UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(A Series of Invesco DB US Dollar Index Trust)
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
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).
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 |
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Accelerated Filer |
☐ |
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Smaller reporting company |
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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
Indicate the number of outstanding Shares as of June 30, 2024:
INVESCO DB US DOLLAR INDEX BEARISH FUND
(A SERIES OF INVESCO DB US DOLLAR INDEX TRUST)
QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
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Page |
PART I. |
1 |
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ITEM 1. |
1 |
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10 |
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ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
ITEM 3. |
30 |
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ITEM 4. |
32 |
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PART II. |
33 |
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Item 1. |
33 |
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Item 1A. |
33 |
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Item 2. |
33 |
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Item 3. |
33 |
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Item 4. |
33 |
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Item 5. |
33 |
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Item 6. |
34 |
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35 |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Invesco DB US Dollar Index Bearish Fund
Statements of Financial Condition
June 30, 2024 and December 31, 2023
(Unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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United States Treasury Obligations, at value (cost $ |
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$ |
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$ |
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Affiliated investments, at value and cost |
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Other investments: |
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Variation margin receivable - Currency Futures Contracts |
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— |
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Receivable for: |
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Dividends from affiliates |
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Total assets |
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$ |
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$ |
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Liabilities |
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Other investments: |
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Variation margin payable - Currency Futures Contracts |
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$ |
— |
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$ |
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Payable for: |
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Management fees |
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Brokerage commissions and fees |
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Total liabilities |
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$ |
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$ |
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Equity |
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Shareholder's equity—General Shares |
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Shareholders' equity—Shares |
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Total shareholders' equity |
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Total liabilities and equity |
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$ |
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$ |
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General Shares outstanding |
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Shares outstanding |
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Net asset value per share |
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$ |
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$ |
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Market value per share |
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$ |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
1
Invesco DB US Dollar Index Bearish Fund
Schedule of Investments
June 30, 2024
(Unaudited)
Description |
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Percentage of |
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Value |
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Principal Value |
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United States Treasury Obligations(a) |
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U.S. Treasury Bills, |
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% |
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$ |
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$ |
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U.S. Treasury Bills, |
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U.S. Treasury Bills, |
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U.S. Treasury Bills, |
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Total United States Treasury Obligations (cost $ |
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% |
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$ |
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Affiliated Investments |
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Shares |
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Money Market Mutual Fund |
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Invesco Government & Agency Portfolio, Institutional |
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% |
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$ |
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Total Investments in Securities (cost $ |
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% |
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$ |
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Open Currency Futures Contracts |
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Number of Contracts |
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Expiration Date |
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Notional |
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Value(e) |
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Unrealized |
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Short Futures Contracts |
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ICE U.S. Dollar Index |
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$ |
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$ |
( |
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$ |
( |
) |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
2
Invesco DB US Dollar Index Bearish Fund
Schedule of Investments
December 31, 2023
(Unaudited)
Description |
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Percentage of |
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Value |
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Principal Value |
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United States Treasury Obligations(a) |
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U.S. Treasury Bills, |
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% |
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$ |
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$ |
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U.S. Treasury Bills, |
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U.S. Treasury Bills, |
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U.S. Treasury Bills, |
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Total United States Treasury Obligations (cost $ |
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% |
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$ |
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Affiliated Investments |
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Shares |
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Money Market Mutual Fund |
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Invesco Government & Agency Portfolio, Institutional |
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% |
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$ |
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Total Investments in Securities (cost $ |
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% |
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$ |
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Open Currency Futures Contracts |
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Number of Contracts |
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Expiration Date |
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Notional |
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Value(e) |
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Unrealized |
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Short Futures Contracts |
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ICE U.S. Dollar Index |
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$ |
( |
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$ |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
3
Invesco DB US Dollar Index Bearish Fund
Statements of Income and Expenses
For the Three and Six Months Ended June 30, 2024 and 2023
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Income |
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Interest Income |
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$ |
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$ |
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$ |
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$ |
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Dividends from Affiliates |
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Total Income |
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Expenses |
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Management Fees |
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Brokerage Commissions and Fees |
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Interest Expense |
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Total Expenses |
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Less: Waivers |
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( |
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( |
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( |
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( |
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Net Expenses |
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Net Investment Income (Loss) |
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Net Realized and Net Change in Unrealized Gain (Loss) |
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Net Realized Gain (Loss) from |
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Currency Futures Contracts |
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( |
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( |
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( |
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Net Realized Gain (Loss) |
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( |
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( |
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( |
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Net Change in Unrealized Gain (Loss) from |
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United States Treasury Obligations |
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( |
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( |
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( |
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Currency Futures Contracts |
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( |
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( |
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( |
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Net Change in Unrealized Gain (Loss) |
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( |
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( |
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( |
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Net Realized and Net Change in Unrealized |
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( |
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( |
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( |
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( |
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Net Income (Loss) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
4
Invesco DB US Dollar Index Bearish Fund
Statement of Changes in Shareholders’ Equity
For the Three Months Ended June 30, 2024
(Unaudited)
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General Shares |
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Shares |
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Total |
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Shares |
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Total |
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Shares |
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Total |
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Shareholders' |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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Redemption of Shares |
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( |
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( |
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( |
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Net Increase (Decrease) due to Share Transactions |
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( |
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( |
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( |
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Net Income (Loss) |
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Net Investment Income (Loss) |
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Net Realized Gain (Loss) on United States Treasury |
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( |
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( |
) |
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( |
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Net Change in Unrealized Gain (Loss) on United States |
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Net Income (Loss) |
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( |
) |
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( |
) |
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( |
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Net Change in Shareholders' Equity |
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— |
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( |
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( |
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( |
) |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
5
Invesco DB US Dollar Index Bearish Fund
Statement of Changes in Shareholders’ Equity
For the Three Months Ended June 30, 2023
(Unaudited)
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General Shares |
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Shares |
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Total |
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Shares |
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Total |
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Shares |
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Total |
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Shareholders' |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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Redemption of Shares |
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( |
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( |
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( |
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Net Increase (Decrease) due to Share Transactions |
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( |
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( |
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( |
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Net Income (Loss) |
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Net Investment Income (Loss) |
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Net Realized Gain (Loss) on United States Treasury |
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Net Change in Unrealized Gain (Loss) on United States |
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( |
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( |
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( |
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Net Income (Loss) |
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( |
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( |
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Net Change in Shareholders' Equity |
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— |
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( |
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( |
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( |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements
6
Invesco DB US Dollar Index Bearish Fund
Statement of Changes in Shareholders’ Equity
For the Six Months Ended June 30, 2024
(Unaudited)
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General Shares |
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Shares |
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Total |
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Shares |
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Total |
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Shares |
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Total |
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Shareholders' |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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Redemption of Shares |
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( |
) |
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( |
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( |
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Net Increase (Decrease) due to Share Transactions |
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( |
) |
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( |
) |
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( |
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Net Income (Loss) |
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Net Investment Income (Loss) |
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Net Realized Gain (Loss) on United States Treasury |
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( |
) |
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( |
) |
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( |
) |
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Net Change in Unrealized Gain (Loss) on United States |
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( |
) |
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( |
) |
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( |
) |
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Net Income (Loss) |
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( |
) |
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( |
) |
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( |
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Net Change in Shareholders' Equity |
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— |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements
7
Invesco DB US Dollar Index Bearish Fund
Statement of Changes in Shareholders’ Equity
For the Six Months Ended June 30, 2023
(Unaudited)
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General Shares |
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Shares |
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Total |
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Shares |
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Total |
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Shares |
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Total |
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Shareholders' |
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|||||
Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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Redemption of Shares |
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( |
) |
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( |
) |
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( |
) |
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Net Increase (Decrease) due to Share Transactions |
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( |
) |
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( |
) |
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( |
) |
||
Net Income (Loss) |
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Net Investment Income (Loss) |
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Net Realized Gain (Loss) on United States Treasury |
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( |
) |
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( |
) |
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( |
) |
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Net Change in Unrealized Gain (Loss) on United States |
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( |
) |
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( |
) |
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( |
) |
||
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Change in Shareholders' Equity |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|||||
See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements
8
Invesco DB US Dollar Index Bearish Fund
Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net Income (Loss) |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating |
|
|
|
|
|
|
||
Cost of securities purchased |
|
|
( |
) |
|
|
( |
) |
Proceeds from securities sold and matured |
|
|
|
|
|
|
||
Cost of affiliated investments purchased |
|
|
( |
) |
|
|
( |
) |
Proceeds from affiliated investments sold |
|
|
|
|
|
|
||
Net accretion of discount on United States Treasury Obligations |
|
|
( |
) |
|
|
( |
) |
Net change in unrealized (gain) loss on United States Treasury Obligations and |
|
|
|
|
|
|
||
Change in operating assets and liabilities: |
|
|
|
|
|
|
||
Variation margin - Currency Futures Contracts |
|
|
( |
) |
|
|
( |
) |
Dividends from affiliates |
|
|
|
|
|
|
||
Management fees |
|
|
( |
) |
|
|
( |
) |
Brokerage commissions and fees |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from purchases of Shares |
|
|
|
|
|
|
||
Redemption of Shares |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
( |
) |
Net change in cash |
|
|
|
|
|
( |
) |
|
Cash at beginning of period |
|
|
|
|
|
|
||
Cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
9
Invesco DB US Dollar Index Bearish Fund
Notes to Unaudited Financial Statements
June 30, 2024
Note 1 – Organization
Invesco DB US Dollar Index Bearish Fund (the “Fund”), a separate series of Invesco DB US Dollar Index Trust (the “Trust”), was formed as a Delaware statutory trust 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 has served as the managing owner (the “Managing Owner”), commodity pool operator and commodity trading advisor of the Trust and the Fund since
The Fund establishes short positions in certain futures contracts (the “DX Contracts”) with a view to tracking the changes, whether positive or negative, in the level of the Deutsche Bank Short USD Currency Portfolio Index–Excess ReturnTM (the “Index”) over time. The performance of the Fund also is intended to reflect 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 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
If the Managing Owner determines in its commercially reasonable judgment that it has become impracticable, including in scenarios wherein the futures market for a DX Contract is thinly traded, or inefficient for any reason for the Fund to gain full or partial exposure to a DX Contract, the Fund may invest in:
if, in the commercially reasonable judgment of the Managing Owner, such an instrument tends to exhibit trading prices that correlate with the DX Contract.
The Index is calculated to reflect the changes in market value over time, whether positive or negative, of short positions in 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 Index reflects the changes in market value over time, whether positive or negative, of the DX Contracts which expire during the months of March, June, September and December. The Fund seeks to track the Index by establishing short positions in DX Contracts. DX Contracts are linked to the six underlying currencies (the “Index Currencies”) of the ICE U.S. Dollar Index (USDX®) (the “USDX®”). The Index Currencies are the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. The notional amounts of the Index Currencies included in the USDX® reflect a geometric weighted average of the change in the Index Currencies’ exchange rates against the U.S. dollar relative to March 1973. March 1973 was chosen as a base period of the USDX® because it represents a significant milestone in foreign exchange history when the world’s major trading nations allowed their currencies to float freely against each other.
The Fund offers common units of beneficial interest (the “Shares”) only to certain eligible financial institutions (the “Authorized Participants”) in
This Quarterly Report (the “Report”) covers the three and six months ended June 30, 2024 and 2023. 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.
10
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, 2023, as filed with the SEC on February 23, 2024.
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 Fund's shareholders ("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.
11
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 and six months ended June 30, 2024 and 2023, 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 $
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, 2020.
J. Currency Futures Contracts
The Fund utilizes derivative instruments to achieve its investment objective. A currency futures contract is an agreement between counterparties to purchase or sell a specified underlying currency 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 currency 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 currency 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 currency 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.
12
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 counterparty to the transactions. The Commodity Broker, when acting as the Fund’s futures commission merchant (“FCM”) in accepting orders for the purchase or sale of domestic futures contracts, is required by Commodity Futures Trading Commission (the “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 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
The Managing Owner waived fees of $
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 an FCM 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.
13
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 Deutsche Bank Securities, 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
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 permissible under CFTC rules. 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 represents the Fund’s overall equity in its broker trading account. To meet the Fund’s maintenance margin requirements, the Fund holds United States Treasury Obligations with the Commodity Broker. The Fund transfers cash to the Commodity Broker to satisfy variation margin requirements. The Fund earns interest on any excess cash deposited with the Commodity Broker and incurs interest expense on any deficit balance with the Commodity Broker.
The brokerage agreement with the Commodity Broker provides for the net settlement of all financial instruments covered by the agreement in the event of default or termination of any one contract. The Managing Owner will utilize any excess cash held at the Commodity Broker to offset any realized losses incurred in the currency futures contracts, if available. To the extent that any excess cash held at the Commodity Broker is not adequate to cover any realized losses, a portion of the United States Treasury Obligations and T-Bill ETFs, if any, on deposit with the Commodity Broker will be sold to make additional cash available. For financial reporting purposes, the Fund offsets financial assets and financial liabilities that are subject to legally enforceable netting arrangements.
The Fund’s remaining cash, United States Treasury Obligations, T-Bill ETFs and money market mutual fund holdings are on deposit with the Custodian. The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the Custodian. The Fund incurs interest expense on any overdraft balance with the Custodian. Such balances, if any at period-end, are shown on the Statements of Financial Condition under the payable caption Due to custodian.
Because the Fund’s assets are maintained with the Commodity Broker and Custodian, the distress, impairment or failure of the Commodity Broker or Custodian could result in the loss of or delay in access to Fund assets.
14
Note 6 – Additional Valuation Information
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. U.S. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods or market conditions may result in transfers in or out of an investment’s assigned level:
Level 1: Prices are determined using quoted prices in an active market for identical assets.
Level 2: Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.
Level 3: Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.
The levels assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. 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.
The following is a summary of the tiered valuation input levels as of June 30, 2024:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Investments in Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States Treasury Obligations |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Money Market Mutual Fund |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total Investments in Securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other Investments—Liabilities (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Currency Futures Contracts |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Total Investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
The following is a summary of the tiered valuation input levels as of December 31, 2023:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Investments in Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States Treasury Obligations |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Money Market Mutual Fund |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total Investments in Securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other Investments—Assets (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Currency Futures Contracts |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total Investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
15
Note 7 – Derivative Instruments
The Fair Value of Derivative Instruments is as follows:
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
Risk Exposure/Derivative Type (a) |
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
Currency risk |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Currency Futures Contracts |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
The Effect of Derivative Instruments on the Statements of Income and Expenses is as follows:
|
|
|
|
For the Three Months Ended |
|
|||||
|
|
Location of Gain (Loss) on Derivatives |
|
June 30, |
|
|||||
Risk Exposure/Derivative Type |
|
Recognized in Income |
|
2024 |
|
|
2023 |
|
||
Currency risk |
|
|
|
|
|
|
|
|
||
Currency Futures Contracts |
|
Net Realized Gain (Loss) |
|
$ |
( |
) |
|
$ |
|
|
|
|
Net Change in Unrealized Gain (Loss) |
|
|
|
|
|
( |
) |
|
Total |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
For the Six Months Ended |
|
|||||
|
|
Location of Gain (Loss) on Derivatives |
|
June 30, |
|
|||||
Risk Exposure/Derivative Type |
|
Recognized in Income |
|
2024 |
|
|
2023 |
|
||
Currency risk |
|
|
|
|
|
|
|
|
||
Currency Futures Contracts |
|
Net Realized Gain (Loss) |
|
$ |
||||||