whether positive negative short positions dx contracts dx contracts traded currency markets ice futures us formerly known new york board trade® symbol “dx” changes market value time whether positive negative dx contracts related changes whether positive negative level us dollar index® “usdx®” index provides general indication international value us dollar relative six major world currencies “index currencies” comprise usdx®euro japanese yen british pound canadian dollar swedish krona swiss franc fund master fund establishes short positions dx contracts view tracking changes whether positive negative level index performance fund also intended reflect excess master fund’s interest income holdings united states treasury obligations high credit quality shortterm fixed income securities expenses fund master fund employ leverage december 31 2009 december 31 2008 fund 320022426 100 172568890 100 respectively holdings cash united states treasury obligations unrealized appreciationdepreciation futures contracts deposit commodity broker 6739908 211 4960900 287 respectively fund’s holdings cash united states treasury obligations required deposited margin support fund’s short futures positions dx contracts additional information please see audited consolidated schedule investments december 31 2009 2008 breakdown fund’s portfolio holdings powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 3 service providers related party agreements trustee amended restated declaration trust agreements wilmington trust company trustee fund master fund “trustee” delegated managing owner exclusive management control aspects business trust fund master trust master fund trustee duty liability supervise monitor performance managing owner trustee liability acts omissions managing owner managing owner managing owner serves fund master fund commodity pool operator commodity trading advisor managing owner indirect whollyowned subsidiary deutsche bank ag year ended december 31 2009 fund master fund incurred management fees 1383499 155747 payable december 31 2009 year ended december 31 2008 fund master fund incurred management fees 443520 51585 payable december 31 2008 period ended december 31 2007 fund master fund incurred management fees 174173 commodity broker deutsche bank securities inc delaware corporation serves master fund’s clearing broker “commodity broker” commodity broker indirect whollyowned subsidiary deutsche bank ag affiliate managing owner capacity clearing broker commodity broker executes clears master fund’s futures transactions performs certain administrative custodial services master fund custodian master fund’s assets commodity broker responsible among things providing periodic accountings dealings actions taken master fund reporting period together accounting securities cash indebtedness obligations held nominees behalf master fund year ended december 31 2009 fund master fund incurred brokerage fees 146851 1755 payable december 31 2009 year ended december 31 2008 fund master fund incurred brokerage fees 69033 1551 payable december 31 2008 period ended december 31 2007 fund master fund incurred brokerage fees 17418 administrator bank new york mellon “administrator” appointed managing owner administrator custodian transfer agent master fund entered separate administrative custodian transfer agency service agreements collectively referred “administration agreement” pursuant administration agreement administrator performs supervises performance services necessary operation administration fund master fund making investment decisions including receiving processing orders authorized participants create redeem baskets net asset value calculations accounting fund administrative services administrator retains certain financial books records including basket creation redemption books records fund accounting records ledgers respect assets liabilities capital income expenses registrar transfer journals related details trading related documents received futures commission merchants distributor alps distributors inc “distributor” provides certain distribution services fund pursuant distribution services agreement among managing owner capacity managing owner fund distributor assists managing owner administrator certain functions duties relating distribution marketing services fund including reviewing approving marketing materials invesco powershares capital management llc license agreement among invesco powershares capital management llc “licensor” managing owner capacity managing owner fund managing owner powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 collectively “licensees” licensor granted licensee nonexclusive license use “powershares®” trademark “trademark” anywhere world solely connection marketing promotion fund use refer trademark connection issuance trading fund necessary invesco aim distributors inc marketing agreement managing owner invesco aim distributors inc “invesco aim distributors” affiliate invesco powershares capital management llc “invesco powershares” managing owner behalf fund master fund appointed invesco aim distributors marketing agent invesco aim distributors assists managing owner administrator certain functions duties providing various educational marketing activities regarding fund primarily secondary trading market activities include limited communicating fund’s name characteristics uses benefits risks consistent prospectus invesco aim distributors open maintain customer accounts handle orders fund invesco aim distributors engages public seminars road shows conferences media interviews distributes sales literature communications including electronic media regarding fund 4 summary significant accounting policies basis presentation consolidation consolidated financial statements fund prepared using us generally accepted accounting principles include consolidated financial statement balances fund master fund upon initial offering shares february 15 2007 capital raised fund used purchase 100 common units beneficial interest master fund “master fund limited units” excluding common units beneficial interest master fund held managing owner “master fund general units” master fund limited units owned fund provide fund investors certain controlling rights abilities master fund consequently financial statement balances master fund consolidated fund’s financial statement balances significant intercompany balances transactions eliminated certain amounts 2008 2007 financial statements reclassified conform 2009 presentation b use estimates preparation consolidated financial statements conformity us generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities revenues expenses related disclosure contingent assets liabilities reporting period consolidated financial statements accompanying notes actual results could differ estimates c financial instruments fair value united states treasury obligations currency futures contracts recorded consolidated statements financial condition trade date basis fair value changes fair value recognized earnings period fair value financial instrument amount would received sell asset paid transfer liability orderly transaction market participants measurement date exit price financial accounting standards board fasb fair value measurement disclosure guidance requires fair value hierarchy prioritizes inputs valuation techniques used measure fair value hierarchy gives highest priority unadjusted quoted prices active markets identical assets liabilities level 1 measurements lowest priority unobservable inputs level 3 measurements three levels fair value hierarchy described basis fair value measurement level 1 unadjusted quoted prices active markets accessible measurement date identical unrestricted assets liabilities level 2 quoted prices markets active financial instruments significant inputs observable either directly indirectly powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 level 3 prices valuations require inputs significant fair value measurement unobservable financial instrument’s level within fair value hierarchy based lowest level input significant fair value measurement determining fair value united states treasury obligations currency futures contracts fund uses unadjusted quoted market prices active markets united states treasury obligations currency futures contracts classified within level 1 fair value hierarchy fund adjust quoted prices united states treasury obligations currency futures contracts deposits broker fund deposits cash united states treasury obligations commodity broker subject commodity futures trading commission “cftc” regulations various exchange broker requirements combination fund’s deposits commodity broker cash united states treasury obligations unrealized profit loss open futures contracts variation margin represents fund’s overall equity broker trading account meet fund’s initial margin requirements fund holds united states treasury obligations fund uses cash held commodity broker satisfy variation margin requirements fund earns interest cash deposited commodity broker e united states treasury obligations fund records purchases sales united states treasury obligations trade date basis holdings marked market based quoted market closing prices fund holds united states treasury obligations deposit master fund’s commodity broker meet margin requirements trading purposes interest income recognized accrual basis earned premiums discounts amortized accreted life united states treasury obligations included united states treasury obligations december 31 2009 2008 holdings 6739908 4960900 respectively restricted held initial margin open futures contracts december 31 2008 fund purchased 5000000 notional united states treasury obligations unpaid result payable securities purchased reported 4999125 f cash held broker fund’s arrangement commodity broker requires fund meet variation margin requirement related price movements positive negative futures contracts held fund keeping cash deposit commodity broker fund defines cash equivalents highly liquid investments original maturities three months less purchased december 31 2009 fund held cash 33574291 7537165 deposit satisfy fund’s negative variation margin open futures contracts december 31 2008 fund held cash 67132379 cash equivalents held fund december 31 2009 2008 g income taxes fund master fund classified partnerships us federal income tax purposes accordingly neither fund master fund incur us federal income taxes provision federal state local income taxes made accompanying consolidated financial statements investors individually liable income taxes allocable share fund’s share master fund’s income gain loss deductions items major tax jurisdiction fund earliest tax year subject examination united states 2007 powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 h futures contracts currency futures contracts held used trading purposes currency futures recorded trade date basis open contracts recorded consolidated statement financial condition fair value last business day period represents market value currency futures market quotes readily available however market closing prices available managing owner may value asset master fund pursuant policies managing owner adopted consistent normal industry standards realized gains losses changes unrealized appreciation depreciation open positions determined specific identification basis recognized consolidated statement income expenses period contract closed changes occur respectively december 31 2009 2008 futures contracts held fund net unrealized depreciation position 7537165 net unrealized appreciation position 4442665 respectively management fee master fund pays managing owner management fee “management fee” monthly arrears amount equal 050 per annum daily net asset value master fund separate management fee paid fund management fee paid consideration managing owner’s currency futures trading advisory services j brokerage commissions fees master fund incurs brokerage commissions including applicable exchange fees nfa fees giveup fees pit brokerage fees transaction related fees expenses charged connection trading activities commodity broker costs recorded brokerage commissions fees consolidated statement income expenses incurred commodity broker’s brokerage commissions trading fees determined contractbycontract basis average total charges paid commodity broker less 1000 per roundturn trade years ended december 31 2009 2008 period ended december 31 2007 k routine operational administrative ordinary expenses managing owner assumes routine operational administrative ordinary expenses fund master fund including limited computer services fees expenses trustee legal accounting fees expenses tax preparation expenses filing fees printing mailing duplication costs accordingly expenses reflected consolidated statement income expenses fund l organizational offering costs organizational offering expenses fund master fund incurred assumed managing owner neither fund master fund responsible managing owner reimbursement organizational offering costs expenses incurred connection continuous offering shares also paid managing owner nonrecurring unusual fees expenses master fund pays fees expenses fund master fund nonrecurring unusual nature expenses include legal claims liabilities litigation costs indemnification unanticipated expenses fees expenses nature unpredictable terms timing amount years ended december 31 2009 2008 period ended december 31 2007 fund master fund incur expenses powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 5 fair value measurements fund’s assets liabilities recorded fair value categorized based upon fair value hierarchy discussed note 4c assets liabilities measured fair value follows level 2 level 3 holdings december 31 2009 2008 6 financial instrument risk normal course business master fund party financial instruments offbalance sheet risk term “offbalance sheet risk” refers unrecorded potential liability even though appear balance sheet may result future obligation loss financial instruments used master fund currency futures whose values based upon underlying asset generally represent future commitments reasonable possibility settled cash physical delivery financial instruments traded exchange standardized contracts market risk potential changes value financial instruments traded master fund due market changes including fluctuations currency prices entering futures contracts exists market risk futures contracts may significantly influenced market conditions resulting futures contracts less valuable markets move futures contracts time master fund could experience substantial losses credit risk possibility loss may occur due failure exchange clearinghouse perform according terms futures contract credit risk respect exchangetraded instruments reduced extent exchange clearing organization acts counterparty transactions master fund’s risk loss event counterparty default typically limited amounts recognized consolidated statement financial condition represented futures contract notional amounts instruments fund master fund utilized expect utilize future special purpose entities facilitate offbalance sheet financing arrangements loan guarantee arrangements offbalance sheet arrangements kind agreements entered normal course business noted 7 share purchases redemptions purchases shares may purchased fund authorized participants one blocks 200000 shares called basket fund issues shares baskets authorized participants continuously noon new york time business day immediately following date valid order create basket accepted fund net asset value 200000 shares closing time nyse arca last close exchanges master fund’s assets traded whichever later date valid order create basket accepted fund b redemptions business day authorized participant may place order managing owner redeem one baskets redemption orders must placed 100 pm new york time day managing owner receives valid redemption order redemption order date redemption orders irrevocable redemption procedures allow authorized participants redeem baskets individual shareholders may redeem directly fund placing redemption order authorized participant agrees deliver baskets redeemed depository trust company’s “dtc” bookentry system fund later noon new york time powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 business day immediately following redemption order date placing redemption order prior receipt redemption proceeds authorized participant’s dtc account charged nonrefundable transaction fee due redemption order redemption proceeds fund consist cash redemption amount cash redemption amount equal net asset value number baskets requested authorized participant’s redemption order closing time nyse arca last close exchanges master fund’s assets traded whichever later redemption order date fund distribute cash redemption amount noon new york time business day immediately following redemption order date dtc account authorized participant recorded dtc’s bookentry system redemption proceeds due fund delivered authorized participant noon new york time business day immediately following redemption order date time business day immediately following redemption order date fund’s dtc account credited baskets redeemed fund’s dtc account credited baskets redeemed time redemption proceeds delivered extent whole baskets received remainder redemption proceeds delivered next business day extent remaining whole baskets received managing owner receives fee applicable extension redemption distribution date managing owner may timetotime determine remaining baskets redeemed credited fund’s dtc account noon new york time next business day outstanding amount redemption order canceled managing owner also authorized deliver redemption proceeds notwithstanding baskets redeemed credited fund’s dtc account noon new york time business day immediately following redemption order date authorized participant collateralized obligation deliver baskets dtc’s bookentry system terms managing owner may timetotime agree upon c share transactions summary share transactions years ended december 31 2009 2008 period ended december 31 2007 8 profit loss allocations distributions pursuant amended restated declaration trust agreement master trust income expenses allocated pro rata managing owner holder general shares shareholders monthly based respective percentage interests close last trading day preceding month losses allocated managing owner general shares excess managing owner’s capital balance allocated shareholders accordance respective interest master fund percentage total shareholders’ equity distributions redemption units may made sole discretion managing owner pro rata basis accordance respective capital balances shareholders distributions paid year ended december 31 2009 distribution 015 per share net investment income declared december 12 2008 shareholders record close business december 17 2008 payable december 30 2008 december 30 2008 total distribution 660000 paid shareholders december 30 2008 fund paid 015 per general share total distribution 600 distribution 040 per share net investment income declared december 14 2007 shareholders record close business december 19 2007 payable december 28 2007 december 28 2007 total distribution 1200000 paid shareholders december 28 2007 fund paid 040 per general share total distribution 1600 powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 9 commitments contingencies managing owner either capacity managing owner behalf fund master fund entered various service agreements contain variety representations provide indemnification provisions related certain risks service providers undertake performing services best interests funds december 31 2009 2008 claims received fund master fund therefore possible estimate fund’s master fund’s potential future exposure indemnification provisions 10 net asset value financial highlights fund presenting following net asset value financial highlights related investment performance share outstanding years ended december 31 2009 2008 period ended december 31 2007 net investment income total expense ratios calculated using average net asset value net asset value presentation calculated using daily shares outstanding net investment income total expense ratios annualized total return based change net asset value shares period individual investor’s return ratios may vary based timing capital transactions fund invests substantially assets master fund masterfeeder structure fund holds investment assets master fund limited units fund majority master fund limited unit owner managing owner holds noncontrolling interest master fund share issued fund correlates master fund limited unit issued master fund held fund net asset value per master fund limited unit master fund general unit collectively “master fund units” net asset value master fund divided number outstanding master fund units onetoone correlation shares master fund limited units net asset value per share net asset value per master fund limited unit equal powershares db us dollar index bearish fund subsidiary notes consolidated financial statementscontinued december 31 2009 percentages annualized percentages annualized period ended december 31 2007 calculated based initial offering price upon commencement investment operations 2500 11 subsequent events fund evaluated need disclosures andor adjustments resulting subsequent events february 24 2010 date financial statements available issued evaluation result subsequent events necessitated disclosures andor adjustments event disclosed effective january 4 2010 management fee increased 075 050 per annum daily net asset value master fund item 9 item 15 exhibits financial statement schedules a1 financial statements see financial statements commencing page 27 hereof a2 financial statement schedules financial statement schedules filed herewith schedules required ii information required presented aforementioned financial statements a3 exhibits following documents unless otherwise indicated filed herewith made part annual report previously filed exhibit preeffective amendment 1 form s1 october 16 2006 incorporated herein reference previously filed exhibit preeffective amendment 2 form s1 january 17 2007 incorporated herein reference signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized item 15 exhibits financial statement schedules a1 financial statements see financial statements commencing page 32 hereof a2 financial statement schedules financial statement schedules filed herewith schedules required ii information required presented aforementioned financial statements a3 exhibits following documents unless otherwise indicated filed herewith made part annual report previously filed exhibit preeffective amendment 1 registration statement form s1 october 16 2006 incorporated herein reference previously filed exhibit preeffective amendment 2 registration statement form s1 january 17 2007 incorporated herein reference signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized item 15 exhibits financial statement schedules a1 financial statements see financial statements commencing page 36 hereof a2 financial statement schedules financial statement schedules filed herewith schedules required ii information required presented aforementioned financial statements a3 exhibits following documents unless otherwise indicated filed herewith made part annual report exhibit description 41 amended restated declaration trust agreement registrant 42 amended restated declaration trust agreement coregistrant 421 corrected amendment 1 amended restated declaration trust agreement coregistrant 422 amendment 2 amended restated declaration trust agreement coregistrant 43 form participant agreement 101 form customer agreement 102 form administration agreement 103 form global custody agreement 104 form transfer agency service agreement previously filed exhibit preeffective amendment 1 registration statement form s1 october 16 2006 incorporated herein reference previously filed exhibit preeffective amendment 2 registration statement form s1 january 17 2007 incorporated herein reference previously filed exhibit registration statement form s3 december 8 2009 incorporated herein reference signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized