Fund Description: PowerShares Build America Bond Portfolio is an exchange-traded index fund or Index ETF which is a separate investment portfolio of the PowerShares Exchange-Traded Fund Trust II, an open-ended investment management company. INVESTMENT OBJECTIVE: PowerShares Build America Bond Portfolio seeks to replicate as closely as possible, before fees and expenses, the price and yield of the BofA Merrill Lynch Build America Bond Index. Issuance of Build America Bonds will cease on December 31, 2010 unless the relevant provisions of the Act are extended. In the event that the Build America Bond program is not extended, the Build America Bonds outstanding at such time will continue to be eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds; however, no bonds issued following expiration of the Build America Bond program will be eligible for the federal tax subsidy. INDEX DESCRIPTION: The BofA Merrill Lynch Build America Bond Index is designed to track the performance of U.S. dollar-denominated Build America Bonds publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. market. Unlike most other municipal obligations, interest received on Build America Bonds is subject to federal and state income tax. Under the terms of the Act, issuers of direct pay Build America Bonds (i.e., taxable municipal bonds issued to provide funds for qualified capital expenditures) are entitled to receive payments from the U.S. Treasury over the life of the bond equal to 35% (or 45% in the case of Recovery Zone Economic Development Bonds) of the interest paid. For example, if a Build America Bond is issued with a taxable coupon of 10%, the issuer would receive a payment from the U.S. Treasury equaling 3.5% or 4.5% in the case of Recovery Zone Economic Development Bonds. The federal interest subsidy continues for the life of the bonds. The Index does not include bonds that, under the Build America Bond program, are eligible for tax credits. Build America Bonds offer an alternative form of financing to state and local governments whose primary means for accessing the capital markets has been through the issuance of tax-free municipal bonds. FUND STRATEGY: The Fund, using an indexing investment approach, attempts to replicate the performance of the Index. The Fund will normally invest at least 80% of its total assets in taxable municipal securities eligible to participate in the Build America Bond program created under the American Recovery and Reinvestment Act of 2009 or other legislation providing for the issuance of taxable municipal securities on which the issuer receives federal support of the interest paid. The Fund will normally invest at least 80% of its total assets in the securities that comprise the Index. A sampling methodology is used in seeking to achieve the Fund's investment objective. Sampling involves the use of quantitative analysis to select securities from the Index to obtain a representative sample of securities that have in the aggregate investment characteristics similar to the Index based on such factors as duration, maturity, credit quality, yield and coupon. The fund is generally expected to hold less than the total number of securities in the Index but reserves the right to hold as many securities as it believes necessary to achieve the Fund's investment objective. The Fund may sell securities that are represented in the Index in anticipation of their removal from the Index, or purchase securities not represented in the Index in anticipation of their addition to the Index. FUND MANAGEMENT: Invesco PowerShares Capital Management LLC has overall responsibility as the Fund's investment adviser for the selection and ongoing monitoring of the Fund's investments, managing the Fund's business affairs and providing certain clerical, bookkeeping and other administrative services.