UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

or

 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
 to

Commission File Number:         001-33317

POWERSHARES DB US
DOLLAR INDEX BEARISH FUND

(A Series of PowerShares DB US Dollar Index Trust)



(Exact name of Registrant as specified in
its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 87-0778084                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                                |  |           
|--------------------------------------------------------------- |  | ----------
|c/o DB Commodity Services LLC 60 Wall Street New York, New York |  | 10005     
|(Address of Principal Executive Offices)                        |  | (Zip Code)

DB US DOLLAR INDEX BEARISH MASTER FUND

(A Series of DB US Dollar Index Master Trust)



(Exact name of Rule 140 Co-Registrant as
specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 87-0778085                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                                |  |           
|--------------------------------------------------------------- |  | ----------
|c/o DB Commodity Services LLC 60 Wall Street New York, New York |  | 10005     
|(Address of Principal Executive Offices)                        |  | (Zip Code)

Registrants telephone number, including area code: (212) 250-5883

Securities registered pursuant to Section 12(b) of the Act:



|                                    |  |                                          
|----------------------------------- |  | -----------------------------------------
|Title of Each Class                 |  | Name of Each Exchange on Which Registered
|Common Units of Beneficial Interest |  | American Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ̈ No x

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ̈ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No  ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of accelerated filer, large accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                                                      |  |                            
|--------------------------------------------------------------------- |  | ---------------------------
|Large Accelerated Filer  ̈                                             |  | Accelerated Filer  ̈        
|                                                                      | 
|Non-Accelerated Filer x (Do not check if a smaller reporting company) |  | Smaller reporting company  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).  Yes  ̈ No x

State the market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants
most recently completed second fiscal quarter.

$25,970,000

Number of Common Units of Beneficial Interest outstanding as of March 17, 2008: 3,600,040



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DOCUMENTS INCORPORATED BY REFERENCE

None.



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Table of Contents



|         |  |                                                                                                              |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I   |  | 1                                                                                                           
|         |  |                                                                                                             
|ITEM 1.  |  | BUSINESS                                                                                                     |  | 1 
|         |  |                                                                                                             
|ITEM 1A. |  | RISK FACTORS                                                                                                 |  | 5 
|         |  |                                                                                                             
|ITEM 1B. |  | UNRESOLVED STAFF COMMENTS                                                                                    |  | 14
|         |  |                                                                                                             
|ITEM 2.  |  | PROPERTIES                                                                                                   |  | 14
|         |  |                                                                                                             
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                            |  | 14
|         |  |                                                                                                             
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 14
|         | 
|PART II  |  | 15                                                                                                          
|         |  |                                                                                                             
|ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 15
|         |  |                                                                                                             
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                      |  | 16
|         |  |                                                                                                             
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 16
|         |  |                                                                                                             
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 24
|         |  |                                                                                                             
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 27
|         |  |                                                                                                             
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 43
|         |  |                                                                                                             
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                      |  | 43
|         |  |                                                                                                             
|ITEM 9B. |  | OTHER INFORMATION                                                                                            |  | 43
|         | 
|PART III |  | 43                                                                                                          
|         |  |                                                                                                             
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE                                  |  | 43
|         |  |                                                                                                             
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                       |  | 44
|         |  |                                                                                                             
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 45
|         |  |                                                                                                             
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    |  | 45
|         |  |                                                                                                             
|ITEM 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  | 45
|         | 
|PART IV  |  | 46                                                                                                          
|         |  |                                                                                                             
|ITEM 15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                   |  | 46



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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that involve substantial risks and uncertainties. These forward-looking statements are based on the
registrants current expectations, estimates and projections about the registrants business and industry and its beliefs and assumptions about future events. These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about the registrant that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, investors can identify forward-looking statements by terminology such as may, should, could, would, expect, plan,
anticipate, believe, estimate, continue, or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those
described in this report, including in Item 1A. Risk Factors, and our other Securities and Exchange Commission (SEC) filings.



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PART I



|ITEM 1. | BUSINESS
|------- | --------

Organization

PowerShares DB US Dollar Index Bearish Fund (the
Fund; Fund may also refer to the Fund and the Master Fund, collectively, as the context requires), a separate series of PowerShares DB US Dollar Index Trust (the Trust), a Delaware statutory trust organized in two
separate series and formed on August 3, 2006, and its subsidiary, DB US Dollar Index Bearish Master Fund (the Master Fund), a separate series of DB US Dollar Index Bearish Master Trust (the Master Trust), a Delaware
statutory trust organized in two separate series and formed on August 3, 2006. DB Commodity Services LLC, a Delaware limited liability company (DBCS or the Managing Owner), funded both the Fund and the Master Fund with a
capital contribution of $1,000 in exchange for 40 General Shares of each of the Fund and Master Fund. The fiscal year end of the Fund is December 31st. The term of the Fund is perpetual (unless terminated earlier in certain circumstances) as provided for in the Amended and Restated Declaration of Trust and Trust Agreement of each of the Trust and the Master Trust (the Trust
Agreements).

The Fund offers common units of beneficial interest (the Limited Shares) only to certain
eligible financial institutions (Authorized Participants) in one or more blocks of 200,000 Limited Shares, called a Basket. The proceeds from the offering of Limited Shares are invested in the Master Fund. The Fund and the Master Fund
commenced investment operations on February 15, 2007 with the initial offering of 1,000,000 Limited Shares to Deutsche Bank Securities Inc. as initial purchaser of the Fund in exchange for $25,000,000. The Fund commenced trading on the American
Stock Exchange (the Amex) on February 20, 2007. After the initial offering of the Limited Shares, an additional 2,000,000 Limited Shares were issued to certain Authorized Participants for $55,209,226 and 200,000 Limited Shares were
redeemed for $5,440,636 during the period from February 15, 2007 (commencement of investment operations) to December 31, 2007. Limited Shares may be purchased from the Fund only by Authorized Participants.

This report covers the three months ended December 31, 2007 and the period from February 15, 2007 (commencement of investment
operations) to December 31, 2007 (herein referred to as Period Ended December 31, 2007). No investment operations occurred prior to February 15, 2007, therefore, the 2007 and 2006 operating results are not comparable.

Fund Investment Overview

The Master Fund invests in futures contracts, or DX Contracts, with a view to tracking the changes, whether positive or negative, in the level of the Deutsche Bank US Dollar Index (USDX®) Futures Index 
Excess Return (Short Index), the Short Index or the Index, over time. The Fund earns interest income from United States Treasury Obligations and other high credit quality short-term fixed income securities. The Index is calculated to reflect the
changes in market value over time, whether positive or negative, of short positions on DX Contracts. DX Contracts are traded through the currency markets of ICE Futures U.S. (formerly known as the New York Board of Trade®), under the symbol
DX. The changes in market value over time, whether positive or negative, of the DX Contracts are related to the changes, whether positive or negative, in the level of the U.S. Dollar Index®, or the USDX®. The Index provides
a general indication of the international value of the U.S. dollar relative to the six major world currencies, or Index Currencies, which comprise the USDX®  Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss
Franc.

The Fund, through its Master Fund, establishes short positions in DX Contracts with a view to tracking the changes,
whether positive or negative, in the level of the Index. The performance of the Fund also is intended to reflect the excess, if any, of its Master Funds interest income from its holdings of United States Treasury Obligations and other high
credit quality short-term fixed income securities over the expenses of the Fund and the Master Fund.

A patent application
directed to the creation and operation of the Trust is pending at the United States Patent and Trademark Office.

The Trustee

Under the Trust Agreements of each of the Fund and the Master Fund, Wilmington Trust Company, the Trustee of the Fund
and the Master Fund has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Fund and the Master Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the
Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing



1



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Owner. Pursuant to the Trust Agreements, the Trustee is compensated by the Fund or Master Fund, as appropriate. Under the Trust Agreements, the Managing
Owner, from the assets of the Fund or the Master Fund, will indemnify the Trustee for any liability or expense relating to the formation, operations and termination of the Funds incurred without gross negligence or willful misconduct of the Trustee.

The Managing Owner

The Managing Owner was formed on May 23, 2005. The Managing Owner is an indirect wholly owned subsidiary of Deutsche Bank AG. The Managing Owner serves as the commodity pool operator and commodity trading advisor
of the Fund and the Master Fund. The Managing Owner and its trading principals have limited experience in operating commodity pools and managing futures trading accounts. The Managing Owner is registered as a commodity pool operator and commodity
trading advisor with the Commodity Futures Trading Commission (the CFTC) and is a member of the National Futures Association (the NFA). As a registered commodity pool operator and commodity trading advisor, with respect to
both the Fund and the Master Fund, the Managing Owner must comply with various regulatory requirements under the Commodity Exchange Act and the rules and regulations of the CFTC and the NFA, including investor protection requirements, antifraud
prohibitions, disclosure requirements, and reporting and recordkeeping requirements. The Managing Owner is also subject to periodic inspections and audits by the CFTC and NFA.

The Managing Owners main business offices are located at 60 Wall Street, New York, New York 10005, telephone (212) 250-5122.

The Master Fund pays the Managing Owner a management fee (the Management Fee) monthly in arrears, in an amount equal to
0.50% per annum of the daily net asset value of the Master Fund. No separate Management Fee is paid by the Fund. The Management Fee is paid in consideration of the Managing Owners commodity futures trading advisory services.

Pursuant to the Trust Agreements, the Fund and the Master Fund will indemnify the Managing Owner against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by it in connection with its activities on behalf of the Master Fund and the Fund incurred without negligence or misconduct.

The Commodity Broker

Deutsche Bank Securities Inc., a Delaware corporation, serves as the Master Funds clearing broker (the Commodity Broker). The Commodity Broker is also an indirect wholly-owned subsidiary of Deutsche Bank AG and an
affiliate of the Managing Owner. In its capacity as clearing broker, the Commodity Broker executes and clears each of the Master Funds futures transactions and performs certain administrative services for the Master Fund.

A variety of executing brokers execute futures transactions on behalf of the Master Fund. Such executing brokers give-up, or
transfer for clearing, all such transactions to the Commodity Broker. The Commodity Broker is registered with the CFTC as a futures commission merchant and is a member of the NFA in such capacity.

The Master Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit
brokerage fees and other transaction related fees and expenses charged in connection with trading activities. The Commodity Brokers brokerage commissions and trading fees are determined on a contract-by-contract basis. Brokerage commissions
and fees in any future fiscal year or any part of any future fiscal year may be greater. On average, total charges paid to the Commodity Broker were approximately $7.00 per round-turn trade for the period from February 15, 2007 (commencement of
investment operations) to December 31, 2007.

A round-turn trade is a completed transaction involving both a purchase
and a liquidating sale, or a sale followed by a covering purchase.

The Administrator

The Managing Owner, on behalf of the Fund and the Master Fund, has appointed The Bank of New York as the administrator (the
Administrator) of the Fund and the Master Fund and has entered into an Administration Agreement in connection therewith. The Bank of New York serves as custodian, or Custodian, of the Fund and has entered into a Global Custody Agreement,
or Custody Agreement, in connection therewith. The Bank of New York serves as the transfer agent, or Transfer Agent, of the Fund and has entered into a Transfer Agency and Service Agreement in connection therewith.



2



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The Bank of New York, a banking
corporation organized under the laws of the State of New York with trust powers, has an office at 2 Hanson Place, 12thFloor, Brooklyn, New York
11217. The Bank of New York is subject to supervision by the New York State Banking Department and the Board of Governors of the Federal Reserve System.

Pursuant to the Administration Agreement, the Administrator performs or supervises the performance of services necessary for the operation and administration of the Fund and the Master Fund (other than making
investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, net asset value calculations, accounting and other fund administrative services. The Administrator retains certain financial
books and records, including: Basket creation and redemption books and records, fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details and trading and
related documents received from futures commission merchants.

The Administration Agreement will continue in effect from
the commencement of trading operations unless terminated on at least 90 days prior written notice by either party to the other party. Notwithstanding the foregoing, the Administrator may terminate the Administration Agreement upon 30
days prior written notice if the Fund and/or Master Fund has materially failed to perform its obligations under the Administration Agreement.

The Administration Agreement provides for the exculpation and indemnification of the Administrator from and against any costs, expenses, damages, liabilities or claims (other than those resulting from the
Administrators own bad faith, negligence or willful misconduct) which may be imposed on, incurred by or asserted against the Administrator in performing its obligations or duties under the Administration Agreement.

The Administrators monthly fees are paid on behalf of the Fund and the Master Fund by the Managing Owner out of the Management Fee.

The Administrator and any of its affiliates may from time-to-time purchase or sell Limited Shares for their own account,
as agent for their customers and for accounts over which they exercise investment discretion.

The Administrator receives a
transaction processing fee in connection with orders from Authorized Participants to create or redeem Baskets in the amount of $500 per order. These transaction processing fees are paid indirectly by the Authorized Participants and not by the Fund
or the Master Fund.

The Distributor

ALPS Distributors (the Distributor) provides certain distribution services to the Fund. Pursuant to the Distribution Services Agreement between the Managing Owner, in its capacity as managing owner of the
Fund, the Fund and the Distributor, the Distributor assists the Managing Owner and the Administrator with certain functions and duties relating to the creation and redemption of Baskets.

The date of the Distribution Services Agreement is the effective date and such Agreement will continue until two years from such date and
thereafter will continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the Funds Managing Owner or otherwise as provided under the Distribution Services Agreement. The
Distribution Services Agreement is terminable without penalty on sixty days written notice by the Managing Owner or by the Distributor. The Distribution Services Agreement will automatically terminate in the event of its assignment.

Pursuant to the Distribution Services Agreement, the Fund will indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the Distributor within the meaning of Section 15 of the 1933 Act, against any loss, liability, claim, damages or expenses (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) arising by reason of any person acquiring any Limited Shares, based upon the ground that the registration statement, prospectus,
statement of additional information, shareholder reports or other information filed or made public by the Fund (as from time-to-time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated
or necessary in order to make the statements not misleading under the 1933 Act or any other statute or the common law.

A I M
Distributors, Inc. and PowerShares Capital Management, LLC

Certain marketing services are provided for the Fund by A I
M Distributors, Inc. or PowerShares Capital Management, LLC. This assistance includes the licensing of the PowerShares® registered service mark to the Managing



3



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Owner for use with the Fund. PowerShares® is a registered service mark of PowerShares Capital Management LLC. PowerShares Capital Management LLC is not a
sponsor or promoter of the Fund and has no responsibility for the performance of the Fund or the decisions made or actions taken by the Managing Owner.

Through a marketing agreement between the Managing Owner and A I M Distributors, Inc. (AIM Distributors) an affiliate of PowerShares Capital Management LLC, or PowerShares, the Managing Owner, on behalf of
the Fund and the Master Fund, has appointed AIM Distributors as a marketing agent. AIM Distributors assists the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities
regarding the Fund, primarily in the secondary trading market, which activities include, but are not limited to, communicating the Funds name, characteristics, uses, benefits, and risks, consistent with the prospectus. AIM Distributors will
not open or maintain customer accounts or handle orders for the Fund. AIM Distributors engages in public seminars, road shows, conferences, media interviews, field incoming telephone 800 number calls and distribute sales literature and
other communications (including electronic media) regarding the Fund.

AIM Distributors is a subsidiary of Invesco, Ltd.
Invesco, Ltd. is a leading independent global investment manager operating under the AIM, INVESCO, AIM Trimark, Invesco Perpetual and Atlantic Trust brands.

Tax Reporting

The Fund has retained the services of PricewaterhouseCoopers LLP to
assist with certain tax reporting requirements of the Fund and its Shareholders.

Regulation

Futures exchanges in the United States are subject to regulation under the Commodity Exchange Act, or CEAct, by the CFTC, the
governmental agency having responsibility for regulation of futures exchanges and trading on those exchanges. No governmental U.S. agency regulates the over-the-counter, or OTC, foreign exchange markets.

The CEAct and the CFTC also regulate the activities of commodity trading advisors and commodity pool operators
and the CFTC has adopted regulations with respect to certain of such persons activities. Pursuant to its authority, the CFTC requires a commodity pool operator (such as the Managing Owner) to keep accurate, current and orderly records with
respect to each pool it operates. The CFTC may suspend the registration of a commodity pool operator if the CFTC finds that the operator has violated the CEAct or regulations thereunder and in certain other circumstances. Suspension, restriction or
termination of the Managing Owners registration as a commodity pool operator would prevent it, until such time (if any) as such registration were to be reinstated, from managing, and might result in the termination of, the Fund and the Master
Fund. The CEAct gives the CFTC similar authority with respect to the activities of commodity trading advisors, such as the Managing Owner. If the registration of a Managing Owner as a commodity trading advisor were to be terminated, restricted or
suspended, the Managing Owner would be unable, until such time (if any) as such registration were to be reinstated, to render trading advice to the Fund and the Master Fund. The Fund and the Master Fund themselves are not registered with the CFTC in
any capacity.

The CEAct requires all futures commission merchants, such as the Commodity Broker, to meet and
maintain specified fitness and financial requirements, segregate customer funds from proprietary funds and account separately for all customers funds and positions, and to maintain specified book and records open to inspection by the staff of
the CFTC.

The CEAct also gives the states certain powers to enforce its provisions and the regulations of the CFTC.

Shareholders are afforded certain rights for reparations under the CEAct. Shareholders may also be able to maintain a
private right of action for certain violations of the CEAct. The CFTC has adopted rules implementing the reparation provisions of the CEAct which provide that any person may file a complaint for a reparations award with the CFTC for violation of the
CEAct against a floor broker, futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, and their respective associated persons.

Pursuant to authority in the CEAct, the NFA has been formed and registered with the CFTC as a registered futures association. At the present time, the NFA is the only non-exchange
self-regulatory organization for commodities professionals. NFA members are subject to NFA standards relating to fair trade practices, financial condition, and consumer protection. As the self-regulatory body of the commodities industry, the NFA
promulgates rules governing the conduct of commodity professionals and disciplines those professionals who do not comply with such standards. The CFTC has delegated to the NFA responsibility for the registration of commodity trading advisors,
commodity pool operators, futures



4



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commission merchants, introducing brokers and their respective associated persons and floor brokers. The Commodity Broker and the Managing Owner are members
of the NFA (the Fund and the Master Fund themselves are not required to become members of the NFA).

The CFTC has no
authority to regulate trading on foreign commodity exchanges and markets.

Employees

The Fund and the Master Fund have no employees.

Available Information

The Fund files with or submits to the SEC annual, quarterly
and current reports and other information meeting the informational requirements of the Exchange Act. These reports are available on the Managing Owners website at http://dbfunds.db.com. Investors may also inspect and copy these
reports, proxy statements and other information, and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. Investors may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SECs
Internet site at http://www.sec.gov.

The Fund also posts monthly performance reports and its annual report, as
required by the Commodity Futures Trading Commission, on the Managing Owners website at the address listed above.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

An investment in the
securities of the Fund involves a high degree of risk. Investors should consider carefully all of the risks described below, together with the other information contained in this report and the Prospectus, before making a decision to invest in the
securities of the Fund. If any of the following risks occur, the business, financial condition and results of operations of the Fund may be adversely affected.

Investment and Trading Related Risks

The Value of the Limited Shares Relates Directly
to the Value of the Futures Contracts and Other Assets Held by the Master Fund and Fluctuations in the Price of These Assets Could Materially Adversely Affect an Investment in the Funds Limited Shares.

The Limited Shares are designed to reflect as closely as possible the changes, whether positive or negative, in the level of the Index,
over time, through the Master Funds investment in the DX Contracts. The value of the Limited Shares relates directly to the changes in market value over time, whether positive or negative, of the DX Contracts, less the liabilities (including
estimated accrued but unpaid expenses) of the Fund and the Master Fund. The price of the DX Contracts may fluctuate widely. Several factors may affect the price of the Index Currencies, and in turn, the DX Contracts owned by the Master Fund,
including, but not limited to:



| |  |  | National debt levels and trade deficits, including changes in balances of payments and trade;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Domestic and foreign inflation rates and investors expectations concerning inflation rates;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Domestic and foreign interest rates and investors expectations concerning interest rates;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Currency exchange rates;
| | - |  | ------------------------



| |  |  | Investment and trading activities of mutual funds, hedge funds and currency funds;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Global or regional political, economic or financial events and situations;
| | - |  | --------------------------------------------------------------------------



| |  |  | Supply and demand changes which influence the foreign exchange rates of various currencies;
| | - |  | -------------------------------------------------------------------------------------------



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| |  |  | Monetary policies of governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a
country or on investment by residents of a country in other countries), trade restrictions, currency devaluations and revaluations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Governmental intervention in the currency market, directly and by regulation, in order to influence currency prices; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Expectations among market participants that a currencys value soon will change.
| | - |  | --------------------------------------------------------------------------------

Net Asset Value May Not Always Correspond to Market Price and, as a Result, Baskets May be Created or Redeemed at a Value that Differs from the Market Price of the Limited Shares.

Net asset value may not always correspond to market price and, as a result, baskets may be created or redeemed at a value
that differs from the market price of the Limited Shares.

The net asset value per share of the Limited Shares will change
as fluctuations occur in the market value of the Master Funds portfolio. Investors should be aware that the public trading price of a Basket of Limited Shares may be different from the net asset value of a Basket of Limited Shares (i.e.,
200,000 Limited Shares may trade at a premium over, or a discount to, net asset value of a Basket of Limited Shares) and similarly the public trading price per Limited Share may be different from its net asset value per Limited Share. Consequently,
an Authorized Participant may be able to create or redeem a Basket of Limited Shares at a discount or a premium to the public trading price per Limited Share. This price difference may be due, in large part, to the fact that supply and demand forces
at work in the secondary trading market for Limited Shares are closely related, but not identical, to the same forces influencing the prices of the Index Currencies trading individually or in the aggregate at any point in time. Investors also should
note that the size of the Fund in terms of total assets held may change substantially over time and from time-to-time as Baskets are created and redeemed.

Authorized Participants or their clients or customers may have an opportunity to realize a riskless profit if they can purchase a Basket at a discount to the public trading price of the Limited Shares or can redeem a
Basket at a premium over the public trading price of the Limited Shares. The Managing Owner expects that the exploitation of such arbitrage opportunities by Authorized Participants and their clients and customers will tend to cause the public
trading price to track net asset value per Limited Share closely over time.

The value of a Limited Share may be influenced
by non-concurrent trading hours between the Amex and ICE Futures U.S., which is the futures exchange on which DX Contracts are traded. While the Limited Shares trade on the Amex from 9:30 a.m. to 4:15 p.m. Eastern Standard Time, DX Contracts are
traded for 22 consecutive hours on ICE Futures U.S. from 8:00 p.m. Eastern Standard Time to 6:00 p.m. Eastern Standard Time on the next business day. Consequently, liquidity in DX Contracts will be reduced after the close of the Amexs trading
at 4:15 p.m. Eastern Standard Time. As a result, during the time when the ICE Futures U.S. is open and the Amex is closed, trading spreads and the resulting premium or discount on the Limited Shares may widen, and, therefore, increase the difference
between the price of the Limited Shares and the net asset value of the Limited Shares.

The Funds Performance May Not Always
Replicate Exactly the Changes in the Levels of the Index.

It is possible that the Funds performance may not
fully replicate the changes in the levels of the Index due to disruptions in the markets for the Index Currencies or DX Contracts, or due to other extraordinary circumstances. In addition, the Fund is not able to replicate exactly the changes in the
levels of the Index because the total return generated by the Master Fund is reduced by expenses and transaction costs, including those incurred in connection with the Master Funds trading activities, and increased by interest income from the
Master Funds holdings of short-term high quality fixed income securities. Tracking the Index requires trading of the Master Funds portfolio with a view to tracking the Index over time and is dependent upon the skills of the Managing
Owner and its trading principals, among other factors.

The Master Fund is Not Actively Managed and Tracks the Index During Periods
in which the Index Is Flat or Declining as well as when the Index Is Rising.

The Master Fund is not actively
managed by traditional methods. For example, if the DX Contracts owned by the Master Fund are declining in value, the Master Fund will not close out such positions, except in connection with a change in the composition or weighting of the Index. The
Managing Owner seeks to cause the net asset value to track the Index during periods in which the Index is flat or declining as well as when the Index is rising.



6



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Investors who Invest Only in the Fund May Not be Able to Profit if the Market Value of the DX
Contracts Moves Against Such Investment.

The Fund is expected to rise as a result of any downward price movement
in DX Contracts.

If the price of the DX Contracts decreases, the Fund will profit and the PowerShares DB US Dollar Bullish
Fund (the Bullish Fund) will suffer a loss. If the price of the DX Contracts increases, the Fund will suffer a loss and the Bullish Fund will profit. Therefore, the investment experience of investors who plan to invest in either the Fund
or the Bullish Fund will depend upon selection of the appropriate fund in light of the price movements of the DX Contracts. Such selection may become unprofitable in the future if the price of the DX Contracts changes direction.

Certain investors who decide to invest in both the Fund Shares and the Bullish Fund Shares may, nevertheless, suffer losses if the
investors investment mix between the Fund Shares and the Bullish Fund Shares is biased in one direction and the market price of the DX Contracts moves in the opposite direction. Additionally, investors should not invest in equal amounts in
both the Fund and the Bullish Fund simultaneously. The net effect of such an investment will be the income from the underlying 3-month U.S. Treasury bills, less fees and expenses.

Amex May Halt Trading in the Limited Shares Which Would Adversely Impact Your Ability to Sell Limited Shares.

The Limited Shares are listed for trading on the Amex under the market symbol UDN. Trading in Limited Shares may be halted
due to market conditions or, in light of Amex rules and procedures, for reasons that, in the view of the Amex, make trading in Limited Shares inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility
pursuant to circuit breaker rules that require trading to be halted for a specified period based on a specified market decline. There can be no assurance that the requirements necessary to maintain the listing of the Limited Shares will
continue to be met or will remain unchanged. The Fund and the Master Fund will be terminated if the Limited Shares are delisted.

The
Lack of an Active Trading Market for the Limited Shares May Result in Losses on Your Investment in the Fund at the Time of Disposition of Your Limited Shares.

Although the Limited Shares are listed and traded on the Amex, there can be no guarantee that an active trading market for the Limited Shares will be maintained. If you need to sell your Limited
Shares at a time when no active market for them exists, the price you receive for your Limited Shares, assuming that you are able to sell them, likely will be lower than the price you would receive if an active market did exist.

The Limited Shares Are a New Securities Product and Their Value Could Decrease if Unanticipated Operational or Trading Problems Arise.

The mechanisms and procedures governing the creation, redemption and offering of the Limited Shares have been developed
specifically for this securities product. Consequently, there may be unanticipated problems or issues with respect to the mechanics of the operations of the Fund and the Master Fund and the trading of the Limited Shares that could have a material
adverse effect on an investment in the Limited Shares. In addition, although the Master Fund is not actively managed by traditional methods, to the extent that unanticipated operational or trading problems or issues arise, the Managing
Owners past experience and qualifications may not be suitable for solving these problems or issues.

As the Managing Owner and
its Principals have Only a Limited History of Operating Investment Vehicles like the Fund or the Master Fund, their Experience may be Inadequate or Unsuitable to Manage the Fund or the Master Fund.

The Managing Owner was formed to be the managing owner of investment vehicles such as the Fund and the Master Fund and has only a limited
history of past performance. The past performances of the Managing Owners management of other commodity pools are no indication of its ability to manage an investment vehicle such as the Fund or the Master Fund. If the experience of the
Managing Owner and its principals is not adequate or suitable to manage an investment vehicle such as the Fund and the Master Fund, the operations of the Fund and the Master Fund may be adversely affected.

You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Limited Shares.

The Fund and the Master Fund have a limited performance history upon which to evaluate your investment in the Fund and the Master Fund.
Although past performance is not necessarily indicative of future results, if the Fund and the



7



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Master Fund had a longer performance history, such performance history might (or might not) provide you with more information on which to evaluate an
investment in the Fund and the Master Fund. Likewise, the Index has a limited history which may not be indicative of future Index results, or of the future performance of the Fund or the Master Fund. Therefore, you will have to make your decision to
invest in the Fund on the basis of limited information.

Fewer Representative Index Currencies May Result In Greater Index
Volatility.

The Index is concentrated in terms of the number of currencies represented. You should be aware that
other currency indexes are more diversified in terms of the number of currencies included. Concentration in fewer currencies may result in a greater degree of volatility in the Index and the net asset value of the Fund and the Master Fund which
tracks the Index under specific market conditions and over time.

Short Selling Theoretically Exposes the Master Fund to Unlimited
Losses.

Investors may invest in either the Fund or PowerShares DB US Dollar Index Bullish Fund (the Bullish
Fund), the second series established by the Trust, which invests into the PowerShares DB US Dollar Index Bullish Master Fund (the Bullish Master Fund).

The Bullish Master Fund establishes long positions in DX Contracts. The price of these DX Contracts is linked to the US Dollar Index, or USDX®. The Bullish Master Fund will profit if the
USDX® rises and the Bullish Master Fund will suffer loss if the USDX® falls. Because the USDX® cannot fall below zero, the Bullish Master Funds exposure to loss is limited to the notional value of the DX Contracts at the time of
establishment.

By contrast, the Master Fund establishes short
positions in DX Contracts. The price of these DX Contracts is linked to the USDX®. The Master Fund will profit if the USDX® falls and the Master Fund will suffer loss if the USDX®
rises. Because the USDX® could, in theory, rise infinitely, a short position in DX Contracts exposes the Master Fund to theoretically unlimited liability.

Each corresponding Master Fund establishes long or short positions in the DX Contracts accordingly. The Master Funds losses with respect to its corresponding Fund Shares could result in the
total loss of your investment. Because liability due to losses will be segregated to either the Bullish Fund or the Fund, as applicable, losses to investors in the Fund will not subject investors in the Bullish Fund to such exposure.

Unusually Long Peak-to-Valley Drawdown Periods With Respect To Both the Long Index and the Short Index May Be Reflected in Equally Long
Peak-to-Valley Drawdown Periods with Respect to the Performance of the Limited Shares.

Although past Index levels
are not necessarily indicative of future Index levels, the Deutsche Bank US Dollar Index (USDX®) Futures Index  Excess Return (Long Index), or Long Index, which is tracked by the Bullish Fund, and the Short Index have experienced unusually
long peak-to-valley drawdown periods. As of December 31, 2007, the closing level of the Long Index decreased (40.29)% from the period December 1986  December 2004. As of December 31, 2007, the closing level of the Short Index
decreased (36.79)% from the period June 1995  January 2002. During the period from June 1995  January 2002, the Short Index and Long Index experienced drawdown periods simultaneously.

Because it is expected that the Funds performance will track the changes in the closing levels of the underlying Index, the Fund
would suffer a continuous drawdown during the period that the Index suffers such a drawdown period, and in turn, the value of your Limited Shares will also suffer.

Price Volatility May Possibly Cause the Total Loss of Your Investment.

Futures contracts have a high degree of price variability and are subject to occasional rapid and substantial changes. Consequently, you could lose all or substantially all of your investment in the Fund.

The following table* reflects various measures of volatility** of the history of the Index, as calculated on an excess return basis:



8



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|                                                                                                            |  |                  |  |            
|----------------------------------------------------------------------------------------------------------- |  | ---------------- |  | -----------
|                                                                                                            |  | Volatility      
|Volatility Type                                                                                             |  | Long Index       |  | Short Index
|Daily volatility over full history                                                                          |  | 8.70%            |  | 8.68%      
|Average rolling 3 month daily volatility                                                                    |  | 8.44%            |  | 8.41%      
|Monthly return volatility                                                                                   |  | 8.52%            |  | 8.44%      
|Average annual volatility                                                                                   |  | 8.57%            |  | 8.54%      
|                                                                                                           
|The following table reflects the daily volatility on an annual basis of the Long Index and the Short Index:
|                                                                                                            | 
|                                                                                                            |  | Daily Volatility
|Year                                                                                                        |  | Long Index       |  | Short Index
|1986***                                                                                                     |  | 0.00%            |  | 0.00%      
|1987                                                                                                        |  | 9.44%            |  | 9.07%      
|1988                                                                                                        |  | 9.64%            |  | 9.70%      
|1989                                                                                                        |  | 10.25%           |  | 10.23%     
|1990                                                                                                        |  | 8.77%            |  | 8.35%      
|1991                                                                                                        |  | 11.53%           |  | 11.89%     
|1992                                                                                                        |  | 11.70%           |  | 12.06%     
|1993                                                                                                        |  | 9.43%            |  | 9.54%      
|1994                                                                                                        |  | 7.83%            |  | 7.52%      
|1995                                                                                                        |  | 9.78%            |  | 9.55%      
|1996                                                                                                        |  | 4.99%            |  | 5.01%      
|1997                                                                                                        |  | 7.59%            |  | 7.91%      
|1998                                                                                                        |  | 8.06%            |  | 7.94%      
|1999                                                                                                        |  | 7.59%            |  | 7.71%      
|2000                                                                                                        |  | 8.77%            |  | 9.17%      
|2001                                                                                                        |  | 8.79%            |  | 8.65%      
|2002                                                                                                        |  | 7.49%            |  | 7.19%      
|2003                                                                                                        |  | 8.44%            |  | 8.25%      
|2004                                                                                                        |  | 9.52%            |  | 9.23%      
|2005                                                                                                        |  | 8.11%            |  | 8.48%      
|2006                                                                                                        |  | 6.96%            |  | 6.76%      
|2007*                                                                                                       |  | 5.21%            |  | 5.08%      

Past Index results are not necessarily indicative of future changes, positive or negative, in the Index levels.



|* | As of December 31, 2007.
|- | ------------------------

|** | Volatility, for these purposes means the following:
|-- | ---------------------------------------------------

Daily Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price.

Monthly Return Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized
standard deviation of the monthly change in price.

Average Annual Volatility: The average of yearly volatilities for
a given sample period. The yearly volatility is the relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price for each business day in the given year.

|*** | As of December 31, 1986.
|--- | ------------------------

Fees and Commissions are Charged Regardless of Profitability and May Result in Depletion of Assets.

The Fund is indirectly subject to the fees and expenses described herein which are payable irrespective of profitability. Such fees and expenses include asset-based fees of 0.50% per annum. Additional charges include brokerage fees of
not greater than 0.05% per annum in the aggregate in selling commissions. As of December 31, 2007, the Fund has earned interest income at an annual rate of approximately 4.18% per annum. Consequently, it is expected that interest



9



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income will exceed fees (other than selling commissions), however, if interest rates fall below approximately 0.55%, the Fund will need to have positive
performance in order to break even net of fees and expenses. Consequently, depending upon the performance of the Fund and the interest rate environment, the expenses of the Master Fund could, over time, result in losses to your investment therein.
You may never achieve profits, significant or otherwise.

You Cannot Be Assured of the Managing Owners Continued Services,
Which Discontinuance May Be Detrimental to the Fund.

You cannot be assured that the Managing Owner will be willing
or able to continue to service the Fund and the Master Fund for any length of time. If the Managing Owner discontinues its activities on behalf of the Fund and the Master Fund, the Fund and the Master Fund may be adversely affected.

Possible Illiquid Markets May Exacerbate Losses.

Futures positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a
market. A market disruption, such as when foreign governments may take or be subject to political actions which disrupt the markets in their currency or major exports, can also make it difficult to liquidate a position.

There can be no assurance that market illiquidity will not cause losses for the Fund. The large size of the positions which the Master
Fund may acquire on behalf of the Fund increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so. Any type of disruption or illiquidity will be exacerbated due
to the fact that the Master Fund only invests in the DX Contract.

You May Be Adversely Affected by Redemption Orders that Are
Subject To Postponement, Suspension or Rejection Under Certain Circumstances.

The Fund may, in its discretion,
suspend the right of redemption or postpone the redemption settlement date, (1) for any period during which an emergency exists as a result of which the redemption distribution is not reasonably practicable, or (2) for such other period as
the Managing Owner determines to be necessary for the protection of the Shareholders of the Fund. In addition, the Fund will reject a redemption order if the order is not in proper form as described in the participant agreement among the Authorized
Participant, the Managing Owner and the Managing Owner in its capacity as managing owner of the Fund or if the fulfillment of the order, in the opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could adversely
affect a redeeming Authorized Participant. For example, the resulting delay may adversely affect the value of the Authorized Participants redemption proceeds if the net asset value of the Fund declines during the period of delay. The Fund
disclaims any liability for any loss or damage that may result from any such suspension or postponement.

Because the Futures
Contracts Have No Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss.

Futures trading is a risk transfer economic activity. For every gain there is an equal and offsetting loss rather than an opportunity to participate over time in general economic growth. Unlike most alternative
investments, an investment in Limited Shares does not involve acquiring any asset with intrinsic value. Overall stock and bond prices could rise significantly and the economy as a whole prosper while Limited Shares trade unprofitably.

Failure of Currency Futures Trading to Exhibit Low to Negative Correlation to General Financial Markets Will Reduce Benefits of Diversification and
May Exacerbate Losses to Your Portfolio.

Historically, currency futures returns have tended to exhibit low
to negative correlation with the returns of other assets such as stocks and bonds. Although currency futures trading can provide a diversification benefit to investor portfolios because of its low to negative correlation with other financial assets,
the fact that the Index is not 100% negatively correlated with financial assets such as stocks and bonds means that the Fund cannot be expected to be automatically profitable during unfavorable periods for the stock or bond market, or vice-versa. If
the Limited Shares perform in a manner that correlates with the general financial markets or do not perform successfully, you will obtain no diversification benefits by investing in the Limited Shares and the Limited Shares may produce no gains to
offset your losses from other investments.



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Shareholders Do Not Have the Protections Associated With Ownership of Limited Shares in an
Investment Company Registered Under the Investment Company Act of 1940.

Neither the Fund nor the Master Fund is
registered as an investment company under the Investment Company Act of 1940 and is not required to register under such Act. Consequently, Shareholders do not have the regulatory protections provided to the investors in registered and regulated
investment companies.

Various Actual and Potential Conflicts of Interest May Be Detrimental to Shareholders.

The Fund and the Master Fund are subject to actual and potential conflicts of interest involving the Managing Owner, various commodity
futures brokers and Authorized Participants. The Managing Owner and its principals, all of whom are engaged in other investment activities, are not required to devote substantially all of their time to the business of the Fund and the Master Fund,
which also presents the potential for numerous conflicts of interest with the Fund and the Master Fund. As a result of these and other relationships, parties involved with the Fund and the Master Fund have a financial incentive to act in a manner
other than in the best interests of the Fund, the Master Fund and the Shareholders. The Managing Owner has not established any formal procedure to resolve conflicts of interest. Consequently, investors are dependent on the good faith of the
respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts do not, in
fact, result in adverse consequences to the Shareholders.

The Fund and the Master Fund may be subject to certain conflicts
with respect to the Commodity Broker, including, but not limited to, conflicts that result from receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded
through the Commodity Broker.

Tax Related Risks

Shareholders of the Fund Will Be Subject to Taxation on Their Share of the Funds Taxable Income (Including the Funds Share of the Master Funds Taxable Income), Whether or
Not They Receive Cash Distributions.

Shareholders of the Fund will be subject to U.S. federal income taxation and,
in some cases, state, local, or foreign income taxation on their share of the Funds taxable income (including the Master Funds taxable income allocable to the Fund), whether or not they receive cash distributions from the Fund.
Shareholders of the Fund may not receive cash distributions equal to their share of the Funds taxable income (including the Master Funds taxable income) or even the tax liability that results from such income.

Items of Income, Gain, Loss, Deduction, and Credit with respect to Limited Shares could be Reallocated if the IRS does not Accept the Assumptions
or Conventions Used by the Fund or the Master Fund in Allocating Such Tax Items.

U.S. federal income tax rules
applicable to partnerships are complex and often difficult to apply to publicly traded partnerships. The Fund and the Master Fund will apply certain assumptions and conventions in an attempt to comply with the applicable rules and to report income,
gain, deduction, loss and credit to Shareholders of the Fund in a manner that reflects the Shareholders beneficial shares of partnership items, but these assumptions and conventions may not be in compliance with all aspects of applicable tax
requirements. It is possible that the IRS will successfully assert that the conventions and assumptions used by the Fund or the Master Fund do not satisfy the technical requirements of the Code and/or Treasury regulations and could require that
items of income, gain, deduction, loss or credit be adjusted or reallocated in a manner that adversely affects you.

The Current
Treatment of Long Term Capital Gains Under Current U.S. Federal Income Tax Law May Be Adversely Affected, Changed or Repealed in the Future.

Under current law, long term capital gains are taxed to noncorporate investors at a maximum U.S. federal income tax rate of 15%. This tax treatment may be adversely affected, changed or repealed by future changes in
tax laws at any time and is currently scheduled to expire for tax years beginning after December 31, 2010.

PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE LIMITED SHARES; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT
INVESTORS.



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Other Risks

Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of Assets, the Master Fund Remains at Risk of Significant Losses Because the Master Fund
May Only Receive a Pro-Rata Share of the Assets, or No Assets at All.

The CEAct requires a clearing broker to
segregate all funds received from customers from such brokers proprietary assets. If the Commodity Broker fails to do so, the assets of the Master Fund might not be fully protected in the event of the Commodity Brokers bankruptcy.
Furthermore, in the event of the Commodity Brokers bankruptcy, the Master Fund Units could be limited to recovering either a pro rata share of all available funds segregated on behalf of the Commodity Brokers combined customer accounts
or the Master Fund Units may not recover any assets at all, even though certain property specifically traceable to the Master Fund was held by the Commodity Broker. The Commodity Broker may, from time-to-time, have been the subject of certain
regulatory and private causes of action.

In the event of a bankruptcy or insolvency of any exchange or a clearing house,
the Master Fund could experience a loss of the funds deposited through its Commodity Broker as margin with the exchange or clearing house, a loss of any profits on its open positions on the exchange, and the loss of unrealized profits on its closed
positions on the exchange.

Regulatory Changes or Actions May Alter the Nature of an Investment in the Fund.

Considerable regulatory attention has been focused on non-traditional investment pools which are publicly distributed in the United
States. There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in the Fund or the ability of the Fund to continue to implement its investment strategy.

The futures markets are subject to comprehensive statutes, regulations, and margin requirements. In addition, the CFTC and the exchanges
are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the
suspension of trading. The regulation of futures transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. The effect of any future regulatory change on the Fund is
impossible to predict, but could be substantial and adverse.

Lack of Independent Advisers Representing Investors.

The Managing Owner has consulted with counsel, accountants and other advisers regarding the formation and
operation of the Fund and the Master Fund. No counsel has been appointed to represent you in connection with the offering of the Limited Shares. Accordingly, you should consult your own legal, tax and financial advisers regarding the desirability of
an investment in the Limited Shares.

Possibility of Termination of the Fund or Master Fund May Adversely Affect Your Portfolio.

The Managing Owner may withdraw from the Fund upon 120 days notice, which would cause the Fund and the
Master Fund to terminate unless a substitute managing owner were obtained. Owners of 50% of the Limited Shares have the power to terminate the Fund. If it is so exercised, investors who may wish to continue to invest in the Funds Index through
a fund vehicle will have to find another vehicle, and may not be able to find another vehicle that offers the same features as the Fund. Such detrimental developments could cause you to liquidate your investments and upset the overall maturity and
timing of your investment portfolio. If the registrations with the CFTC or memberships in the NFA of the Managing Owner or the Commodity Broker were revoked or suspended, such entity would no longer be able to provide services to the Fund and the
Master Fund.

Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles.

As interests in separate series of a Delaware statutory trust, the Limited Shares have none of the statutory rights normally associated
with the ownership of shares of a corporation (including, for example, the right to bring oppression or derivative actions). In addition, the Limited Shares have limited voting and distribution rights (for example,
Shareholders do not have the right to elect directors and the Fund is not required to pay regular distributions, although the Fund may pay distributions in the discretion of the Managing Owner).



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An Investment in the Limited Shares May Be Adversely Affected by Competition From Other Methods of
Investing in Currencies.

The Fund and the Master Fund constitute a new, and thus untested, type of investment
vehicle. They compete with other financial vehicles, including other commodity pools, hedge funds, traditional debt and equity securities issued by companies and foreign governments, other securities backed by or linked to currencies, and direct
investments in the underlying currencies or currencies futures contracts. Market and financial conditions, and other conditions beyond the Managing Owners control, may make it more attractive to invest in other financial vehicles or to invest
in such currencies directly, which could limit the market for the Limited Shares and reduce the liquidity of the Limited Shares.

Competing Claims Over Ownership of Intellectual Property Rights Related to the Fund Could Adversely Affect the Fund and an Investment in the Limited Shares.

While the Managing Owner believes that all intellectual property rights needed to operate the Fund and the Master Fund are either owned
by or licensed to the Managing Owner or have been obtained, third parties may allege or assert ownership of intellectual property rights which may be related to the design, structure and operations of the Fund and the Master Fund. To the extent any
claims of such ownership are brought or any proceedings are instituted to assert such claims, the negotiation, litigation or settlement of such claims, or the ultimate disposition of such claims in a court of law if a suit is brought, may adversely
affect the Fund and the Master Fund and an investment in the Limited Shares, for example, resulting in expenses or damages or the termination of the Fund and the Master Fund.

Because the Price of DX Contracts Is Primarily Influenced by Short-Term Interest Rate Differentials, You May Sell Your Limited Shares at a Time When the DX Contracts Are Being Traded at a
Discount, and therefore Receive an Amount that Would be Lower than if the DX Contracts Were Trading at a Premium.

The price of DX Contracts responds directly to short-term interest rate differentials. For example, if interest rates in the U.S. are broadly higher than international interest rates, then DX Contracts will trade at a discount to the spot
index. If U.S. rates are lower, DX Contracts will trade at a premium to the spot index. This relationship also holds for long-dated futures versus nearby futures. Because interest rates move up and down, DX Contracts may trade at a premium some of
the time and at a discount at other times. In turn, if you sell your Limited Shares during a period when the DX Contracts are trading at a discount, you may receive less than you may have received if you sold your Limited Shares during a period when
the DX Contracts are trading at a premium.

The Value of the Limited Shares Will be Adversely Affected if the Fund or the Master Fund
is Required to Indemnify the Trustee or the Managing Owner.

Under the Trust Agreement, the Trustee and the
Managing Owner have the right to be indemnified for any liability or expense either incurs without negligence or misconduct. That means the Managing Owner may require the assets of the Master Fund to be sold in order to cover losses or liability
suffered by it or by the Trustee. Any sale of that kind would reduce the net asset value of the Master Fund and the value of the Limited Shares.

The Net Asset Value Calculation of the Master Fund May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of Net Asset Value Calculation.

Calculating the net asset value of the Master Fund (and, in turn, the Fund) includes, in part, any unrealized profits or losses on open
currency futures contracts. Under normal circumstances, the net asset value of the Master Fund reflects the settlement price of open currency futures contracts on the date when the net asset value is being calculated. However, if a currency futures
contract traded on an exchange (both U.S. and, to the extent it becomes applicable, non-U.S. exchanges) could not be liquidated on such day (due to the operation of daily limits or other rules of the exchange or otherwise), the settlement price on
the most recent day on which the position could have been liquidated will be the basis for determining the market value of such position for such day. In such a situation, there is a risk that the calculation of the net asset value of the Master
Fund on such day will not accurately reflect the realizable market value of such currency futures contract. For example, daily limits are generally triggered in the event of a significant change in market price of a currency futures contract.
Therefore, as a result of the daily limit, the current settlement price is unavailable. Because the settlement price on the most recent day on which the position could have been liquidated would be used in lieu of the actual settlement price on the
date of determination, there is a risk that the resulting calculation of the net asset value of the Master Fund (and, in turn, the Fund) could be under or overstated, perhaps to a significant degree. Although the DX Contracts that the Master Fund
will invest in are not currently subject to daily limits, the terms and conditions of these contracts may change in the future, and thus, may subject the Fund to the above-described risks.



13



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Exchange Rates on the Index Currencies Could be Volatile and Could Materially and Adversely Affect
the Performance of the Limited Shares.

Foreign exchange rates are influenced by national debt levels and trade
deficits, domestic and foreign inflation rates and investors expectations concerning inflation rates, domestic and foreign interest rates and investors expectations concerning interest rates, currency exchange rates, investment and
trading activities of mutual funds, hedge funds and currency funds; and global or regional political, economic or financial events and situations. Additionally, foreign exchange rates on the Index Currencies may also be influenced by changing supply
and demand for a particular Index Currency, monetary policies of governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a
country in other countries), changes in balances of payments and trade, trade restrictions, currency devaluations and revaluations. Also, governments from time-to-time intervene in the currency markets, directly and by regulation, in order to
influence prices directly. Additionally, expectations among market participants that a currencys value soon will change may also affect exchange rates on the Index Currencies, and in turn, both the Index and the DX Contracts. These events and
actions are unpredictable. The resulting volatility in the exchange rates on the underlying Index Currencies may materially and adversely affect the market value of the DX Contracts, which would then negatively impact the value of your Limited
Shares.

Substantial Sales of Index Currencies by the Official Sector Could Adversely Affect an Investment in the Limited Shares.

The official sector consists of central banks, other governmental agencies and multi-lateral institutions that
buy, sell and hold certain Index Currencies as part of their reserve assets. The official sector holds a significant amount of Index Currencies that can be mobilized in the open market. In the event that future economic, political or social
conditions or pressures require members of the official sector to sell their Index Currencies simultaneously or in an uncoordinated manner, the demand for Index Currencies might not be sufficient to accommodate the sudden increase in the supply of
certain Index Currencies to the market. Consequently, the price of an Index Currency may decline, which may materially and adversely affect the market value of the DX Contract, which would then negatively impact the Limited Shares.

Although the Limited Shares are Limited Liability Investments, Certain Circumstances such as Bankruptcy of the Fund or Indemnification of the Fund
by the Shareholders will Increase the Shareholders Liability.

The Limited Shares are limited liability
investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, Shareholders could be required, as a matter of bankruptcy law, to return to the estate of the Fund any distribution
they received at a time when the Fund was in fact insolvent or in violation of its Trust Agreement. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund, Shareholders
agree in the Trust Agreement that they will indemnify the Fund for any harm suffered by it as a result of:



| |  |  | Shareholders actions unrelated to the business of the Fund, or
| | - |  | ---------------------------------------------------------------



| |  |  | Taxes imposed on the Limited Shares by the states or municipalities in which such investors reside.
| | - |  | ---------------------------------------------------------------------------------------------------



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

The Fund and the Master Fund do not own or use physical properties in the conduct of their business. Their assets consist of futures contracts, cash, United States Treasury Obligations and may consist of other high credit quality short-term
fixed income securities. The Managing Owners headquarters are located at 60 Wall Street, New York, New York 10005.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None.



14



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market Information

The Limited Shares trade on the American Stock Exchange under the symbol UDN.

The following table
sets forth, for the calendar quarters indicated, the high and low sales prices per Limited Share, as reported on the Amex.



|                                                                             |  |                |       |     |   |      
|---------------------------------------------------------------------------- |  | -------------- | ----- | --- | - | -----
|                                                                             |  | Limited Shares
|Quarter ended                                                                |  | High           |       | Low
|March 31, 2007 (from commencement ofinvestment trading on February 15,
2007) |  | $              | 25.44 |     | $ | 24.93
|June 30, 2007                                                                |  | $              | 25.97 |     | $ | 25.25
|September 30, 2007                                                           |  | $              | 27.45 |     | $ | 26.03
|December 31, 2007                                                            |  | $              | 28.56 |     | $ | 27.09

Holders

As of December 31, 2007, the Fund had 4,441 holders of record of its Limited Shares.

Distributions

The Managing Owner has sole discretion in determining what distributions, if any, the Fund
will make to holders of Limited Shares. On December 28, 2007, the Fund paid $0.40 per General Share, to the Managing Owner, a total distribution of $16.00. On December 28, 2007, the Fund paid $0.40 per Limited Share to each holder of
Limited Shares of record on December 19, 2007, a total distribution of $1,200,000. Prior to this, no distributions had been paid on the Funds Limited Shares or General Shares. All distributions were made from net investment income.

Sales of Unregistered Equity Securities and Use of Proceeds of Registered Securities

(a)There have been no unregistered sales of the Funds securities. No Fund securities are authorized for issuance by the
Fund under equity compensation plans.

(b)The Registrants Registration Statement on Form S-1 (Registration
No. 333-136574-04) was declared effective on February 7, 2007 with information with respect to the use of proceeds from the sale of Limited Shares being disclosed. Trading on the Amex commenced on February 20, 2007. A Post-Effective
Amendment No. 1 to the Registration Statement on Form S-1 was declared effective on November 7, 2007, which also contained this information.

The proceeds from the sale of the Limited Shares are used to purchase Master Fund Limited Units. The Master Fund uses the proceeds from the sale of the Master Fund Limited Units for general corporate purposes in
accordance with its investment objectives and policies.

For the Period Ended December 31, 2007, 3.0 million
Limited Shares were created for $80.2 million and $0.2 million Limited Shares were redeemed for $5.4 million. For the three months ended December 31, 2007 1.0 million Limited Shares were created for $28.3 million and 0.2 million
Limited Shares were redeemed for $5.4 million. On December 31, 2007, 2.8 million Limited Shares were outstanding for a market capitalization of $77.2 million.

(c)The following table summarizes the redemptions by Authorized Participants during the Period Ended December 31, 2007:



|                                       |  |                                 |  |                             
|-------------------------------------- |  | ------------------------------- |  | ----------------------------
|Period of Redemption                   |  | Total Number of Shares Redeemed |  | Average Price Paid per Share
|February 15, 2007 to December 31, 2007 |  | 200,000                         |  | 27.20                       



15



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following table summarizes the relevant 2007 financial data for the Fund and should be read in conjunction with the Funds financial statements, and the notes and schedules related thereto, which are included
in this report. The Fund commenced investment operations on February 15, 2007; therefore, no operating results occurred prior to that date. As a result, there is no comparable financial data presented below for 2006, 2005, 2004 and 2003.

Period from February 15, 2007 (commencement of investment operations) to December 31, 2007



|                                                                     |  |                         |           
|-------------------------------------------------------------------- |  | ----------------------- | ----------
|Interest Income                                                      |  | $                       | 1,475,217 
|Net investment income                                                |  |                         | 1,283,626 
|Net realized and unrealized gains/(losses) on investment and futures |  | $                       | 2,268,574 
|Net Income                                                           |  | $                       | 3,552,200 
|Distribution per share                                               |  | $                       | 0.40      
|Net Increase in cash                                                 |  | $                       | 3,992,952 
|                                                                     | 
|                                                                     |  | As of December 31, 2007
|Total Assets                                                         |  | $                       | 77,157,266
|Limited Shares NAV                                                   |  | $                       | 27.54     
|General Shares NAV                                                   |  | $                       | 27.55     

Selected Quarterly Financial Data (Unaudited)



|                                                                     |  |                                                                                                 |  |                                          |  |                                               |  |                                             
|-------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ---------------------------------------- |  | --------------------------------------------- |  | --------------------------------------------
|                                                                     |  | For the period from February 15, 2007 (commencement
of investment operations) to March 31, 2007 |  | For the three months ended June 30, 2007 |  | For the three months ended September 30, 2007 |  | For the three months ended December 31, 2007
|Interest income                                                      |  | $131,636                                                                                        |  | 323,295                                  |  | 376,502                                       |  | 643,784                                     
|Net investment income                                                |  | $116,476                                                                                        |  | 288,052                                  |  | 330,648                                       |  | 548,450                                     
|Net realized and unrealized gains/(losses) on investment and futures |  | $297,112                                                                                        |  | 218,643                                  |  | 1,721,479                                     |  | 31,340                                      
|Net income/(loss)                                                    |  | $413,588                                                                                        |  | 506,695                                  |  | 2,052,127                                     |  | 579,790                                     
|Increase/(decrease) in Net Asset Value                               |  | $24,414,588                                                                                     |  | 506,695                                  |  | 28,947,043                                    |  | 22,253,448                                  



|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This information should be read in conjunction with the consolidated financial statements and notes included in Item 8 of Part I of this Annual
Report (the Report). The discussion and analysis which follows may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views
with respect to future events and financial results. Words such as anticipate, expect, intend, plan, believe, seek, outlook and estimate as well as
similar words and phrases signify forward-looking statements. PowerShares DB US Dollar Index Bearish Funds forward-looking statements are not guarantees of future results and conditions and important factors, risks and uncertainties may cause
our actual results to differ materially from those expressed in our forward-looking statements.

You should not place undue reliance
on any forward-looking statements. Except as expressly required by the Federal securities laws, DB Commodity Services LLC (the Managing Owner) undertakes no obligation to publicly update or revise any forward-looking statements or the
risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.



16



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Overview / Introduction

The Master Fund invests in futures contracts, or DX Contracts, with a view to tracking the changes, whether positive or negative, in the level of the Deutsche Bank US Dollar Index (USDX®)
Futures Index  Excess Return (Short Index), the Short Index or the Index, over time. The Fund earns interest income from United States Treasury Obligations and other high credit quality short-term fixed income securities. The Index is
calculated to reflect the changes in market value over time, whether positive or negative, of short positions on DX Contracts. DX Contracts are traded through the currency markets of ICE Futures U.S. (formerly known as the New York Board of
Trade®), under the symbol DX. The changes in market value over time, whether positive or negative, of the DX Contracts are related to the changes, whether positive or negative, in the level of the U.S. Dollar Index®, or the
USDX®. The Index provides a general indication of the international value of the U.S. dollar relative to the six major world currencies, or Index Currencies, which comprise the USDX®  Euro, Japanese Yen, British Pound, Canadian Dollar,
Swedish Krona and Swiss Franc.

The Fund, through its Master Fund, establishes short positions in DX Contracts with a view
to tracking the changes, whether positive or negative, in the level of the Index. The performance of the Fund also is intended to reflect the excess, if any, of its Master Funds interest income from its holdings of United States Treasury
Obligations and other high credit quality short-term fixed income securities over the expenses of such Fund and its Master Fund.

Under the Trust Agreements of the Trust and the Master Trust, Wilmington Trust Company, the Trustee of the Trust and the Master Trust has delegated to the Managing Owner the exclusive management and control of all aspects of the business of
the Trust, the Fund, and the Master Trust and Master Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing
Owner.

The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the Index from sources
the Index Sponsor considers reliable. None of the Index Sponsor, the Managing Owner, the Trust, the Fund, the Master Trust, the Master Fund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or
completeness of the Index or any data included in the Index.

The Limited Shares are intended to provide investment results
that generally correspond to the changes, positive or negative, in the levels of the Index over time. The value of the Limited Shares is expected to fluctuate in relation to changes in the value of the Master Funds portfolio. The market price
of the Limited Shares may not be identical to the net asset value per Limited Share, but these two valuations are expected to be very close.

Performance Summary

This Report covers the three months ended December 31, 2007 and the period from
February 15, 2007 (commencement of investment operations) to December 31, 2007 (herein referred to as the Period Ended December 31, 2007). The Fund commenced trading on the American Stock Exchange (the Amex) on
February 20, 2007.

Performance of the Fund and the exchange traded Limited Shares are detailed below in Results
of Operations. Past performance of the Fund is not necessarily indicative of future performance.

The Index provides
a general indication of the international value of the U.S. dollar relative to the six major world currencies, or Index Currencies, which comprise the USDX®  Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss
Franc. The Deutsche Bank US Dollar Index (USDX®) Futures Index  Total Return (Short Index) (Short Index-TR), consists of the Index plus 3-month United States Treasury bills returns. Past Index results are not necessarily indicative of
future changes, positive or negative, in the Index closing levels.

The section Summary of Deutsche Bank US Dollar
Index (USDX®) Futures Index  Total Return (Short Index) and Underlying DX Contract Returns for the Three Months Ended December 31, 2007 and the Period Ended December 31, 2007 below provides an overview of the changes in the
closing levels of the Index by disclosing the change in closing levels of the Index itself and the underlying DX Contracts of the Index.



17



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Summary of Deutsche Bank US Dollar Index (USDX®) Futures Index  Total Return (Short Index)
and Underlying DX Contract Returns for the Three Months Ended December 31, 2007 and the Period Ended December 31, 2007.



|                               |                                      |                                      |                                |       
|------------------------------ | ------------------------------------ | ------------------------------------ | ------------------------------ | ------
|Underlying DX Contract
Returns |                                      | Total returns
for the SHORT INDEX-TR
|                               | Three Months Ended December 31, 2007 |                                      | Period Ended December 31, 2007
|DX Contract                    |                                      | (1.98%)                              |                                | 12.30%
|                               |                                      |                                     
|TOTAL RETURN                   |                                      | (1.98%)                              |                                | 12.30%

In the current interest rate environment, the total return on an investment in the
Fund is expected to outperform the Index and underperform the Deutsche Bank US Dollar Index (USDX®) Futures Index  Total Return (the Short Index). The only difference between the Index and the Short Index is that the Index does
not include interest income from a hypothetical basket of fixed income securities while the Short Index does include such a component. The difference between the Index and the Short Index is attributable entirely to the hypothetical interest income
from this hypothetical basket of fixed income securities. The Funds interest income from its holdings of fixed-income securities is expected to exceed the Funds fees and expenses, and the amount of such excess is expected to be
distributed periodically. The market price of the Limited Shares is expected closely to track the Index. The total return on an investment in the Fund over any period is the sum of the capital appreciation or depreciation of the Limited Shares over
the period, plus the amount of any distributions during the period. Consequently, in the current interest rate environment, the Funds total return is expected to outperform the Index by the amount of the excess of its interest income over its
fees and expenses but, as a result of the Funds fees and expenses, the total return on the Fund is expected to underperform the Short Index. If the Funds fees and expenses were to exceed the Funds interest income from its holdings
of fixed income securities, the Fund would underperform the Index.

Net Asset Value

Net asset value means the total assets of the Master Fund, including, but not limited to, all futures, cash and investments less total
liabilities of the Master Fund, each determined on the basis of U.S. generally accepted accounting principles, consistently applied under the accrual method of accounting. In particular, net asset value includes any unrealized appreciation or
depreciation on open currency futures contracts, and any other credit or debit accruing to the Master Fund but unpaid or not received by the Master Fund. All open currency futures contracts will be calculated at their then current market value,
which will be based upon the settlement price for that particular currency futures contract traded on the applicable exchange on the date with respect to which net asset value is being determined; provided, that if a currency futures contract could
not be liquidated on such day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, the settlement price on the most recent day on which the position could have been liquidated will be
the basis for determining the market value of such position for such day. The Managing Owner may in its discretion (and only under extraordinary circumstances, including, but not limited to, periods during which a settlement price of a futures
contract is not available due to exchange limit orders or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening
circumstance) value any asset of the Master Fund pursuant to such other principles as the Managing Owner deems fair and equitable so long as such principles are consistent with normal industry standards. Interest earned on the Master Funds
brokerage account is accrued monthly. The amount of any distribution is a liability of the Master Fund from the day when the distribution is declared until it is paid.

The Fund invests substantially all of its assets in the Master Fund in a master-feeder structure. The Fund holds no investment assets other than Master Fund Limited Units. The Fund is the
majority Master Fund Limited Unit owner and the Managing Owner holds a minority interest in the Master Fund. Each Limited Share issued by the Fund correlates with the Master Fund Limited Unit issued by the Master Fund and held by the Fund.

Net asset value per Master Fund Limited Unit and Master Fund General Unit (collectively, Master Fund Units) is
the net asset value of the Master Fund divided by the number of outstanding Master Fund Units. Because there is a one-to-one correlation between Limited Shares and the Master Fund Units, the net asset value per Limited Share and the net asset value
per Master Fund Limited Unit are equal.



18



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Critical Accounting Policies

The Funds and Master Funds critical accounting policies are as follows:

Preparation of the financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires
the application of appropriate accounting rules and guidance, as well as the use of estimates, and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expense and related
disclosure of contingent assets and liabilities during the reporting period of the consolidated financial statements and accompanying notes. Both the Funds and the Master Funds application of these policies involve judgments and actual
results may differ from the estimates used.

The Master Fund holds a significant portion of its assets in currency futures
contracts and United States Treasury Obligations, both of which are recorded on a trade date basis and at fair value in the consolidated financial statements, with changes in fair value reported in the consolidated statement of income and expenses.
Generally, fair values are based on quoted market closing prices. However, when market closing prices are not available, the Managing Owner may value an asset of the Master Fund pursuant to policies the Managing Owner has adopted, which are
consistent with normal industry standards.

Realized gains (losses) and changes in unrealized appreciation (depreciation)
on open positions are determined on a specific identification basis and recognized in the consolidated statement of income and expenses in the period in which the contract is closed or the changes occur, respectively.

Interest income on United States Treasury Obligations is recognized on an accrual basis when earned. Premiums and discounts are amortized
or accreted over the life of the United States Treasury Obligations.

Market Risk

Trading in futures contracts involves the Master Fund entering into contractual commitments to purchase or sell a particular currency at
a specified date and price. The market risk associated with the Master Funds commitments to purchase currencies is limited to the gross or face amount of the contracts held.

The Master Funds exposure to market risk is also influenced by a number of factors including the volatility of interest rates and
foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Master Funds trading as well as the development of drastic market
occurrences could ultimately lead to a loss of all or substantially all of the investors capital.

Credit Risk

When the Master Fund enters into futures contracts, the Master Fund will be exposed to credit risk that the counterparty to the contract
will not meet its obligations. The counterparty for futures contracts traded on United States exchanges is the clearing house associated with the particular exchange. In general, clearing houses are backed by their corporate members who may be
required to share in the financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., some
foreign exchanges), it may be backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the Master Fund.

The Commodity Broker, when acting as the Master Funds futures commission merchant in accepting orders for the purchase or sale of
domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the Master Fund all assets of the Master Fund relating to domestic futures trading and the Commodity Broker is not allowed to
commingle such assets with other assets of the Commodity Broker. Also see Item 1A.  Risk Factors  Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of
Assets, the Master Fund Remains at Risk of Significant Losses Because the Master Fund May Only Receive a Pro-rata Share of the Assets.

Liquidity

All of the Master Funds source of capital is derived from the Fund through the Funds
offering of Limited Shares to Authorized Participants. Authorized Participants may then subsequently redeem such Limited Shares. The Master Fund in



19



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turn allocates its net assets to currency futures trading. A significant portion of the net asset value is held in United States Treasury Obligations and
cash, which is used as margin for the Master Funds trading in currency futures. The percentage that United States Treasury Obligations bear to the total net assets will vary from period to period as the market values of the Master Funds
currency futures change. The balance of the net assets is held in the Master Funds trading account. Interest earned on the Master Funds interest-bearing funds is paid to the Master Fund.

The Master Funds currency futures contracts may be subject to periods of illiquidity because of market conditions, regulatory
considerations or for other reasons. For example, commodity exchanges generally have the ability to limit fluctuations in futures contract prices during a single day by regulations referred to as daily limits. During a single day, no
trades may be executed at prices beyond the daily limit. Once the price of a particular futures contract has increased or decreased by an amount equal to the daily limit, positions in the future can neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit. Although the DX Contracts that the Master Fund invests in are not currently subject to daily limits, the DX Contracts held by the Master Fund could become subject to such limits in the future. Such
market conditions could prevent the Master Fund from promptly liquidating its currency futures positions.

Because the
Master Fund trades futures contracts, its capital is at risk due to changes in the value of future contracts (market risk) or the inability of counterparties (including exchange clearinghouses) to perform under the terms of the contracts (credit
risk).

On any business day, an Authorized Participant may place an order with the Managing Owner to redeem one or more
Baskets. Redemption orders must be placed by 1:00 p.m., New York time. The day on which the Managing Owner receives a valid redemption order is the redemption order date. Redemption orders are irrevocable. The redemption procedures allow Authorized
Participants to redeem Baskets. Individual Shareholders may not redeem directly from the Fund. By placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTCs book-entry system to the Fund no
later than noon, New York time, on the business day immediately following the redemption order date. By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participants DTC account is charged the
non-refundable transaction fee due for the redemption order.

Cash Flows

The primary cash flow activities of the Fund is to raise capital from Authorized Participants through the issuance of Limited Shares in
the Fund. This cash is invested into the Master Fund where it is used to invest in United States Treasury Obligations and to meet margin requirements as a result of the positions taken in futures contracts to match the fluctuations of the Index the
Fund is tracking.

Operating Activities

Net cash flow used for operating activities was $69.6 million. These amounts primarily include net purchases and sales of United States Treasury Obligations which are held at fair value on the
statement of financial condition. During the Period Ended December 31, 2007, $173.3 million was paid to purchase United States Treasury Obligations against $101.0 million received from sales of maturing contracts. Net change in unrealized
appreciation on United States Treasury Obligations and futures decreased by $0.5 million during the Period Ended December 31, 2007.

Financing Activities

The Funds net cash flow provided by financing activities was $73.6 million
during the Period Ended December 31, 2007. This included $80.2 million from the sale of Limited Shares to Authorized Participants during the Year Ended December 31, 2007.

Results of Operations

FOR THE THREE MONTHS ENDED
DECEMBER 31, 2007 AND THE PERIOD ENDED DECEMBER 31, 2007

The Fund was launched on February 15, 2007 at $25.00 per
share and listed for trading on the Amex on February 20, 2007.

The Fund and the Master Fund seek to track changes in
the closing levels of the Deutsche Bank US Dollar Index (USDX®) Futures Index  Excess Return (Short Index), the Short Index or the Index, over time, plus the excess, if any, of the Master Funds interest income from its holdings of
United States Treasury Obligations and other high credit quality short-



20



---

term fixed income securities over the expenses of the Fund and the Master Fund. The following graphs illustrate changes in (i) the price of the Limited
Shares (as reflected by the graph UDN), (ii) the Funds NAV (as reflected by the graph UDNNAV), and (iii) the closing levels of the Index (as reflected by the graph USDDNX). The price of the Limited
Shares generally has exceeded the levels of the Index primarily because the Limited Share price reflects interest income from the Master Funds collateral holdings whereas the Index does not consider such interest income. There can be no
assurances that the price of the Limited Shares will continue to exceed the Index levels.

COMPARISON OF UDN, UDNNAV AND USDDNX FOR
THE THREE MONTHS ENDED DECEMBER 31,

2007 AND THE PERIOD ENDED DECEMBER 31, 2007

LOGO

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUNDS FUTURE

PERFORMANCE.

See Additional Legends below



21



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LOGO

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUNDS FUTURE

PERFORMANCE.

See Additional Legends below

Additional Legends

Deutsche Bank US
Dollar Index (USDX®) Futures Index  Excess Return (Short Index) is an index and does not reflect (i) actual trading and (ii) any fees or expenses.

WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN AUGUST 2006, CERTAIN INFORMATION RELATING TO THE INDEX
CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.

WITH RESPECT TO INDEX DATA, NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO
REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES
BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.

WITH
RESPECT TO INDEX DATA, ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1986 THROUGH JULY 2006, THE
INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEXS METHODOLOGY, AND SELECTION OF DX CONTRACTS, IN HINDSIGHT.

NO HYPOTHETICAL
RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED



22



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UNDER ITEM 1A: RISK FACTORS HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS EFFORTS TO TRACK THE
INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX
INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.

THE MANAGING OWNER HAS
HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE
RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.

FOR THE PERIOD ENDED DECEMBER 31, 2007

Fund Limited Share Price Performance

The Fund was launched on February 15, 2007 at $25.00 per share and listed for trading on the Amex on February 20, 2007.

On December 28, 2007, the Fund made a $0.40 per share distribution to Limited shareholders of record as of December 19, 2007.

For the Period Ended December 31, 2007, the Amex market value of Limited Shares increased 10.32% from $25.00 per share to $27.58 per share. The Limited Share price low and high for the
Period ended December 31, 2007 and related change from the Limited Share price on February 15, 2007 (commencement of investment operations) was as follows: Limited Shares traded from a high of $28.56 per share (+14.24%) on
November 26, 2007 to a low of $24.93 per share (-0.28%) on February 22, 2007. Total return for the Fund, on a market value basis was 11.92%, including the above noted distribution, for the period.

Fund Limited Share Net Asset Performance

For the Period Ended December 31, 2007, the net asset value of each Limited Share increased 10.16% from $25.00 per share to $27.54 per share. On December 28, 2007, the Fund made a $0.40 per share
distribution to Limited shareholders of record as of December 19, 2007. Therefore, total return on a net asset value basis, for the Fund including the distribution, was 11.76%.

Net income for the Period Ended December 31, 2007 was $3.6 million, resulting from $1.5 million of interest income supplemented by
net realized gain of $2.8 million and net change in unrealized loss of $0.5 million and operating expenses of $0.2 million.

FOR THE THREE MONTHS ENDED DECEMBER 31, 2007

Fund Limited Share Price Performance

On December 28, 2007, the Fund made a $0.40 per share distribution to Limited shareholders of record as of December 19, 2007.

For the three months ended December 31, 2007, the Amex market value of Limited Shares increased 0.47% from $27.45 per
share to $27.58 per share. The Limited Share price low and high for the three months ended December 31, 2007 and related change from the Limited Share price on September 30, 2007 was as follows: Limited Shares traded from a high of $28.56
per share (+4.04%) on November 26, 2007 to a low of $27.09 per share (-1.31%) on October 8, 2007 and December 17, 2007. Total return for the Fund, on a market value basis was 1.93% including the above noted distribution, for the
three month period.

Fund Limited Share Net Asset Performance

For the three months ended December 31, 2007, the net asset value of each Limited Share increased 0.40% from $27.43 per share to $27.54 per share. On December 28, 2007, the Fund made a
$0.40 per share distribution to Limited



23



---

shareholders of record as of December 19, 2007. Therefore, total return on a net asset value basis, for the Fund, including the above noted
distribution, was 1.86%.

Net income for the three months ended December 31, 2007 was $0.6 million, resulting from
$0.6 million of interest income supplemented by net realized gain of $1.5 million and net unrealized loss of $1.4 million and operating expenses of $0.1 million.

Off-Balance Sheet Arrangements and Contractual Obligations

In the normal course of
its business, the Master Fund is party to financial instruments with off-balance sheet risk. The term off-balance sheet risk refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may
result in a future obligation or loss. The financial instruments used by the Master Fund are currency futures, whose values are based upon an underlying asset and generally represent future commitments which have a reasonable possibility to be
settled in cash or through physical delivery. The financial instruments are traded on an exchange and are standardized contracts.

The Fund and the Master Fund have not utilized, nor do they expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet
arrangements of any kind, other than agreements entered into in the normal course of business noted above, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best
interests of the Fund and the Master Fund. While the Funds and the Master Funds exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on
either the Funds or the Master Funds financial position.

The Fund and Master Funds contractual
obligations are with the Managing Owner and the Commodity Broker. Management Fee payments made to the Managing Owner are calculated as a fixed percentage of the Master Funds net asset value. Commission payments to the Commodity Broker are on a
contract-by-contract, or round-turn, basis. As such, the Managing Owner cannot anticipate the amount of payments that will be required under these arrangements for future periods as net asset values are not known until a future date. These
agreements are effective for one year terms, renewable automatically for additional one year terms unless terminated. Additionally, these agreements may be terminated by either party for various reasons.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

INTRODUCTION

The Fund is designed to replicate positions in a
currency futures index. The market sensitive instruments held by it are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Funds main line of business.

Market movements can produce frequent changes in the fair market value of the Funds open positions and,
consequently, in its earnings and cash flow. The Funds market risk is primarily influenced by changes in the price of currencies.

Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty in the markets in which the Fund trades and the
recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Funds experience to date (i.e., risk of
ruin). In light of this, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the
Funds losses in any market sector will be limited to Value at Risk or by the Funds attempts to manage its market risk.

Standard of Materiality

Materiality as used in this section, Quantitative and Qualitative
Disclosures About Market Risk, is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Funds market sensitive
instruments.



24



---

QUANTIFYING THE FUNDS TRADING VALUE AT RISK

Quantitative Forward-Looking Statements

The following quantitative disclosures regarding the Funds market risk exposures contain forward-looking statements within the meaning of the safe harbor from civil liability provided for such
statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to
be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the reporting period).

The Funds risk exposure in the various market sectors traded by the Fund is quantified below in terms of Value at
Risk. Exchange maintenance margin requirements have been used by the Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed 95-99% of the maximum one-day losses at fair value of any given
contract incurred during the time period over which historical price fluctuations are researched for purposes of establishing margin levels. The maintenance margin levels are established by exchanges using historical price studies as well as an
assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

THE FUNDS TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS

The following table indicates the trading Value at Risk associated with the Funds open positions by market category as of December 31, 2007.



|                |  |                |  |                              |  |                                     |  |                             
|--------------- |  | -------------- |  | ---------------------------- |  | ----------------------------------- |  | ----------------------------
|Market Sector   |  | Delivery Month |  | Value at Risk (VaR) $ Value* |  | Value at Risk(VaR)* % of Net Assets |  | Number of times VaR Exceeded
|Dollar Short    |  | March 2008     |  | $564,348                     |  | 0.73%                               |  | 7                           
|Aggregate/Total |  |                |  | $564,348                     |  | 0.73%                               |  | 7                           



|* | The VaR for a contract represents the one day, downside risk, under normal market conditions, with a 99% confidence level. It is calculated using historical
market moves for the contract and uses a one year look-back. The aggregate VaR for the fund represents the VaR of the Funds open positions across all contracts, and is less than the sum of VaRs for each individual contract due to the
diversification benefit across the contracts.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NON-TRADING RISK

The Fund has non-trading market risk as a result of investing in short-term United States Treasury Obligations. The market risk
represented by these investments is expected to be immaterial.

QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES

The following qualitative disclosures regarding the Funds market risk exposures  except for those disclosures that are
statements of historical fact  constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Funds primary market risk exposures are subject to
numerous uncertainties, contingencies and risks. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures of the Fund. There can be no assurance that the Funds current market exposure will not change
materially. Investors may lose all or substantially all of their investment in the Fund.

Several factors may affect the
price of the Index Currencies (which underlie the DX Contracts), including, but not limited to:



| |  |  | National debt levels and trade deficits, including changes in balances of payments and trade;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Domestic and foreign inflation rates and investors expectations concerning inflation rates;
| | - |  | --------------------------------------------------------------------------------------------



25



---

| |  |  | Domestic and foreign interest rates and investors expectations concerning interest rates;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Currency exchange rates;
| | - |  | ------------------------



| |  |  | Investment and trading activities of mutual funds, hedge funds and currency funds;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Global or regional political, economic or financial events and situations;
| | - |  | --------------------------------------------------------------------------



| |  |  | Supply and demand changes which influence the foreign exchange rates of various currencies;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Monetary policies of governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a
country or on investment by residents of a country in other countries), trade restrictions, currency devaluations and revaluations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Governmental intervention in the currency market, directly and by regulation, in order to influence currency prices; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Expectations among market participants that a currencys value soon will change.
| | - |  | --------------------------------------------------------------------------------

QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE

General

The Fund is unaware of any (i) anticipated known demands, commitments or capital
expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations.

QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE

Under ordinary
circumstances, the Managing Owners discretionary power is limited to determining whether the Fund will make a distribution. Under emergency or extraordinary circumstances, the Managing Owners discretionary powers increase, but remain
circumscribed. These special circumstances, for example, include the unavailability of the Index or certain natural or man-made disasters. The Managing Owner does not apply risk management techniques. The Fund initiates positions only on the
short side of the market and does not employ stop-loss techniques.



26



---

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Index to Financial Statements



|                                                                                                                                                             |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|Documents                                                                                                                                                    |  | Page
|                                                                                                                                                             | 
|Report of Independent Registered Public Accounting Firm                                                                                                      |  | 28  
|Consolidated Statements of Financial Condition as of December 31, 2007 and 2006                                                                              |  | 29  
|Consolidated Schedule of Investments as of December 31, 2007                                                                                                 |  | 30  
|Consolidated Statement of Income and Expenses for the Period from February 15, 2007 (commencement of investment operations) to December 31, 2007             |  | 31  
|Consolidated Statement of Changes in Shareholders Equity for the Period from February 15, 2007 (commencement of investment operations) to December 31, 2007 |  | 32  
|Consolidated Statement of Cash Flows for the Period from February 15, 2007 (commencement of investment operations) to December 31, 2007                      |  | 33  
|Notes to Consolidated Financial Statements                                                                                                                   |  | 34  



27



---

Report of Independent Registered Public Accounting Firm

The Board of Managers

DB Commodity Services LLC:

We have audited
the accompanying consolidated statement of financial condition of PowerShares DB US Dollar Index Bearish Fund and Subsidiary (the Fund), including the consolidated schedule of investments, as of December 31, 2007, and the related consolidated
statements of income and expenses, changes in shareholders equity, and cash flows for the period from February 15, 2007 (commencement of investment operations) to December 31, 2007. We have also audited the accompanying statement of
financial condition of PowerShares DB US Dollar Index Bearish Fund as of December 31, 2006. The above referenced consolidated financial statements of PowerShares DB US Dollar Index Bearish Fund and Subsidiary and the statement of financial
condition of PowerShares DB US Dollar Index Bearish Fund are the responsibility of the Funds management. Our responsibility is to express an opinion on the consolidated financial statements of PowerShares DB US Dollar Index Bearish Fund and
Subsidiary as of December 31, 2007 and for the period from February 15, 2007 (commencement of investment operations) to December 31, 2007 and the statement of financial condition of PowerShares DB US Dollar Index Bearish Fund as of
December 31, 2006 based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
of PowerShares DB US Dollar Index Bearish Fund and Subsidiary present fairly, in all material respects, the financial position of PowerShares DB US Dollar Index Bearish Fund and Subsidiary as of December 31, 2007 and the results of their
operations, change in their shareholders equity and their cash flows for period from February 15, 2007 (commencement of investment operations) to December 31, 2007, and the statement of financial condition of PowerShares DB US Dollar
Index Bearish Fund presents fairly, in all material respects, the financial position of PowerShares DB US Dollar Index Bearish Fund as of December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements of PowerShares DB US Dollar Index Bearish Fund and Subsidiary, the Fund commenced
investment operations on February 15, 2007, with the initial offering of common units of beneficial interest to certain eligible financial institutions.



|                  
|------------------
|/s/ KPMG LLP      
|                  
|New York, New York
|March 25, 2008    



28



---

PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Consolidated Statements of Financial
Condition

December 31, 2007 and 2006(i)



|                                                                                                                          |  |      |            |   |      |   |               
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------------
|                                                                                                                          |  | 2007 |            |   | 2006
|Assets                                                                                                                    |  |      |            |   |      |   |               
|Equity in broker trading accounts:                                                                                        |  |      |            |   |      |   |               
|United States Treasury Obligations, at fair value (cost $73,689,527)                                                      |  | $    | 73,706,883 |   |      | $ | -             
|Cash held by broker                                                                                                       |  |      | 3,993,952  |   |      |   | 1,000         
|Net unrealized depreciation on futures contracts                                                                          |  |      | (549,800   | ) |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|Deposits with broker                                                                                                      |  |      | 77,151,035 |   |      |   | 1,000         
|                                                                                                                          |  |      |            |   |      |   |               
|Other assets                                                                                                              |  |      | 6,231      |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|Total assets                                                                                                              |  | $    | 77,157,266 |   |      | $ | 1,000         
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Liabilities and shareholders equity                                                                                      |  |      |            |   |      |   |               
|Management fee payable                                                                                                    |  |      | 34,492     |   |      |   | -             
|Non controlling interest in consolidated subsidiary  related party                                                       |  |      | 1,000      |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|Total liabilities                                                                                                         |  |      | 35,492     |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Commitment and Contingencies (Note 9)                                                                                     |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Shareholders equity                                                                                                      |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|General shares:                                                                                                           |  |      |            |   |      |   |               
|Paid in capital - 40 shares issued and outstanding as of December 31, 2007 and 2006, respectively                         |  |      | 1,000      |   |      |   | 1,000         
|Accumulated earnings                                                                                                      |  |      | 102        |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|Total General shares                                                                                                      |  |      | 1,102      |   |      |   | 1,000         
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Limited shares:                                                                                                           |  |      |            |   |      |   |               
|Paid-in-capital - 2,800,000 and 0 redeemable shares issued and outstanding as of December 31, 2007 and 2006, respectively |  |      | 74,768,590 |   |      |   | -             
|Accumulated earnings                                                                                                      |  |      | 2,352,082  |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|Total Limited shares                                                                                                      |  |      | 77,120,672 |   |      |   | -             
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Total shareholders equity                                                                                                |  |      | 77,121,774 |   |      |   | 1,000         
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Total liabilities and shareholders equity                                                                                |  | $    | 77,157,266 |   |      | $ | 1,000         
|                                                                                                                          |  |      |            |   |      |   |               
|                                                                                                                          |  |     
|Net asset value per share                                                                                                 |  |      |            |   |      |   |               
|General shares                                                                                                            |  | $    | 27.55      |   |      | $ | 25.00         
|Limited shares                                                                                                            |  | $    | 27.54      |   |      |   | Not Applicable

See accompanying notes to consolidated financial statements.



|(i) | Represents financial condition only for PowerShares DB US Dollar Index Bearish Fund as consolidation of DB US Dollar Index Bearish Master Fund occurred upon
commencement of investment operations, as of February 15, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



29



---

PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Consolidated Schedule of Investments

December 31, 2007(i)



|                                                            |  |                         |   |  |           |            |           |   |           
|----------------------------------------------------------- |  | ----------------------- | - |  | --------- | ---------- | --------- | - | ----------
|Description                                                 |  | Percentage ofNet Assets |   |  | FairValue |            | FaceValue
|United States Treasury Obligations                          |  |                         |   |  |           |            |           |   |           
|U.S. Treasury Bills, 2.89% due January 10, 2008             |  | 6.48                    | % |  | $         | 4,997,285  |           | $ | 5,000,000 
|U.S. Treasury Bills, 3.55% due February 7, 2008             |  | 24.57                   |   |  |           | 18,944,900 |           |   | 19,000,000
|U.S. Treasury Bills, 3.43% due February 14, 2008            |  | 29.72                   |   |  |           | 22,920,190 |           |   | 23,000,000
|U.S. Treasury Bills, 3.39% due February 21, 2008            |  | 6.46                    |   |  |           | 4,979,495  |           |   | 5,000,000 
|U.S. Treasury Bills, 3.175% due February 28, 2008           |  | 2.58                    |   |  |           | 1,990,548  |           |   | 2,000,000 
|U.S. Treasury Bills, 3.03% due March 6, 2008                |  | 6.45                    |   |  |           | 4,973,040  |           |   | 5,000,000 
|U.S. Treasury Bills, 3.00% due March 13, 2008               |  | 6.44                    |   |  |           | 4,969,675  |           |   | 5,000,000 
|U.S. Treasury Bills, 3.00% due March 20, 2008               |  | 12.88                   |   |  |           | 9,931,750  |           |   | 10,000,000
|                                                            |  |                         |   |  |           |            |           |   |           
|Total United States Treasury Obligations (cost $73,689,527) |  | 95.58                   | % |  | $         | 73,706,883 |           |   |           
|                                                            |  |                         |   |  |           |            |           |   |           

A portion of the above United States Treasury Obligations are held as initial margin against open futures
contracts, as noted in Note 4 (d)



|                                                                |  |                         |    |  |           |          |  
|--------------------------------------------------------------- |  | ----------------------- | -- |  | --------- | -------- | -
|Description                                                     |  | Percentage ofNet Assets |    |  | FairValue |         
|Unrealized Depreciation on Futures Contracts                    |  |                         |    |  |           |          |  
|Dollar Index (1,002 contracts, settlement date March 17, 2008)* |  | (0.71                   | )% |  | $         | (549,800 | )
|                                                                |  |                         |    |  |           |          |  
|Net Unrealized Depreciation on Futures Contracts                |  | (0.71                   | )% |  | $         | (549,800 | )
|                                                                |  |                         |    |  |           |          |  

See accompanying notes to consolidated financial statements.



|* | Positions represents future contracts sold.
|- | -------------------------------------------



|(i) | PowerShares DB US Dollar Index Bearish Fund and Subsidiary commenced investment operations on February 15, 2007, therefore no investments were held prior
to that date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



30



---

PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Consolidated Statement of Income and
Expenses

For the Period from February 15, 2007 (commencement of investment operations) to December 31, 2007(i)



|                                                                                                        |  |   |           |  
|------------------------------------------------------------------------------------------------------- |  | - | --------- | -
|Income                                                                                                  |  |   |           |  
|Interest Income                                                                                         |  | $ | 1,475,217 |  
|                                                                                                        |  |   |           |  
|                                                                                                        | 
|Expenses                                                                                                |  |   |           |  
|Management fee                                                                                          |  |   | 174,173   |  
|Brokerage commissions and fees                                                                          |  |   | 17,418    |  
|                                                                                                        |  |   |           |  
|Total expenses                                                                                          |  |   | 191,591   |  
|                                                                                                        |  |   |           |  
|Net investment income                                                                                   |  |   | 1,283,626 |  
|                                                                                                        |  |   |           |  
|Net Realized and Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Futures |  |   |           |  
|Net Realized Gain on                                                                                    |  |   |           |  
|United States Treasury Obligations                                                                      |  |   | 4,878     |  
|Futures                                                                                                 |  |   | 2,796,140 |  
|                                                                                                        |  |   |           |  
|Net realized gain                                                                                       |  |   | 2,801,018 |  
|                                                                                                        |  |   |           |  
|Net Change in Unrealized Gain (Loss) on                                                                 |  |   |           |  
|United States Treasury Obligations                                                                      |  |   | 17,356    |  
|Futures                                                                                                 |  |   | (549,800  | )
|                                                                                                        |  |   |           |  
|                                                                                                        | 
|Net change in unrealized loss                                                                           |  |   | (532,444  | )
|                                                                                                        |  |   |           |  
|Net realized and Net change in unrealized gain on United States Treasury Obligations and Futures        |  |   | 2,268,574 |  
|                                                                                                        |  |   |           |  
|                                                                                                        | 
|Net Income                                                                                              |  | $ | 3,552,200 |  
|                                                                                                        |  |   |           |  

See accompanying notes to consolidated financial statements.



|(i) | PowerShares DB US Dollar Index Bearish Fund and Subsidiary commenced operations on February 15, 2007, therefore no operating results occurred prior to
that date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



31



---

PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Consolidated Statement of Changes in
Shareholders Equity

For the Period from February 15, 2007 (commencement of investment operations) to
December 31, 2007(i)



|                                                                                       |        |                |        |                              |                |  |                                          |       |   |                |   |       |                              |  |           |                                          |  |   |                                   |   |  |   |            |   |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------------- | ------ | -------------- | ------ | ---------------------------- | -------------- |  | ---------------------------------------- | ----- | - | -------------- | - | ----- | ---------------------------- |  | --------- | ---------------------------------------- |  | - | --------------------------------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                       |        | General Shares |        |                              | Limited Shares |  |                                          | Total |  
|                                                                                       |        | General Shares |        | AccumulatedEarnings(Deficit) |                |  | TotalGeneralShareholdersEquity(Deficit) |       |   | Limited Shares |   |       | AccumulatedEarnings(Deficit) |  |           | TotalLimitedShareholdersEquity(Deficit) |  |   | TotalShareholdersEquity(Deficit) |  
|                                                                                       | Shares |                | Amount |                              |                |  | Shares                                   |       |   | Amount         |   |       |                              | 
|Balance at February 15, 2007                                                           |        | 40             |        | $                            | 1,000          |  |                                          | -     |   |                | $ | 1,000 |                              |  | -         |                                          |  | $ | -                                 |   |  | $ | -          |   |  | $ | -          |   |  | $ | 1,000      |  
|Sale of Limited Shares                                                                 |        | -              |        |                              | -              |  |                                          | -     |   |                |   | -     |                              |  | 3,000,000 |                                          |  |   | 80,209,226                        |   |  |   | -          |   |  |   | 80,209,226 |   |  |   | 80,209,226 |  
|Redemption of Limited Shares                                                           |        | -              |        |                              | -              |  |                                          | -     |   |                |   | -     |                              |  | (200,000  | )                                        |  |   | (5,440,636                        | ) |  |   | -          |   |  |   | (5,440,636 | ) |  |   | (5,440,636 | )
|Net Income                                                                             |        |                |        |                              |                |  |                                          |       |   |                |   |       |                              |  |           |                                          |  |   |                                   |   |  |   |            |   |  |   | -          |   |  |   | -          |  
|Net investment income                                                                  |        | -              |        |                              | -              |  |                                          | 37    |   |                |   | 37    |                              |  | -         |                                          |  |   | -                                 |   |  |   | 1,283,589  |   |  |   | 1,283,589  |   |  |   | 1,283,626  |  
|Net realized gain on United States Treasury Obligations and Futures                    |        | -              |        |                              | -              |  |                                          | 60    |   |                |   | 60    |                              |  | -         |                                          |  |   | -                                 |   |  |   | 2,800,958  |   |  |   | 2,800,958  |   |  |   | 2,801,018  |  
|Net change in unrealized gain (loss) on United States Treasury Obligations and Futures |        | -              |        |                              | -              |  |                                          | 21    |   |                |   | 21    |                              |  | -         |                                          |  |   | -                                 |   |  |   | (532,465   | ) |  |   | (532,465   | ) |  |   | (532,444   | )
|                                                                                       |        |                |        |                              |                |  |                                          |       |   |                |   |       |                              |  |           |                                          |  |   |                                   |   |  |   |            |   |  |   |            |   |  |   |            |  
|Net Income                                                                             |        |                |        |                              |                |  |                                          | 118   |   |                |   | 118   |                              |  |           |                                          |  |   |                                   |   |  |   | 3,552,082  |   |  |   | 3,552,082  |   |  |   | 3,552,200  |  
|                                                                                       |        |                |        |                              |                |  |                                          |       |  
|Distributions of net investment income ($0.40 per share)                               |        | -              |        |                              | -              |  |                                          | (16   | ) |                |   | (16   | )                            |  | -         |                                          |  |   | -                                 |   |  |   | (1,200,000 | ) |  |   | (1,200,000 | ) |  |   | (1,200,016 | )
|                                                                                       |        |                |        |                              |                |  |                                          |       |   |                |   |       |                              |  |           |                                          |  |   |                                   |   |  |   |            |   |  |   |            |   |  |   |            |  
|Balance at December 31, 2007                                                           |        | 40             |        | $                            | 1,000          |  | $                                        | 102   |   |                | $ | 1,102 |                              |  | 2,800,000 |                                          |  | $ | 74,768,590                        |   |  | $ | 2,352,082  |   |  | $ | 77,120,672 |   |  | $ | 77,121,774 |  
|                                                                                       |        |                |        |                              |                |  |                                          |       |   |                |   |       |                              |  |           |                                          |  |   |                                   |   |  |   |            |   |  |   |            |   |  |   |            |  

See accompanying notes to consolidated financial statements.



|(i) | PowerShares DB US Dollar Index Bearish Fund and Subsidiary commenced operations on February 15, 2007, therefore no operating results occurred prior to
that date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Consolidated Statement of Cash Flows

For the Period from February 15, 2007 (commencement of investment operations) to December 31, 2007(i)



|                                                                               |  |      |              |  
|------------------------------------------------------------------------------ |  | ---- | ------------ | -
|                                                                               |  | 2007 |             
|Cash flow provided by operating activities:                                    |  |      |              |  
|Net Income                                                                     |  | $    | 3,552,200    |  
|Adjustments to reconcile net income to net cash used for operating activities: |  |      |              |  
|Cost of securities purchased                                                   |  |      | (173,312,479 | )
|Proceeds from securities sold                                                  |  |      | 100,975,259  |  
|Net accretion of discount and amortization of premium on United States         |  |      |              |  
|Treasury Obligations                                                           |  |      | (1,347,429   | )
|Net realized (gain) on United States Treasury Obligations                      |  |      | (4,878       | )
|Net change in unrealized loss on United States Treasury                        |  |      |              |  
|Obligations and Futures                                                        |  |      | 532,444      |  
|Increase in operating receivables and liabilities:                             |  |      |              |  
|Other assets                                                                   |  |      | (6,231       | )
|Management fee payable                                                         |  |      | 34,492       |  
|Non controlling interest in consolidated subsidiary related party             |  |      | 1,000        |  
|                                                                               |  |      |              |  
|Net cash used for operating activities                                         |  |      | (69,575,622  | )
|                                                                               |  |      |              |  
|                                                                               | 
|Cash flows from financing activities:                                          |  |      |              |  
|Proceeds from sale of Limited Shares                                           |  |      | 80,209,226   |  
|Redemption of Limited Shares                                                   |  |      | (5,440,636   | )
|Cash distributions paid on Limited Shares                                      |  |      | (1,200,016   | )
|                                                                               |  |      |              |  
|Net cash provided by financing activities                                      |  |      | 73,568,574   |  
|                                                                               |  |      |              |  
|                                                                               | 
|Net change in cash held by broker                                              |  |      | 3,992,952    |  
|                                                                               | 
|Cash held by broker at beginning of period                                     |  |      | 1,000        |  
|                                                                               |  |      |              |  
|Cash held by broker at end of period                                           |  | $    | 3,993,952    |  
|                                                                               |  |      |              |  

See accompanying notes to consolidated financial statements.



|(i) | PowerShares DB US Dollar Index Bearish Fund and Subsidiary commenced operations on February 15, 2007, therefore no operating results occurred prior to
that date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



33



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PowerShares DB US Dollar Index Bearish Fund and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007



|(1) | Organization
|--- | ------------

PowerShares DB US Dollar Index Bearish Fund (the Fund;
Fund may also refer to the Fund and the Master Fund, collectively, as the context requires), a separate series of PowerShares DB US Dollar Index Trust (the Trust), a Delaware statutory trust organized in two separate series
and formed on August 3, 2006, and its subsidiary, DB US Dollar Index Bearish Master Fund (the Master Fund), a separate series of DB US Dollar Index Bearish Master Trust (the Master Trust), a Delaware statutory trust
organized in two separate series and formed on August 3, 2006. DB Commodity Services LLC, a Delaware limited liability company, (DBCS or the Managing Owner) funded both the Fund and the Master Fund with a capital
contribution of $1,000 in exchange for 40 General Shares of each Fund and Master Fund. The fiscal year end of the Fund is December 31st. The
term of the Fund is perpetual (unless terminated earlier in certain circumstances) as provided in the Amended and Restated Declaration of Trust and Trust Agreement of the Trust and the Master Trust (the Trust Agreement).

The Fund offers common units of beneficial interest (the Limited Shares) only to certain eligible financial institutions
(Authorized Participants) in one or more blocks of 200,000 Limited Shares, called a Basket. The proceeds from the offering of Limited Shares are invested in the Master Fund. The Fund and the Master Fund commenced investment operations on
February 15, 2007 with the initial offering of 1,000,000 Limited Shares to Deutsche Bank Securities Inc. as initial purchaser of the Fund in exchange for $25,000,000. The Fund commenced trading on the American Stock Exchange (the
Amex) on February 20, 2007.

This report covers the period from February 15, 2007 (commencement of
investment operations) to December 31, 2007 (herein referred to as Period Ended December 31, 2007). No investment operations occurred prior to February 15, 2007, therefore, the 2007 and 2006 operating results are not
comparable.



|(2) | Fund Investment Overview
|--- | ------------------------

The Master Fund invests in futures contracts, or DX Contracts, with a view to tracking the changes, whether positive or negative, in the level of the Deutsche Bank US Dollar Index (USDX®) Futures Index 
Excess Return (Short Index), the Short Index or the Index, over time. The Fund earns interest income from United States Treasury Obligations and other high credit quality short-term fixed income securities. The Index is calculated to reflect the
changes in market value over time, whether positive or negative, of short positions on DX Contracts. DX Contracts are traded through the currency markets of ICE Futures U.S. (formerly known as the New York Board of Trade®), under the symbol
DX. The changes in market value over time, whether positive or negative, of the DX Contracts are related to the changes, whether positive or negative, in the level of the U.S. Dollar Index®, or the USDX®. The Index provides
a general indication of the international value of the U.S. dollar relative to the six major world currencies, or Index Currencies, which comprise the USDX®  Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss
Franc.

The Fund, through its Master Fund, establishes short positions in DX Contracts with a view to tracking the changes,
whether positive or negative, in the level of the Index. The performance of the Fund also is intended to reflect the excess, if any, of its Master Funds interest income from its holdings of United States Treasury Obligations and other high
credit quality short-term fixed income securities over the expenses of such Fund and its Master Fund.



|(3) | Service Providers and Related Party Agreements
|--- | ----------------------------------------------

The Trustee

Under the Trust Agreement of the Fund and the Master Fund, Wilmington
Trust Company (the Trustee), has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Fund and the Master Fund. The Trustee will have no duty or liability to supervise or monitor the
performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing Owner.



34



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The Managing Owner

The Managing Owner serves the Fund and Master Fund as commodity pool operator, commodity trading advisor and managing owner, and is an indirect wholly-owned subsidiary of Deutsche Bank AG. During
the Period Ended December 31, 2007 the Fund and Master Fund incurred management fees of $174,173 of which $34,492 was still payable at December 31, 2007.

The Commodity Broker

Deutsche Bank Securities Inc., a Delaware corporation, serves
as the Master Funds clearing broker (the Commodity Broker). The Commodity Broker is an indirect wholly-owned subsidiary of Deutsche Bank AG. In its capacity as clearing broker, the Commodity Broker executes and clears each of the
Master Funds futures transactions and performs certain administrative services for the Master Fund. The Commodity Broker is an affiliate of the Managing Owner. During the Period Ended December 31, 2007 the Fund and Master Fund incurred
brokerage fees of $17,418. At December 31, 2007, there were no brokerage fees payable.

The Administrator

The Bank of New York (the Administrator) has been appointed by the Managing Owner as the administrator, custodian and
transfer agent of the Master Fund and the Fund, and have entered into separate administrative, custodian, transfer agency and service agreements (collectively referred to as the Administration Agreement).

Pursuant to the Administration Agreement, the Administrator performs or supervises the performance of services necessary for the
operation and administration of the Fund and the Master Fund (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, net asset value calculations, accounting and
other fund administrative services. The Administrator retains certain financial books and records, including: Basket creation and redemption books and records, fund accounting records, ledgers with respect to assets, liabilities, capital, income and
expenses, the registrar, transfer journals and related details and trading and related documents received from futures commission merchants.

The Administration Agreement will continue in effect from the commencement of trading operations unless terminated on at least 90 days prior written notice by either party to the other party. Notwithstanding the
foregoing, the Administrator may terminate the administrative portion of the Administration Agreement upon 30 days prior written notice if the Fund and/or Master Fund has materially failed to perform its obligations under the Administration
Agreement.

The Distributor

ALPS Distributors (the Distributor) provides certain distribution services to the Fund. Pursuant to the Distribution Services Agreement between the Managing Owner in its capacity as managing owner of the
Fund and the Distributor, the Distributor assists the Managing Owner and the Administrator with certain functions and duties relating to the creation and redemption of Baskets.

The Distribution Services Agreement is effective for two years and thereafter will continue automatically for successive annual periods, provided that such continuance is specifically approved at
least annually by the Managing Owner or otherwise as provided under the Distribution Services Agreement. The Distribution Services Agreement is terminable without penalty on sixty days written notice by the Managing Owner or by the
Distributor. The Distribution Services Agreement will automatically terminate in the event of its assignment.

PowerShares Capital
Management LLC

Under the License Agreement among PowerShares Capital Management LLC (the Licensor), the
Managing Owner in its own capacity and in its capacity as managing owner of the Fund (the Fund and the Managing Owner, collectively, the Licensees), the Licensor granted to each Licensee a non-exclusive license to use the
PowerShares® trademark (the Trademark) anywhere in the world, solely in connection with the marketing and promotion of the Fund and to use or refer to the Trademark in connection with the issuance and trading of the Fund
as necessary.



35



---

A I M Distributors, Inc.

Through a marketing agreement between the Managing Owner and A I M Distributors, Inc. (AIM Distributors) an affiliate of PowerShares Capital Management LLC, or PowerShares, the Managing Owner, on behalf of the Fund and the
Master Fund, has appointed AIM Distributors as a marketing agent. AIM Distributors assists the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding the Fund,
primarily in the secondary trading market, which activities include, but are not limited to, communicating the Funds name, characteristics, uses, benefits, and risks, consistent with the prospectus. AIM Distributors will not open or maintain
customer accounts or handle orders for the Fund. AIM Distributors engages in public seminars, road shows, conferences, media interviews, field incoming telephone 800 number calls and distribute sales literature and other communications
(including electronic media) regarding the Fund.



|(4) | Summary of Significant Accounting Policies
|--- | ------------------------------------------



| | (a) | Basis of Presentation and Consolidation
| | --- | ---------------------------------------

The consolidated financial statements of the Fund have been prepared using U.S. generally accepted accounting principles, and they include the consolidated financial statement balances of the
Fund and the Master Fund. Upon the initial offering of the Limited Shares on February 15, 2007, the capital raised by the Fund was used to purchase 100% of the common units of beneficial interest of the Master Fund (Master Fund Limited
Units) (excluding common units of beneficial interest of the Master Fund held by the Managing Owner (Master Fund General Units)). The Master Fund Limited Units owned by the Fund provide the Fund and its investors certain
controlling rights and abilities over the Master Fund. Consequently, the financial statement balances of the Master Fund have been consolidated with the Funds financial statement balances beginning February 15, 2007 (commencement of
investment operations), and all significant inter-company balances and transactions have been eliminated.



| | (b) | Use of Estimates
| | --- | ----------------

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenue and expense and related disclosure of contingent assets and liabilities during the reporting period of the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.



| | (c) | Deposits with Broker
| | --- | --------------------

The Fund deposits cash and United States Treasury Obligations with its Commodity Broker subject to Commodity Futures Trading Commission (CFTC) regulations and various exchange and broker requirements. The combination
of the Funds deposits with its Commodity Broker of cash and United States Treasury Obligations and the unrealized profit or loss on open futures contracts (variation margin) represents the Funds overall equity in its broker trading
account. To meet the Funds initial margin requirements, the Fund holds United States Treasury Obligations. The Fund uses its cash held by the Commodity Broker to satisfy variation margin requirements. The Fund earns interest on its cash
deposited with the Commodity Broker.



| | (d) | United States Treasury Obligations
| | --- | ----------------------------------

The Fund records purchases and sales of United States Treasury Obligations on a trade date basis. These holdings are marked to market based on quoted market closing prices. The Fund holds United States Treasury
Obligations for deposit with the Master Funds Commodity Broker to meet margin requirements and for trading purposes. Interest income is recognized on an accrual basis when earned. Premiums and discounts are amortized or accreted over the life
of the United States Treasury Obligations. Included in the United States Treasury Obligations is $1,066,128 which is restricted and held against initial margin of the open futures contracts.



| | (e) | Cash Held by Broker
| | --- | -------------------

The Funds arrangement with the Commodity Broker requires the Fund to meet its variation margin requirement related to the price movements, both positive and negative, on futures contracts held by the Fund by
keeping cash on deposit with the Commodity Broker. The Fund defines cash and cash equivalents to be highly liquid investments, with original maturities of three months or less when purchased. As of December 31, 2007 the Fund held cash of
$3,993,952 of which $549,800 was on deposit to satisfy the Funds negative variation margin against open futures contracts. There were no cash equivalents held by the Fund as of December 31, 2007.



36



---

| | (f) | Income Taxes
| | --- | ------------

The Fund and the Master Fund are classified as partnerships for U.S. federal income tax purposes. Accordingly, neither the Fund nor the Master Fund will incur U.S. federal income taxes. No provision for federal,
state, and local income taxes has been made in the accompanying consolidated financial statements, as investors are individually liable for income taxes, if any, on their allocable share of the Funds share of the Master Funds income,
gain, loss, deductions and other items.

The following are the major tax jurisdictions for the Fund and the earliest tax
year subject to examination:



|                       |  |         
|---------------------- |  | --------
|Jurisdiction           |  | Tax Year
|US Federal             |  | 2007    
|State of New York      |  | 2007    
|New York City          |  | 2007    
|State of Florida       |  | 2007    
|State of Georgia       |  | 2007    
|State of Maine         |  | 2007    
|State of Missouri      |  | 2007    
|State of New Jersey    |  | 2007    
|State of Oregon        |  | 2007    
|State of Pennsylvania  |  | 2007    
|State of Utah          |  | 2007    
|State of West Virginia |  | 2007    



| | (g) | Futures Contracts
| | --- | -----------------

All commodity futures contracts are held and used for trading purposes. The commodity futures are recorded on a trade date basis and open contracts are recorded in the consolidated statement of financial condition at
fair value on the last business day of the period, which represents market value for those commodity futures for which market quotes are readily available. However, when market closing prices are not available, the Managing Owner may value an asset
of the Master Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards. Realized gains (losses) and changes in unrealized appreciation (depreciation) on open positions are determined on a specific
identification basis and recognized in the consolidated statement of income and expenses in the period in which the contract is closed or the changes occur, respectively. As of December 31, 2007, the futures contracts held by the Fund were in a
net unrealized depreciation position of $549,800.



| | (h) | Management Fee
| | --- | --------------

The Master Fund pays the Managing Owner a management fee (Management Fee), monthly in arrears, in an amount equal to 0.50% per annum of the daily net asset value of the Master Fund. No separate
Management Fee is paid by the Fund. The Management Fee is paid in consideration of the Managing Owners currency futures trading advisory services. For the Period Ended December 31, 2007, management fees amounted to $174,173 of which
$34,492 was payable to the Managing Owner as of December 31, 2007.



| | (i) | Brokerage Commissions and Fees
| | --- | ------------------------------

The Master Fund incurs all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading
activities by the Commodity Broker. These costs are recorded as brokerage commissions and fees in the consolidated statement of income and expenses as incurred. The Commodity Brokers brokerage commissions and trading fees are determined on a
contract-by-contract basis. On average, total charges paid to the Commodity Broker were approximately $7.00 per round-turn trade for the Period Ended December 31, 2007. For the Period Ended December 31, 2007, brokerage fees amounted to
$17,418.



37



---

| | (j) | Routine Operational, Administrative and Other Ordinary Expenses
| | --- | ---------------------------------------------------------------

The Managing Owner assumes all routine operational, administrative and other ordinary expenses of the Fund and the Master Fund,
including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees and printing, mailing and duplication costs. Accordingly, all such expenses are not
reflected in the consolidated statement of income and expenses of the Fund. (For additional information, see Note (8), Organizational and Offering Costs).



| | (k) | Non-Recurring and Unusual Fees and Expenses
| | --- | -------------------------------------------

The Master Fund pays all fees and expenses, if any, of the Fund and the Master Fund, which are non-recurring and unusual in nature. Such expenses include legal claims and liabilities, litigation
costs or indemnification or other unanticipated expenses. Such fees and expenses, by their nature, are unpredictable in terms of timing and amount. For the Period Ended December 31, 2007, the Fund and the Master Fund did not incur such
expenses.



|(5) | Financial Instrument Risk
|--- | -------------------------

In the normal course of its business, the Master Fund is party to financial instruments with off-balance sheet risk. The term off-balance sheet risk refers to an unrecorded potential liability that, even
though it does not appear on the balance sheet, may result in a future obligation or loss. The financial instruments used by the Master Fund are currency futures, whose values are based upon an underlying asset and generally represent future
commitments that have a reasonable possibility of being settled in cash or through physical delivery. The financial instruments are traded on an exchange and are standardized contracts.

Market risk is the potential for changes in the value of the financial instruments traded by the Master Fund due to market changes,
including fluctuations in currency prices. In entering into these futures contracts, there exists a market risk that such futures contracts may be significantly influenced by conditions, resulting in such futures contracts being less valuable. If
the markets should move against all of the futures contracts at the same time, the Master Fund could experience substantial losses.

Credit risk is the possibility that a loss may occur due to the failure of an exchange clearinghouse to perform according to the terms of a futures contract. Credit risk with respect to exchange-traded instruments is reduced to the extent
that an exchange or clearing organization acts as a counterparty to the transactions. The Master Funds risk of loss in the event of counterparty default is typically limited to the amounts recognized in the consolidated statement of financial
condition and not represented by the futures contract or notional amounts of the instruments.

The Fund and the Master Fund
have not utilized, nor do they expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind, other than
agreements entered into in the normal course of business noted above.



|(6) | Share Purchases and Redemptions
|--- | -------------------------------



| | (a) | Purchases
| | --- | ---------

Limited Shares may be purchased from the Fund only by Authorized Participants in one or more blocks of 200,000 Shares, called a Basket. The Fund issues Limited Shares in Baskets only to Authorized Participants continuously as of noon, New
York time, on the business day immediately following the date on which a valid order to create a Basket is accepted by the Fund, at the net asset value of 200,000 Limited Shares as of the closing time of the Amex or the last to close of the
exchanges on which the Master Funds assets are traded, whichever is later, on the date that a valid order to create a Basket is accepted by the Fund.



| | (b) | Redemptions
| | --- | -----------

On any business day, an Authorized Participant may place an order with the Managing Owner to redeem one or more Baskets. Redemption orders must be placed by 1:00 p.m. New York time. The day on which the Managing Owner receives a valid
redemption order is the redemption order date. Redemption orders are irrevocable. The redemption procedures allow Authorized Participants to redeem Baskets. Individual shareholders may not redeem directly from the Fund.



38



---

By placing a redemption order, an Authorized Participant agrees to deliver the Baskets to
be redeemed through The Depository Trust Companys (DTC) book entry-system to the Fund not later than noon, New York time, on the business day immediately following the redemption order date. By placing a redemption order, and prior
to receipt of the redemption proceeds, an Authorized Participants DTC account is charged the non-refundable transaction fee due for the redemption order.

The redemption proceeds from the Fund consist of the cash redemption amount. The cash redemption amount is equal to the net asset value of the number of Basket(s) requested in the Authorized
Participants redemption order as of the closing time of the Amex or the last to close of the exchanges on which the Master Funds assets are traded, whichever is later, on the redemption order date. The Fund will distribute the cash
redemption amount at noon, New York time, on the business day immediately following the redemption order date through DTC to the account of the Authorized Participant as recorded on DTCs book-entry system.

The redemption proceeds due from the Fund are delivered to the Authorized Participant at noon, New York time, on the business day
immediately following the redemption order date if, by such time on such business day immediately following the redemption order date, the Funds DTC account has been credited with the Baskets to be redeemed. If the Funds DTC account has
not been credited with all of the Baskets to be redeemed by such time, the redemption proceeds are delivered to the extent of whole Baskets received. Any remainder of the redemption proceeds are delivered on the next business day to the extent of
remaining whole Baskets received if the Managing Owner receives the fee applicable to the extension of the redemption distribution date which the Managing Owner may, from time-to-time, determine and the remaining Baskets to be redeemed are credited
to the Funds DTC account by noon, New York time, on such next business day. Any further outstanding amount of the redemption order will be canceled. The Managing Owner is also authorized to deliver the redemption proceeds notwithstanding that
the Baskets to be redeemed are not credited to the Funds DTC account by noon, New York time, on the business day immediately following the redemption order date if the Authorized Participant has collateralized its obligation to deliver the
Baskets through DTCs book-entry system on such terms as the Managing Owner may from time-to-time agree upon.



| | (c) | Limited Share Transactions
| | --- | --------------------------

The Fund and the Master Fund commenced investment operations on February 15, 2007 with the initial offering of 1,000,000 Limited Shares to Deutsche Bank Securities Inc. as Initial Purchaser of the Fund in
exchange for $25,000,000. The Fund commenced trading on the Amex on February 20, 2007.

Summary of Limited Share Transactions for
the Period Ended December 31, 2007



|                        |  |                                             |   |  |                                     |            |  
|----------------------- |  | ------------------------------------------- | - |  | ----------------------------------- | ---------- | -
|                        |  | Limited SharesPeriod EndedDecember 31, 2007 |   |  | AmountPeriod EndedDecember 31, 2007 |           
|Limited Shares Sold     |  | 3,000,000                                   |   |  | $                                   | 80,209,226 |  
|Limited Shares Redeemed |  | (200,000                                    | ) |  |                                     | (5,440,636 | )
|                        |  |                                             |   |  |                                     |            |  
|Net Increase            |  | 2,800,000                                   |   |  | $                                   | 74,768,590 |  
|                        |  |                                             |   |  |                                     |            |  



|(7) | Profit and Loss Allocations and Distributions
|--- | ---------------------------------------------

Pursuant to the Amended and Restated Declaration of Trust and Trust Agreement of the Master Trust, income and expenses are allocated pro rata to the General and Limited shareholders monthly based
on their respective percentage interests as of the close of the last trading day of the preceding month. Any losses allocated to the Managing Owner (the owner of the General Shares) which are in excess of the Managing Owners capital balance
are allocated to the Limited shareholders in accordance with their respective interest in the Master Fund as a percentage of total shareholders equity. Distributions (other than redemption of units) may be made at the sole discretion of the
Managing Owner on a pro rata basis in accordance with the respective capital balances of the shareholders.

A distribution
of $0.40 per share from net investment income was declared on December 14, 2007 to Limited shareholders, on record as of the close of business on December 19, 2007, payable on December 28, 2007. On December 28, 2007, the total
distribution of $1,200,000 was paid to Limited shareholders. On December 28, 2007 the Fund paid $0.40 per General Share, a total distribution of $16.00.



39



---

|(8) | Organizational and Offering Costs
|--- | ---------------------------------

All organizing and offering expenses of the Fund and its Master Fund are incurred and assumed by the Managing Owner. Expenses incurred in connection with the continuous offering of Limited Shares after the
commencement of the Master Funds trading operations also will be paid by the Managing Owner.



|(9) | Commitments and Contingencies
|--- | -----------------------------

The Managing Owner, either in its own capacity or in its capacity as the Managing Owner and on behalf of the Fund and the Master Fund, has entered into various service agreements that contain a variety of
representations, or provide indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Funds. As of December 31, 2007 no claims had been received by the Fund or
the Master Fund and it was therefore not possible to estimate the Funds and the Master Funds potential future exposure under such indemnification provisions.



|(10) | Net Asset Value and Financial Highlights
|---- | ----------------------------------------

The Fund is presenting the following net asset value and financial highlights related to investment performance and operations for a Limited Share outstanding for the Period Ended December 31, 2007. The net
investment income and total expense ratios are calculated using average net asset value. The net asset value presentation is calculated using daily Limited Shares outstanding. The net investment income and total expense ratios have been annualized.
The total return is based on the change in net asset value of the Limited Shares during the period. An individual investors return and ratios may vary based on the timing of capital transactions.



40



---

|                                                                                                    |  |                               |       |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------- | ----- | -
|                                                                                                    |  | Period EndedDecember 31, 2007 |      
|Net Asset Value                                                                                     |  |                               |       |  
|Initial offering price per Limited Share                                                            |  | $                             | 25.00 |  
|                                                                                                    | 
|Net realized and change in unrealized gain (loss) on United States Treasury Obligations and Futures |  |                               | 2.08  |  
|Net investment income                                                                               |  |                               | 0.86  |  
|                                                                                                    |  |                               |       |  
|Net increase in net assets from operations                                                          |  |                               | 2.94  |  
|Distributions of net investment income on Limited Shares                                            |  |                               | (0.40 | )
|                                                                                                    |  |                               |       |  
|Net increase                                                                                        |  |                               | 2.54  |  
|Net asset value per Limited Share, end of period                                                    |  | $                             | 27.54 |  
|                                                                                                    |  |                               |       |  
|                                                                                                    | 
|Market value per Limited Share, beginning of period                                                 |  | $                             | 25.00 |  
|                                                                                                    |  |                               |       |  
|Market value per Limited Share, end of period                                                       |  | $                             | 27.58 |  
|                                                                                                    |  |                               |       |  
|                                                                                                    | 
|Ratio to average Limited Shares*                                                                    |  |                               |       |  
|Net investment income                                                                               |  |                               | 3.63  | %
|Total expenses                                                                                      |  |                               | 0.54  | %
|                                                                                                    | 
|Total Return, at net asset value **                                                                 |  |                               | 11.76 | %
|                                                                                                    |  |                               |       |  
|Total Return, at market value **                                                                    |  |                               | 11.92 | %
|                                                                                                    |  |                               |       |  



|* | Percentages are annualized.
|- | ---------------------------

|** | Percentages are not annualized and are calculated based on initial offering price upon commencement of investment operations of $25.00.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------



|(11) | Recently Issued Accounting Standards
|---- | ------------------------------------

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement (Statement 157). Statement 157 defines fair value, establishes a framework for the measurement of fair value and enhances
disclosures about fair value measurements. The Statement does not require any new fair value measures. The Statement is effective for fair value measures already required or permitted by other standards for fiscal years beginning after
November 15, 2007. The Fund is required to adopt Statement 157 beginning on January 1, 2008. Statement 157 is required to be applied prospectively, except for certain financial instruments. Any transition adjustment will be recognized as
an adjustment to opening retained earnings in the year of adoption. The Fund is currently evaluating the impact of adopting Statement 157 on its financial statements disclosures.

In December 2007, the FASB issued FASB Statement No 160, Noncontrolling Interests in Consolidated Financial Statements  an
amendment to ARB No. 51 (Statement 160). Statement 160 requires noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling
interest holders. Statement 160 is effective for periods beginning on or after December 15, 2008 and earlier adoption is prohibited. Statement 160 will be applied prospectively to all noncontrolling interests including any that arose before the
effective date and presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Fund is currently evaluating the impact of adopting Statement 160 on its results of operations and financial position.



|(12) | Recently Adopted Accounting Standards
|---- | -------------------------------------

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an



41



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enterprises financial statements and prescribes a threshold of more-likely-than-not for recognition of tax benefits of uncertain tax positions taken or
expected to be taken in a tax return. FIN 48 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The Fund adopted FIN 48 on January 1, 2007, and has determined that the
application of this Statement did not have any impact on its results of operations and financial position.



42



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|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

Under the supervision and with the participation of the management of the Managing
Owner, including Kevin Rich, its Chief Executive Officer and Principal Financial Officer, the Fund carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this annual report, and, based upon that evaluation, Kevin Rich, the Chief Executive Officer and Principal Financial
Officer of the Managing Owner, concluded that the Funds disclosure controls and procedures were effective to ensure that information the Fund is required to disclose in the reports that it files or submits with the Securities and Exchange
Commission (the SEC) under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and to ensure that information required to be disclosed by the Fund in the
reports that it files or submits under the Exchange Act is accumulated and communicated to management of the Managing Owner, including its Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the Funds last fiscal
quarter that has materially affected or is reasonably likely to materially affect, the Funds internal control over financial reporting.

Managements Annual Report on Internal Control Over Financial Reporting

This annual report does not
include a report of managements assessment regarding internal control over financial reporting or an attestation report of the companys registered public accounting firm due to a transition period established by rules of the Securities
and Exchange Commission for newly public companies.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.

PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
|-------- | ---------------------------------------------------------------------------

Board of Directors and Executive Officers

The Fund has no
directors or executive officers and also does not have any employees. It is managed by the Managing Owner.



43



---

The current board of managers and executive officers of the Managing Owner are as
follows:



|                   |  |     |  |                                                                                                   
|------------------ |  | --- |  | --------------------------------------------------------------------------------------------------
|Name               |  | Age |  | Position                                                                                          
|                   |  |    
|Kevin Rich         |  | 47  |  | Director, Chief Executive Officer, Principal Financial Officer and Member of the Board of Managers
|Gregory S. Collett |  | 36  |  | Chief Operating Officer and Member of the Board of Managers                                       
|Martin Kremenstein |  | 31  |  | Vice President and Member of the Board of Managers                                                

Kevin Rich joined Deutsche Bank AG in June 2003 and serves as a Managing Director
in the Global Markets Investment Products Group with responsibility for providing currency and commodity-based investor solutions to the DB sales force in the Americas. Mr. Rich serves as an associated person, principal, Chief Executive Officer
and Principal Financial Officer of the Managing Owner and as an associated person of Deutsche Bank Securities Inc. Prior to joining Deutsche Bank, Mr. Rich was a Regional Vice President from November 2002 through May 2003 in Product
Distribution for Claymore Securities, Inc. (Claymore), responsible for distribution of closed-end funds and unit investment trusts in the State of New York. Mr. Rich acted as an independent product development consultant prior to
joining Claymore (August through October, 2002). From January 2000 through July 2002, Mr. Rich worked at Lehman Brothers, Inc. Mr. Rich served in several roles supporting the equities, fixed income and investment banking product lines.
Mr. Rich received his MBA in Finance from the New York University Leonard N. Stern School of Business in 1996 and his Bachelors of Science in Business Administration from Taylor University in Upland, Indiana in 1983.

Gregory Collett served as Vice President and Counsel in the Legal Department of Deutsche Bank AG from October 2002 through June 2006,
where he worked primarily with the Commodities Group to build Deutsche Banks power and gas trading and commodity funds businesses. Mr. Collett joined the Global Markets Investment Products Group in June 2006 where he is a Director with
responsibility for providing currency and commodity based investor solutions to the DB sales force in the Americas and serves as a principal and Chief Operating Officer of the Managing Owner. Mr. Collett also serves as an associated person of
Deutsche Bank Securities Inc. From March 2000 through October 2002, Mr. Collett was an associate with the law firm of Sidley Austin LLP in New York, and prior to that he was an attorney-advisor with the Commodity Futures Trading Commission from
October 1998 to February 2000. From May 2003 through May 2007, Mr. Collett has served on the Futures Industry Associations Law & Compliance Executive Committee. Mr. Collett received his J.D. from George Washington University
Law School in 1997 and his B.A. from Colgate University in 1993.

Martin Kremenstein joined Deutsche Bank AG in August
2006, and serves as a Vice President in the Global Markets Investment Products Group with responsibility for providing currency and commodity-based investor solutions to the DB sales force in the Americas. Mr. Kremenstein serves as a Vice
President of the Managing Owner. Prior to joining Deutsche Bank, Mr. Kremenstein worked for JPMorgan Chase from September 1998 to August 2006, initially in London and then, from June 2003, in New York. From February 2005 to August 2006,
Mr. Kremenstein worked in Market Risk Management, covering the Credit Portfolio division initially as an Associate, and later as a Vice President. From September 1998 to February 2005, Mr. Kremenstein worked in various roles in Operations
at JPMorgan Chase, including managing the Credit Portfolio Credit Hedge Analysis team, managing projects for the Credit Portfolio Market Hedge team, and managing P&L production for the Counterparty Risk Book (London). Mr. Kremenstein
received his B.A. from the University of Leeds in 1998. Mr. Kremenstein is a principal and an associated person of the Managing Owner.

Code of Ethics

The Fund has no officers or employees and is managed by DB Commodity Services LLC. DB
Commodity Services LLC has adopted the code of ethics of its parent, Deutsche Bank AG, which applies to all of its employees and is available at http://sec.gov/Archives/edgar/data/1159508/000095012306003563/y18643e20vf.htm.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Executive Compensation

The Fund has no employees,
officers or directors and is managed by DB Commodity Services LLC. None of the directors or officers of DB Commodity Services LLC receive compensation from the Fund. DB Commodity Services LLC receives a monthly Management Fee of 1/12thof 0.50% (0.50% annually) of the daily net asset value per Limited Share at the



44



---

end of each month. In addition, Deutsche Bank Securities Inc., an affiliate of DB Commodity Services LLC, serves as the futures commission merchant and
receives brokerage commissions paid by the Fund in connection with its futures trading.

From its inception to
December 31, 2007.

As of the Period Ended December 31, 2007, the Fund has incurred Management Fees of $174,173
to DB Commodity Services LLC of which $139,681 had been paid at December 31, 2007.

As of the Period Ended
December 31, 2007, the Fund has incurred brokerage fees of $17,418 to the Commodity Broker all of which had been paid at December 31, 2007.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The Fund has no officers or directors. The following table sets forth certain information regarding beneficial ownership of our General
Shares and Limited Shares as of December 31, 2007, by management. No person is known by us to own beneficially more than 5% of the outstanding shares of such class.



|               |  |                                                                   |  |                                          |  |                
|-------------- |  | ----------------------------------------------------------------- |  | ---------------------------------------- |  | ---------------
|Title of Class |  | Name and Address of Beneficial Owner                              |  | Amount and Nature ofBeneficial Ownership |  | Percent ofClass
|General Shares |  | DB Commodity Services LLC 60 Wall Street New York, New York 10005 |  | 40                                       |  | 100%           
|               |  |                                                                   | 
|Limited Shares |  | Directors and Officers of DB Commodity Services LLC as a group    |  | -                                        |  | 0%             

The Fund has no securities authorized for issuance under equity compensation plans.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

See Item 11



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

Audit and Non-Audit Fees

The following table sets forth the fees for professional
services rendered by KPMG LLP, the Funds independent registered public accounting firm.



|                   |  |                                    |        
|------------------ |  | ---------------------------------- | -------
|                   |  | Fiscal Year EndedDecember 31, 2007
|Audit Fees         |  | $                                  | 133,350
|Audit-Related Fees |  | $                                  | 0      
|Tax Fees           |  | $                                  | 0      
|All Other Fees     |  | $                                  | 0      
|Total              |  | $                                  | 133,350
|                   |  |                                    |        

Approval of Independent Registered Public Accounting Firm Services and Fees

The Managing Owner approved all of the services provided by KPMG LLP to the Fund described above. The Managing Owner pre-approves all audit and allowed
non-audit services of the Funds independent registered public accounting firm, including all engagement fees and terms.



45



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a)(1) Financial Statements

See financial statements commencing on page 27 hereof.

(a)(2) Financial Statement Schedules

No financial statement schedules are filed herewith because (i) such schedules are not required or (ii) the information required has been presented in the aforementioned financial statements.

(a)(3) Exhibits

The
following documents (unless otherwise indicated) are filed herewith and made a part of this Annual Report:



|            |  |                                                                                                                                          
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                              
|            | 
|4.1         |  | Amended and Restated Declaration of Trust and Trust Agreement of the Registrant**                                                        
|            | 
|4.2         |  | Amended and Restated Declaration of Trust and Trust Agreement of the Co-Registrant**                                                     
|            | 
|4.3         |  | Form of Participant Agreement**                                                                                                          
|            | 
|10.1        |  | Form of Customer Agreement*                                                                                                              
|            | 
|10.2        |  | Form of Administration Agreement*                                                                                                        
|            | 
|10.3        |  | Form of Global Custody Agreement*                                                                                                        
|            | 
|10.4        |  | Form of Transfer Agency and Service Agreement*                                                                                           
|            | 
|10.5        |  | Form of Distribution Services Agreement**                                                                                                
|            | 
|10.6        |  | Form of Marketing Agreement**                                                                                                            
|            | 
|31.1        |  | Certificate Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (filed herewith)                                        
|            | 
|32.1        |  | Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)



|* | Previously filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-1 on October 16, 2006 and incorporated herein by reference.
|- | -------------------------------------------------------------------------------------------------------------------------------------

|** | Previously filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-1 on January 17, 2007 and incorporated herein by reference.
|-- | -------------------------------------------------------------------------------------------------------------------------------------



46



---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                       |  |  |  |                                                                                                 |  |                                              
|---------------------- |  |  |  | ----------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|                       |  |  |  | PowerShares DB US Dollar Index Trust with respect toPowerShares DB US Dollar Index Bearish Fund
|                       |  |  | 
|                       |  |  |  | By:                                                                                             |  | DB Commodity Services LLC, its Managing Owner
|                       |  |  | 
|                       |  |  |  | By:                                                                                             |  | /s/ Kevin Rich                               
|                       |  |  |  | Name:                                                                                           |  | Kevin Rich                                   
|                       |  |  |  | Title:                                                                                          |  | Chief Executive Officer and Principal        
|                       |  |  |  |                                                                                                 |  | Financial Officer                            
|                       |  |  | 
|Dated : March 25, 2008 |  |  |  | By:                                                                                             |  | /s/ Gregory S. Collett                       
|                       |  |  |  | Name:                                                                                           |  | Gregory S. Collett                           
|                       |  |  |  | Title:                                                                                          |  | Chief Operating Officer                      



47