Company Quick10K Filing
Invesco DB Precious Metals Fund
Price41.70 EPS4
Shares3 P/E10
MCap133 P/FCF-18
Net Debt-0 EBIT13
TEV133 TEV/EBIT10
TTM 2019-09-30, in MM, except price, ratios
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S-1 2018-11-15 Public Filing
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10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-02
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10-K 2011-12-31 Filed 2012-03-14
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10-K 2010-12-31 Filed 2011-03-14
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10-K 2009-12-31 Filed 2010-03-08
8-K 2020-04-02
8-K 2019-10-01
8-K 2019-05-07
8-K 2018-08-27
8-K 2018-06-04
8-K 2018-05-24
8-K 2018-03-08

DBP 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Note 1 - Organization
Note 2 - Summary of Significant Accounting Policies
Note 3 - Financial Instrument Risk
Note 4 - Service Providers and Related Party Agreements
Note 5 - Deposits with Commodity Broker and Custodian
Note 6 - Additional Valuation Information
Note 7 - Derivative Instruments
Note 8 - Share Purchases and Redemptions
Note 9 - Commitments and Contingencies
Note 10 - Financial Highlights
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 dbp-ex311_7.htm
EX-31.2 dbp-ex312_9.htm
EX-32.1 dbp-ex321_8.htm
EX-32.2 dbp-ex322_6.htm

Invesco DB Precious Metals Fund Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

dbp-10q_20200331.htm
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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, 2020

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: (800983-0903

 

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, 2020: 3,400,000


 

INVESCO DB PRECIOUS METALS FUND

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

QUARTER ENDED MARCH 31, 2020

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

17

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

24

ITEM 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

27

 

 

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

29

 

 

SIGNATURES

30

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM  1.

FINANCIAL STATEMENTS.

Invesco DB Precious Metals Fund

Statements of Financial Condition

March 31, 2020 and December 31, 2019

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

United States Treasury Obligations, at value (cost $97,972,719 and $77,722,522,

   respectively)

 

$

97,990,729

 

 

$

77,740,351

 

Affiliated investments, at value and cost

 

 

44,464,517

 

 

 

63,714,072

 

Other investments:

 

 

 

 

 

 

 

 

Variation margin receivable- Commodity Futures Contracts

 

 

 

 

 

205,850

 

Cash held by custodian

 

 

 

 

 

129,560

 

Receivable for:

 

 

 

 

 

 

 

 

Dividends from affiliates

 

 

60,715

 

 

 

39,537

 

Total assets

 

$

142,515,961

 

 

$

141,829,370

 

Liabilities

 

 

 

 

 

 

 

 

Other investments:

 

 

 

 

 

 

 

 

Variation margin payable- Commodity Futures Contracts

 

$

3,354,080

 

 

$

 

Payable for:

 

 

 

 

 

 

 

 

Management fees

 

 

78,283

 

 

 

88,249

 

Brokerage commissions and fees

 

 

4,999

 

 

 

4,729

 

Total liabilities

 

 

3,437,362

 

 

 

92,978

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Shareholder's equity—General Shares

 

 

1,636

 

 

 

1,668

 

Shareholders' equity—Shares

 

 

139,076,963

 

 

 

141,734,724

 

Total shareholders' equity

 

 

139,078,599

 

 

 

141,736,392

 

Total liabilities and equity

 

$

142,515,961

 

 

$

141,829,370

 

General Shares outstanding

 

 

40

 

 

 

40

 

Shares outstanding

 

 

3,400,000

 

 

 

3,400,000

 

 

 

 

 

 

 

 

 

 

Net asset value per share

 

$

40.90

 

 

$

41.69

 

Market value per share

 

$

40.95

 

 

$

41.61

 

 

 

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, 2020

(Unaudited)

 

Description

 

Percentage of

Shareholders'

Equity

 

 

Value

 

 

Principal Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills, 1.520% due April 2, 2020 (b)

 

 

36.67

%

 

$

51,000,014

 

 

$

51,000,000

 

U.S. Treasury Bills, 1.505% due May 28, 2020

 

 

8.63

 

 

 

11,998,765

 

 

 

12,000,000

 

U.S. Treasury Bills, 0.085% due July 2, 2020 (b)

 

 

25.16

 

 

 

34,991,950

 

 

 

35,000,000

 

Total United States Treasury Obligations (cost $97,972,719)

 

 

70.46

%

 

$

97,990,729

 

 

 

 

 

Affiliated Investments

 

 

 

 

 

 

 

 

 

Shares

 

Money Market Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

Invesco Premier U.S. Government Money Portfolio- Institutional

     Class, 0.54% (cost $44,464,517)(c)

 

 

31.97

%

 

$

44,464,517

 

 

 

44,464,517

 

Total Investments in Securities (cost $142,437,236)

 

 

102.43

%

 

$

142,455,246

 

 

 

 

 

 

(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 $55,989,500 are on deposit with the Commodity Broker and held as maintenance margin for open futures contracts.

(c)

The security and the Fund are advised by wholly-owned subsidiaries of Invesco Ltd. and are therefore considered to be affiliated. The rate shown is the 7-day SEC standardized yield as of March 31, 2020.

 

Open Commodity Futures Contracts

 

Number of Contracts

 

 

Expiration Date

 

Notional

Value

 

 

Value(d)

 

 

Unrealized Appreciation (Depreciation)(d)

 

 

Long Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Gold

 

 

728

 

 

February-2021

 

$

116,378,080

 

 

$

272,634

 

 

$

272,634

 

 

COMEX Silver

 

 

320

 

 

May-2020

 

 

22,649,600

 

 

 

(3,086,169

)

 

 

(3,086,169

)

 

Total Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

$

(2,813,535

)

 

$

(2,813,535

)

 

 

(d)

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, 2019

(Unaudited)

 

Description

 

Percentage of

Shareholders'

Equity

 

 

Value

 

 

Principal Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills, 1.520% due February 6, 2020

 

 

4.23

%

 

$

5,991,337

 

 

$

6,000,000

 

U.S. Treasury Bills, 1.560% due March 5, 2020

 

 

14.78

 

 

 

20,944,967

 

 

 

21,000,000

 

U.S. Treasury Bills, 1.520% due April 2, 2020 (b)

 

 

35.84

 

 

 

50,804,047

 

 

 

51,000,000

 

Total United States Treasury Obligations (cost $77,722,522)

 

 

54.85

%

 

$

77,740,351

 

 

 

 

 

Affiliated Investments

 

 

 

 

 

 

 

 

 

Shares

 

Money Market Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

Invesco Premier U.S. Government Money Portfolio- Institutional

   Class, 1.47% (cost $63,714,072) (c)

 

 

44.95

%

 

$

63,714,072

 

 

 

63,714,072

 

Total Investments in Securities (cost $141,436,594)

 

 

99.80

%

 

$

141,454,423

 

 

 

 

 

 

(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 $20,918,100 are on deposit with the Commodity Broker and held as maintenance margin for open futures contracts.

(c)

The security and the Fund are advised by wholly-owned subsidiaries of Invesco Ltd. and are therefore considered to be affiliated. The rate shown is the 7-day SEC standardized yield as of December 31, 2019.

 

Open Commodity Futures Contracts

 

Number of Contracts

 

 

Expiration Date

 

Notional

Value

 

 

Value(d)

 

 

Unrealized Appreciation (Depreciation)(d)

 

 

Long Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Gold

 

 

741

 

 

February-2020

 

$

112,861,710

 

 

$

11,493,134

 

 

$

11,493,134

 

 

COMEX Silver

 

 

319

 

 

May-2020

 

 

28,724,355

 

 

 

3,114,481

 

 

 

3,114,481

 

 

Total Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

$

14,607,615

 

 

$

14,607,615

 

 

 

(d)

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, 2020 and 2019

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Income

 

 

 

 

 

 

 

 

Interest Income

 

$

304,450

 

 

$

741,069

 

Dividends from Affiliates

 

 

206,401

 

 

 

42,720

 

Total Income

 

 

510,851

 

 

 

783,789

 

Expenses

 

 

 

 

 

 

 

 

Management Fees

 

 

263,336

 

 

 

242,540

 

Brokerage Commissions and Fees

 

 

6,026

 

 

 

5,070

 

Interest Expense

 

 

1,898

 

 

 

1,306

 

Total Expenses

 

 

271,260

 

 

 

248,916

 

Less: Waivers

 

 

(29,310

)

 

 

(3,817

)

Net Expenses

 

 

241,950

 

 

 

245,099

 

Net Investment Income (Loss)

 

 

268,901

 

 

 

538,690

 

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

 

 

 

 

 

 

 

 

United States Treasury Obligations

 

 

 

 

 

(707

)

Commodity Futures Contracts

 

 

13,631,863

 

 

 

2,697,238

 

Net Realized Gain (Loss)

 

 

13,631,863

 

 

 

2,696,531

 

Net Change in Unrealized Gain (Loss) on

 

 

 

 

 

 

 

 

United States Treasury Obligations

 

 

181

 

 

 

(5,079

)

Commodity Futures Contracts

 

 

(17,421,150

)

 

 

(3,639,773

)

Net Change in Unrealized Gain (Loss)

 

 

(17,420,969

)

 

 

(3,644,852

)

Net Realized and Net Change in Unrealized Gain (Loss) on

     United States Treasury Obligations, Affiliated

     Investments and Commodity Futures Contracts

 

 

(3,789,106

)

 

 

(948,321

)

Net Income (Loss)

 

$

(3,520,205

)

 

$

(409,631

)

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, 2020

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at December 31, 2019

 

 

40

 

 

$

1,668

 

 

 

3,400,000

 

 

$

141,734,724

 

 

$

141,736,392

 

Purchases of Shares

 

 

 

 

 

 

 

 

 

 

1,000,000

 

 

 

41,508,133

 

 

 

41,508,133

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

(1,000,000

)

 

 

(40,645,721

)

 

 

(40,645,721

)

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

862,412

 

 

 

862,412

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

2

 

 

 

 

 

 

 

268,899

 

 

 

268,901

 

Net Realized Gain (Loss) on United States Treasury

   Obligations, Affiliated Investments and

   Commodity Futures Contracts

 

 

 

 

 

 

124

 

 

 

 

 

 

 

13,631,739

 

 

 

13,631,863

 

Net Change in Unrealized Gain (Loss) on United States

   Treasury Obligations, Affiliated Investments and

   Commodity Futures Contracts

 

 

 

 

 

 

(158

)

 

 

 

 

 

 

(17,420,811

)

 

 

(17,420,969

)

Net Income (Loss)

 

 

 

 

 

 

(32

)

 

 

 

 

 

 

(3,520,173

)

 

 

(3,520,205

)

Net Change in Shareholders' Equity

 

 

 

 

 

(32

)

 

 

 

 

 

(2,657,761

)

 

 

(2,657,793

)

Balance at March 31, 2020

 

 

40

 

 

$

1,636

 

 

 

3,400,000

 

 

$

139,076,963

 

 

$

139,078,599

 

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, 2019

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at December 31, 2018

 

 

40

 

 

$

1,452

 

 

 

3,000,000

 

 

$

108,879,478

 

 

$

108,880,930

 

Purchases of Shares

 

 

 

 

 

 

 

 

 

 

800,000

 

 

 

29,269,146

 

 

 

29,269,146

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

(600,000

)

 

 

(21,645,716

)

 

 

(21,645,716

)

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

200,000

 

 

 

7,623,430

 

 

 

7,623,430

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

1

 

 

 

 

 

 

 

538,689

 

 

 

538,690

 

Net Realized Gain (Loss) on United States Treasury

   Obligations, Affiliated Investments and

   Commodity Futures Contracts

 

 

 

 

 

 

7

 

 

 

 

 

 

 

2,696,524

 

 

 

2,696,531

 

Net Change in Unrealized Gain (Loss) on United States

   Treasury Obligations, Affiliated Investments and

   Commodity Futures Contracts

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

(3,644,843

)

 

 

(3,644,852

)

Net Income (Loss)

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

(409,630

)

 

 

(409,631

)

Net Change in Shareholders' Equity

 

 

 

 

 

(1

)

 

 

200,000

 

 

 

7,213,800

 

 

 

7,213,799

 

Balance at March 31, 2019

 

 

40

 

 

$

1,451

 

 

 

3,200,000

 

 

$

116,093,278

 

 

$

116,094,729

 

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, 2020 and 2019

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

(3,520,205

)

 

$

(409,631

)

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

   activities:

 

 

 

 

 

 

 

 

Cost of securities purchased

 

 

(46,947,478

)

 

 

(74,616,286

)

Proceeds from securities sold and matured

 

 

27,000,000

 

 

 

64,962,489

 

Cost of affiliated investments purchased

 

 

(104,084,145

)

 

 

(57,308,844

)

Proceeds from affiliated investments sold

 

 

123,333,701

 

 

 

61,921,855

 

Net accretion of discount on United States Treasury Obligations

 

 

(302,720

)

 

 

(739,779

)

Net realized (gain) loss on United States Treasury Obligations and

   Affiliated Investments

 

 

 

 

 

707

 

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

   Affiliated Investments

 

 

(181

)

 

 

5,079

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Variation margin- Commodity Futures Contracts

 

 

3,559,930

 

 

 

(399,535

)

Dividends from affiliates

 

 

(21,178

)

 

 

(312

)

Management fees

 

 

(9,966

)

 

 

6,562

 

Brokerage commissions and fees

 

 

270

 

 

 

(7

)

Net cash provided by (used in) operating activities

 

 

(991,972

)

 

 

(6,577,702

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from purchases of Shares

 

 

41,508,133

 

 

 

29,269,146

 

Redemption of Shares

 

 

(40,645,721

)

 

 

(21,645,716

)

Increase (decrease) in payable for amount due to custodian

 

 

 

 

 

(1,045,728

)

Net cash provided by (used in) financing activities

 

 

862,412

 

 

 

6,577,702

 

Net change in cash

 

 

(129,560

)

 

 

 

Cash at beginning of period

 

 

129,560

 

 

 

 

Cash at end of period

 

$

 

 

$

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,898

 

 

$

1,306

 

 

 

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, 2020

 

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 seven 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. In addition, 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 200,000 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, 2020 and 2019. 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, 2019 as filed with the SEC on February 28, 2020.

 

 

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 ServicesInvestment Companies.

8


 

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.

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, 2020 and 2019.

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.

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, 2020 and 2019, 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

9


 

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, 2020 and 2019, respectively.

I.

Income Taxes

The Fund is classified as a partnership for U.S. federal income tax purposes. Accordingly, the Fund will generally not incur U.S. federal income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as investors are individually liable for income taxes, if any, on their allocable share of the Fund’s income, gain, loss, deductions and other items.

The Managing Owner has reviewed all of the Fund’s open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States, 2016.

J.

Commodity Futures Contracts

The Fund utilizes derivative instruments to achieve its investment objective. A commodity futures contract is an agreement between counterparties to purchase or sell a specified underlying commodity for a specified price, or to pay or receive a cash amount based on the value of an index or other reference instrument, at a future date. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral with the Commodity Broker. During the period that the commodity futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as a receivable or payable on the Statements of Financial Condition. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. Realized gains (losses) and changes in unrealized appreciation (depreciation) on open positions 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 changes occur, respectively.

 

Note 3 - Financial Instrument Risk

In the normal course of its business, the Fund is a 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 in excess of the amounts shown on the Statements of Financial Condition. The financial instruments used by the Fund are commodity futures contracts, the values of which 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 Fund due to market changes, including fluctuations in commodity prices. In entering into these futures contracts, there exists a market risk that such futures contracts may be significantly influenced by adverse market 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 Fund could experience substantial losses.

Credit risk is the possibility that a loss may occur due to the failure of the Commodity Broker and/or clearing house 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 Commodity Broker, when acting as the 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 Fund all assets of the Fund relating to domestic futures trading. The Commodity Broker is not allowed to commingle such assets with other assets of the Commodity Broker. In addition, CFTC regulations also require the Commodity Broker to hold in a secure account assets of the Fund related to foreign futures trading. The Fund’s risk of loss in the event of counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and not represented by the futures contract or notional amounts of the instruments.

The Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has 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.

 

 

Note 4 – Service Providers and Related Party Agreements

The Trustee

Under the Trust Agreement, Wilmington Trust Company, the trustee of the Trust and the Fund (the “Trustee”), has the power and authority to execute and file certificates as required by the Delaware Statutory Trust Act and to accept service of process on the Fund in the State of Delaware. The Managing Owner has the exclusive management and control of all aspects of the business of the

10


 

Trust and the Fund. The Trustee will serve in that capacity until such time as the Managing Owner removes the Trustee or the Trustee resigns and a successor is appointed by the Managing Owner. 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 Managing Owner

The Managing Owner serves as the Fund’s commodity pool operator, commodity trading advisor and managing owner. The Fund pays the Managing Owner a management fee, monthly in arrears, in an amount equal to 0.75% per annum of the daily NAV of the Fund (the “Management Fee”). The Fund, for cash management purposes, invests in money market mutual funds and/or T-Bill ETFs that are managed by affiliates of the Managing Owner. The indirect portion of the management fee that the Fund incurs through such investments is in addition to the Management Fee paid to the Managing Owner. The Managing Owner has contractually agreed to waive indefinitely the fees that it receives in an amount equal to the indirect management fees that the Fund incurs through its investments in affiliated money market mutual funds and/or affiliated T-Bill ETFs. The Managing Owner may terminate this fee waiver on 60 days notice.

The Managing Owner waived fees of $29,310 and $3,817 for the three months ended March 31, 2020 and 2019, respectively.

The Distributor

Invesco Distributors, Inc. (the “Distributor”) provides certain distribution services to the Fund. Pursuant to the Distribution Services Agreement among the Managing Owner, the Fund and the Distributor, the Distributor assists the Managing Owner and the Fund’s administrator, The Bank of New York Mellon, with certain functions and duties relating to distribution and marketing services to the Fund including reviewing and approving marketing materials.

The Managing Owner pays the Distributor a distribution fee out of the Management Fee.

The Commodity Broker

Morgan Stanley & Co. LLC, a Delaware limited liability company, serves as the Fund’s futures clearing broker (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.  

A variety of executing brokers execute futures transactions on behalf of the Fund. Such executing brokers give-up all such transactions to the Commodity Broker. In its capacity as clearing broker, the Commodity Broker may execute or receive transactions executed by others and clears all of the Fund’s futures transactions and performs certain administrative and custodial services for the Fund. The Commodity Broker is responsible, among other things, for providing periodic accountings of all dealings and actions taken by the Trust on behalf of the Fund during the reporting period, together with an accounting of all securities, cash or other indebtedness or obligations held by it or its nominees for or on behalf of the Fund.

The Administrator, Custodian and Transfer Agent

The Bank of New York Mellon (the “Administrator”, “Custodian” and “Transfer Agent”) is the administrator, custodian and transfer agent of the Fund. The Fund and the Administrator have entered into separate administrative and accounting, 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 (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Creation Units, NAV calculations, accounting and other fund administrative services. The Administrator maintains certain financial books and records, including: Creation Unit creation and redemption 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 the Commodity Broker. The Managing Owner pays the Administrator for its services out of the Management Fee.

Index Sponsor

The Managing Owner, on behalf of the Fund, has appointed DWS Investment Management Americas, Inc. to serve as the index sponsor (the “Index Sponsor”). The Index Sponsor calculates and publishes the daily index levels and the indicative intraday index levels. Additionally, the Index Sponsor also calculates the indicative value per Share of the Fund throughout each business day.

The Managing Owner pays the Index Sponsor a licensing fee and an index services fee out of the Management Fee for performing its duties.

 

 

Note 5 - Deposits with Commodity Broker and Custodian

The Fund defines cash as cash held by the Custodian.  There were no cash equivalents held by the Fund as of March 31, 2020 and December 31, 2019.

11


 

The Fund may deposit cash, United States Treasury Obligations, T-Bill ETFs and money market mutual funds with the Commodity Broker as margin, to the extent