10-Q 1 dbp-20230331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒

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

For the quarterly period ended March 31, 2023

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: 001-33244

 

INVESCO DB PRECIOUS METALS FUND

(A Series of Invesco DB Multi-Sector Commodity Trust)

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

87-0778065

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

c/o Invesco Capital Management LLC

3500 Lacey Road, Suite 700

Downers Grove, Illinois

 

60515

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (800) 983-0903

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units of Beneficial Interest

DBP

NYSE Arca, Inc.

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

☐

Accelerated Filer

☐

 

 

 

 

Non-Accelerated Filer

☒

Smaller reporting company

☒

 

 

 

 

 

 

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of outstanding Shares as of March 31, 2023: 3,200,000

INVESCO DB PRECIOUS METALS FUND

(A SERIES OF INVESCO DB MULTI-SECTOR COMMODITY TRUST)

QUARTER ENDED MARCH 31, 2023

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

 

 

 

ITEM 1.

Financial Statements

1

Notes to Unaudited Financial Statements

8

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

26

ITEM 4.

Controls and Procedures

28

 

 

 

PART II.

OTHER INFORMATION

29

 

 

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

 

 

SIGNATURES

31

 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Invesco DB Precious Metals Fund

Statements of Financial Condition

March 31, 2023 and December 31, 2022

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

United States Treasury Obligations, at value (cost $59,552,472 and $39,815,185,
   respectively)

 

$

59,589,524

 

 

$

39,826,444

 

Affiliated investments, at value (cost $103,627,894 and $69,524,903, respectively)

 

 

103,641,387

 

 

 

69,499,655

 

Cash held by custodian

 

 

—

 

 

 

873,920

 

Receivable for:

 

 

 

 

 

 

Dividends from affiliates

 

 

389,948

 

 

 

202,075

 

Total assets

 

$

163,620,859

 

 

$

110,402,094

 

Liabilities

 

 

 

 

 

 

Other Investments:

 

 

 

 

 

 

Variation margin payable- Commodity Futures Contracts

 

 

585,685

 

 

$

181,220

 

Payable for:

 

 

 

 

 

 

Management fees

 

 

92,917

 

 

 

65,381

 

Brokerage commissions and fees

 

 

5,005

 

 

 

5,004

 

Total liabilities

 

 

683,607

 

 

 

251,605

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Shareholder's equity—General Shares

 

 

2,037

 

 

 

1,916

 

Shareholders' equity—Shares

 

 

162,935,215

 

 

 

110,148,573

 

Total shareholders' equity

 

 

162,937,252

 

 

 

110,150,489

 

Total liabilities and equity

 

$

163,620,859

 

 

$

110,402,094

 

General Shares outstanding

 

40

 

 

 

40

 

Shares outstanding

 

 

3,200,000

 

 

 

2,300,000

 

Net asset value per share

 

 

50.92

 

 

$

47.89

 

Market value per share

 

$

51.02

 

 

$

48.00

 

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

1

Invesco DB Precious Metals Fund

Schedule of Investments

March 31, 2023

(Unaudited)

 

Description

 

Percentage of
Shareholders'
Equity

 

 

Value

 

 

Principal Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

U.S. Treasury Bill, 4.050% due April 6, 2023

 

 

3.07

%

 

$

4,998,078

 

 

$

5,000,000

 

U.S. Treasury Bill, 4.750% due June 1, 2023 (b)

 

 

33.50

 

 

 

54,591,446

 

 

 

55,000,000

 

Total United States Treasury Obligations (cost $59,552,472)

 

 

36.57

%

 

$

59,589,524

 

 

 

 

Affiliated Investments

 

 

 

 

 

 

 

Shares

 

Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

Invesco Treasury Collateral ETF (cost $21,504,074) (c)(d)

 

 

13.21

%

 

$

21,517,567

 

 

 

203,900

 

Money Market Mutual Fund

 

 

 

 

 

 

 

 

 

Invesco Government & Agency Portfolio, Institutional Class,
    4.73% (cost $82,123,820) (c)(e)

 

 

50.40

 

 

 

82,123,820

 

 

 

82,123,820

 

Total Affiliated Investments (cost $103,627,894)

 

 

63.61

%

 

$

103,641,387

 

 

 

 

Total Investments in Securities (cost $163,180,366)

 

 

100.18

%

 

$

163,230,911

 

 

 

 

 

(a)
Security may be traded on a discount basis. The interest rate shown represents the discount rate at the most recent auction date of the security prior to period end.
(b)
United States Treasury Obligations of $21,835,000 are on deposit with the Commodity Broker and held as maintenance margin for open futures contracts.
(c)
Affiliated issuer. The issuer and/or the Fund is a wholly-owned subsidiary of Invesco Ltd., or is affiliated by having an investment adviser that is under common control of Invesco Ltd. See Note 8.
(d)
All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 2J.
(e)
The rate shown is the 7-day SEC standardized yield as of March 31, 2023.

 

Open Commodity Futures Contracts

 

Number of Contracts

 

 

Expiration Date

 

Notional
Value

 

 

Value(f)

 

 

Unrealized Appreciation (Depreciation)(f)

 

 

Long Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Gold

 

 

642

 

 

December-2023

 

$

130,903,800

 

 

$

11,342,598

 

 

$

11,342,598

 

 

COMEX Silver

 

 

49

 

 

January-2024

 

 

6,113,975

 

 

 

(5,238

)

 

 

(5,238

)

 

COMEX Silver

 

 

208

 

 

December-2023

 

 

25,845,040

 

 

 

1,899,245

 

 

 

1,899,245

 

 

Total Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

$

13,236,605

 

 

$

13,236,605

 

 

 

(f)
Unrealized Appreciation (Depreciation) and Value are presented above, net by contract.

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

2

Invesco DB Precious Metals Fund

Schedule of Investments

December 31, 2022

(Unaudited)

 

Description

 

Percentage of
Shareholders'
Equity

 

 

Value

 

 

Principal Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

U.S. Treasury Bill, 3.340% due January 5, 2023

 

 

13.61

%

 

$

14,996,975

 

 

$

15,000,000

 

U.S. Treasury Bill, 4.285% due March 2, 2023

 

 

22.54

 

 

 

24,829,469

 

 

 

25,000,000

 

Total United States Treasury Obligations (cost $39,815,185)

 

 

36.15

%

 

$

39,826,444

 

 

 

 

Affiliated Investments

 

 

 

 

 

 

 

Shares

 

Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

Invesco Treasury Collateral ETF (cost $21,504,074) (b)(c)

 

 

19.50

%

 

$

21,478,826

 

 

 

203,900

 

Money Market Mutual Fund

 

 

 

 

 

 

 

 

 

Invesco Government & Agency Portfolio, Institutional
   Class, 4.22% (cost $48,020,829) (b)(d)

 

 

43.60

 

 

 

48,020,829

 

 

 

48,020,829

 

Total Affiliated Investments (cost $69,524,903)

 

 

63.10

%

 

 

69,499,655

 

 

 

 

Total Investments in Securities (cost $109,340,088)

 

 

99.25

%

 

$

109,326,099

 

 

 

 

 

(a)
Security may be traded on a discount basis. The interest rate shown represents the discount rate at the most recent auction date of the security prior to period end.
(b)
Affiliated issuer. The issuer and/or the Fund is a wholly-owned subsidiary of Invesco Ltd., or is affiliated by having an
investment adviser that is under common control of Invesco Ltd. See Note 8.
(c)
All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 2J.
(d)
The rate shown is the 7-day SEC standardized yield as of December 31, 2022.

 

Open Commodity Futures Contracts

 

Number of Contracts

 

 

Expiration Date

 

Notional
Value

 

 

Value(e)

 

 

Unrealized Appreciation (Depreciation)(e)

 

 

Long Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Gold

 

 

457

 

 

December-2023

 

$

87,108,770

 

 

$

4,976,093

 

 

$

4,976,093

 

 

COMEX Silver

 

 

190

 

 

March-2023

 

 

22,838,000

 

 

 

1,173,691

 

 

 

1,173,691

 

 

Total Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

$

6,149,784

 

 

$

6,149,784

 

 

 

(e)
Unrealized Appreciation (Depreciation) and Value are presented above, net by contract.

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

3

Invesco DB Precious Metals Fund

Statements of Income and Expenses

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2023

 

 

2022

 

 

Income

 

 

 

 

 

 

 

Interest Income

 

$

457,980

 

 

$

6,443

 

 

Dividends from Affiliates

 

 

1,129,900

 

 

 

15,175

 

 

Total Income

 

 

1,587,880

 

 

 

21,618

 

 

Expenses

 

 

 

 

 

 

 

Management Fees

 

 

267,160

 

 

 

221,705

 

 

Brokerage Commissions and Fees

 

 

2,577

 

 

 

10,035

 

 

Interest Expense

 

 

6,422

 

 

 

476

 

 

Total Expenses

 

 

276,159

 

 

 

232,216

 

 

Less: Waivers

 

 

(22,527

)

 

 

(3,337

)

 

Net Expenses

 

 

253,632

 

 

 

228,879

 

 

Net Investment Income (Loss)

 

 

1,334,248

 

 

 

(207,261

)

 

Net Realized and Net Change in Unrealized Gain (Loss) on
     United States Treasury Obligations, Affiliated Investments
     and Commodity Futures Contracts

 

 

 

 

 

 

 

Net Realized Gain (Loss) on

 

 

 

 

 

 

 

Commodity Futures Contracts

 

 

801,895

 

 

 

4,594,681

 

 

Net Realized Gain (Loss)

 

 

801,895

 

 

 

4,594,681

 

 

Net Change in Unrealized Gain (Loss) on

 

 

 

 

 

 

 

United States Treasury Obligations

 

 

25,793

 

 

 

(6,125

)

 

Affiliated Investments

 

 

38,741

 

 

 

(8,122

)

 

Commodity Futures Contracts

 

 

7,086,821

 

 

 

2,911,953

 

 

Net Change in Unrealized Gain (Loss)

 

 

7,151,355

 

 

 

2,897,706

 

 

Net Realized and Net Change in Unrealized Gain (Loss) on
     United States Treasury Obligations, Affiliated
     Investments and Commodity Futures Contracts

 

 

7,953,250

 

 

 

7,492,387

 

 

Net Income (Loss)

 

$

9,287,498

 

 

$

7,285,126

 

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

4

Invesco DB Precious Metals Fund

Statement of Changes in Shareholders’ Equity

For the Three Months Ended March 31, 2023

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total
Equity

 

 

Shares

 

 

Total
Equity

 

 

Shareholders'
Equity

 

Balance at December 31, 2022

 

40

 

 

$

1,916

 

 

 

2,300,000

 

 

$

110,148,573

 

 

$

110,150,489

 

Purchases of Shares

 

 

 

 

 

 

 

 

1,200,000

 

 

 

58,047,992

 

 

 

58,047,992

 

Redemption of Shares

 

 

 

 

 

 

 

 

(300,000

)

 

 

(14,548,727

)

 

 

(14,548,727

)

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

900,000

 

 

 

43,499,265

 

 

 

43,499,265

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

17

 

 

 

 

 

 

1,334,231

 

 

 

1,334,248

 

Net Realized Gain (Loss) on United States
   Treasury Obligations, Affiliated Investments
   and Commodity Futures Contracts

 

 

 

 

 

11

 

 

 

 

 

 

801,884

 

 

 

801,895

 

Net Change in Unrealized Gain (Loss) on
   United States Treasury Obligations,
   Affiliated Investments and Commodity
   Futures Contracts

 

 

 

 

 

93

 

 

 

 

 

 

7,151,262

 

 

 

7,151,355

 

Net Income (Loss)

 

 

 

 

 

121

 

 

 

 

 

 

9,287,377

 

 

 

9,287,498

 

Net Change in Shareholders' Equity

 

 

—

 

 

 

121

 

 

 

900,000

 

 

 

52,786,642

 

 

 

52,786,763

 

Balance at March 31, 2023

 

40

 

 

$

2,037

 

 

 

3,200,000

 

 

$

162,935,215

 

 

$

162,937,252

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

 

 

 

 

5

Invesco DB Precious Metals Fund

Statement of Changes in Shareholders’ Equity

For the Three Months Ended March 31, 2022

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total
Equity

 

 

Shares

 

 

Total
Equity

 

 

Shareholders'
Equity

 

Balance at December 31, 2021

 

 

40

 

 

$

1,959

 

 

 

2,300,000

 

 

$

112,649,943

 

 

$

112,651,902

 

Purchases of Shares

 

 

 

 

 

 

 

 

300,000

 

 

 

15,569,488

 

 

 

15,569,488

 

Redemption of Shares

 

 

 

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

300,000

 

 

 

15,569,488

 

 

 

15,569,488

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

(4

)

 

 

 

 

 

(207,257

)

 

 

(207,261

)

Net Realized Gain (Loss) on United States
   Treasury Obligations, Affiliated Investments
   and Commodity Futures Contracts

 

 

 

 

 

80

 

 

 

 

 

 

4,594,601

 

 

 

4,594,681

 

Net Change in Unrealized Gain (Loss) on
   United States Treasury Obligations,
   Affiliated Investments and Commodity
   Futures Contracts

 

 

 

 

 

50

 

 

 

 

 

 

2,897,656

 

 

 

2,897,706

 

Net Income (Loss)

 

 

 

 

 

126

 

 

 

 

 

 

7,285,000

 

 

 

7,285,126

 

Net Change in Shareholders' Equity

 

 

—

 

 

 

126

 

 

 

300,000

 

 

 

22,854,488

 

 

 

22,854,614

 

Balance at March 31, 2022

 

 

40

 

 

$

2,085

 

 

 

2,600,000

 

 

$

135,504,431

 

 

$

135,506,516

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

6

Invesco DB Precious Metals Fund

Statements of Cash Flows

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net Income (Loss)

 

$

9,287,498

 

 

$

7,285,126

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
   activities:

 

 

 

 

 

 

Cost of securities purchased

 

 

(59,283,881

)

 

 

(9,993,301

)

Proceeds from securities sold and matured

 

 

40,000,000

 

 

 

17,001,400

 

Cost of affiliated investments purchased

 

 

(97,522,661

)

 

 

(67,114,679

)

Proceeds from affiliated investments sold

 

 

63,419,670

 

 

 

36,612,401

 

Net accretion of discount on United States Treasury Obligations

 

 

(453,406

)

 

 

(6,443

)

Net change in unrealized (gain) loss on United States Treasury Obligations and
   Affiliated Investments

 

 

(64,534

)

 

 

14,247

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Variation margin- Commodity Futures Contracts

 

 

404,465

 

 

 

131,300

 

Dividends from affiliates

 

 

(187,873

)

 

 

(9,923

)

Management fees

 

 

27,536

 

 

 

13,139

 

Brokerage commissions and fees

 

 

1

 

 

 

(10

)

Due from broker

 

 

—

 

 

 

497,255

 

Net cash provided by (used in) operating activities

 

 

(44,373,185

)

 

 

(15,569,488

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from purchases of Shares

 

 

58,047,992

 

 

 

15,569,488

 

Redemption of Shares

 

 

(14,548,727

)

 

 

—

 

Net cash provided by (used in) financing activities

 

 

43,499,265

 

 

 

15,569,488

 

Net change in cash

 

 

(873,920

)

 

 

—

 

Cash at beginning of period

 

 

873,920

 

 

 

—

 

Cash at end of period

 

$

—

 

 

$

—

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

6,422

 

 

$

476

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

7

Invesco DB Precious Metals Fund

Notes to Unaudited Financial Statements

March 31, 2023

 

Note 1 - Organization

Invesco DB Precious Metals Fund (the “Fund”), a separate series of Invesco DB Multi-Sector Commodity Trust (the “Trust”), a Delaware statutory trust organized in five separate series, was formed on August 3, 2006. The term of the Fund is perpetual (unless terminated earlier in certain circumstances) as provided for in the Fifth Amended and Restated Declaration of Trust and Trust Agreement of the Trust, as amended (the “Trust Agreement”). The Fund has an unlimited number of shares authorized for issuance.

Invesco Capital Management LLC (“Invesco”) has served as the managing owner (the “Managing Owner”), commodity pool operator and commodity trading advisor of the Trust and the Fund since February 23, 2015. The Managing Owner holds 40 general shares (the “General Shares”) of the Fund. The fiscal year end of the Fund is December 31st.

The Fund seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Precious Metals Index Excess Return™ (the “Index”) over time, plus the excess, if any, of the sum of the Fund’s interest income from its holdings of United States Treasury Obligations (“Treasury Income”), dividends from its holdings in money market mutual funds (affiliated or otherwise) (“Money Market Income”) and dividends or distributions of capital gains from its holdings of T-Bill ETFs (as defined below) (“T-Bill ETF Income”) over the expenses of the Fund. The Fund invests in futures contracts in an attempt to track its Index. The Index is intended to reflect the change in market value of the precious metals sector. The commodities comprising the Index are gold and silver (each an “Index Commodity”, and collectively, the “Index Commodities”).

The Fund may invest directly in United States Treasury Obligations. The Fund may also gain exposure to United States Treasury Obligations through investments in exchange-traded funds (“ETFs”) (affiliated or otherwise) that track indexes that measure the performance of United States Treasury Obligations with a maximum remaining maturity of up to 12 months (“T-Bill ETFs”). The Fund holds as collateral United States Treasury Obligations, money market mutual funds and T-Bill ETFs (affiliated or otherwise), if any, for margin and/or cash management purposes. While the Fund's performance reflects the appreciation and depreciation of those holdings, the Fund's performance, whether positive or negative, is driven primarily by its strategy of trading futures contracts with the aim of seeking to track the Index.

The Commodity Futures Trading Commission (the “CFTC”) and certain futures exchanges impose position limits on futures contracts that reference Index Commodities (the “Index Contracts”). As the Fund approaches or reaches position limits with respect to an Index Commodity, the Fund may commence investing in Index Contracts that reference other Index Commodities. In those circumstances, the Fund may also trade in futures contracts based on commodities other than Index Commodities that the Managing Owner reasonably believes tend to exhibit trading prices that correlate with an Index Contract.

The Managing Owner may determine to invest in other futures contracts if at any time it is impractical or inefficient to gain full or partial exposure to an Index Commodity through the use of Index Contracts. These other futures contracts may or may not be based on an Index Commodity. When they are not, the Managing Owner may seek to select futures contracts that it reasonably believes tend to exhibit trading prices that correlate with an Index Contract.

The Fund offers common units of beneficial interest (the “Shares”) only to certain eligible financial institutions (the “Authorized Participants”) in one or more blocks of 50,000 Shares (“Creation Units”). The Fund commenced investment operations on January 3, 2007. The Fund commenced trading on the American Stock Exchange (which became the NYSE Alternext US LLC) on January 5, 2007 and, since November 25, 2008, has been listed on the NYSE Arca, Inc. (the “NYSE Arca”).

This Quarterly Report (the “Report”) covers the three months ended March 31, 2023 and 2022. The accompanying unaudited financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Fund’s financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 24, 2023.

 

 

8

Note 2 - Summary of Significant Accounting Policies

A.
Basis of Presentation

The financial statements of the Fund have been prepared using U.S. GAAP.

The Fund has determined that it meets the definition of an investment company and has prepared the financial statements in conformity with U.S. GAAP for investment companies in conformity with accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services — Investment Companies.

B.
Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are issued.

C.
Investment Valuations

Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value (“NAV”) per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.

United States Treasury Obligations are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as developments related to specific securities, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. All debt obligations involve some risk of default with respect to interest and/or principal payments.

Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded.

Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved by the Managing Owner. Issuer-specific events, market trends, bid/asked quotes of brokers and information providers and other data may be reviewed in the course of making a good faith determination of a security’s fair value.

Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general market conditions which are not specifically related to the particular issuer, such as real or perceived adverse economic conditions, changes in the general outlook for revenues, changes in interest or currency rates, regional or global instability, natural or environmental disasters, widespread disease or other public health issues, war, acts of terrorism or adverse investor sentiment generally and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

D.
Investment Transactions and Investment Income

Investment transactions are accounted for on a trade date basis. Realized gains or losses from the sale or disposition of securities or derivatives are determined on a specific identification basis and recognized in the Statements of Income and Expenses in the period in which the contract is closed or the sale or disposition occurs, 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. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date.

E.
Profit and Loss Allocations and Distributions

Pursuant to the Trust Agreement, income and expenses are allocated pro rata to the Managing Owner as holder of the General Shares and to the Shareholders monthly based on their respective percentage interests as of the close of the last trading day of the preceding month. 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.

No distributions were paid for the three months ended March 31, 2023 and 2022.

F.
Routine Operational, Administrative and Other Ordinary Expenses

The Managing Owner is responsible for all routine operational, administrative and other ordinary expenses of the 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. The Fund does not reimburse the Managing Owner for the routine operational, administrative and other ordinary expenses of the Fund. Accordingly, such expenses are not reflected in the Statements of Income and Expenses of the Fund.

9

G.
Non-Recurring Fees and Expenses

The Fund pays all non-recurring and unusual fees and expenses, if any, of itself, as determined by the Managing Owner. Non-recurring and unusual fees and expenses include fees and expenses such as legal claims and liabilities, litigation costs, indemnification expenses or other non-routine expenses. Non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount. For the three months ended March 31, 2023 and 2022, the Fund did not incur such expenses.

H.
Brokerage Commissions and Fees

The Fund incurs all brokerage commissions, including applicable exchange fees, National Futures Association (“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 (as defined below). These costs are recorded as Brokerage Commissions and Fees in the Statements of Income and Expenses. 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, as applicable were less than $6.00 and $6.00 per round-turn trade during the three months ended March 31, 2023 and 2022, respectively.

I.
Income Taxes