Item 1. Financial Statements
Invesco CurrencyShares® Australian Dollar Trust
Statements of Financial Condition
March 31, 2023 and December 31, 2022
(Unaudited)
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March 31, 2023 |
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December 31, 2022 |
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Assets |
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Australian Dollar deposits, interest bearing |
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$ |
76,236,369 |
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$ |
87,260,857 |
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Australian Dollar deposits, non-interest bearing |
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— |
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931 |
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Receivable from accrued interest |
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80,091 |
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58,317 |
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Total Assets |
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$ |
76,316,460 |
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$ |
87,320,105 |
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Liabilities |
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Redemption Payable |
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$ |
— |
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$ |
6,712,374 |
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Accrued Sponsor’s fee |
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25,909 |
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26,450 |
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Total Liabilities |
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25,909 |
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6,738,824 |
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Commitments and Contingent Liabilities (Note 8) |
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Redeemable Capital Shares and Shareholders’ Equity |
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Redeemable Capital Shares, at redemption value, no par value,
1,150,000 and 1,200,000 issued and
outstanding, respectively |
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76,290,551 |
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80,581,281 |
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Shareholders’ Equity: |
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Retained Earnings |
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— |
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— |
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Total Liabilities, Redeemable Capital Shares and Shareholders’ Equity |
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$ |
76,316,460 |
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$ |
87,320,105 |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
1
Invesco CurrencyShares® Australian Dollar Trust
Statements of Comprehensive Income
For the Three Months Ended March 31, 2023 and 2022
(Unaudited)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Income |
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Interest Income |
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$ |
217,271 |
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$ |
— |
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Total Income |
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217,271 |
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— |
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Expenses |
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Sponsor’s fee |
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(77,711 |
) |
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(94,045 |
) |
Total Expenses |
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(77,711 |
) |
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(94,045 |
) |
Net Comprehensive Income (Loss) |
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$ |
139,560 |
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$ |
(94,045 |
) |
Basic and Diluted Earnings (Loss) per Share |
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$ |
0.12 |
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$ |
(0.07 |
) |
Weighted-average Shares Outstanding |
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1,161,667 |
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1,327,222 |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
2
Invesco CurrencyShares® Australian Dollar Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Three Months Ended March 31, 2023
(Unaudited)
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Retained Earnings |
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Total Shareholders' Equity |
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Shares |
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Redeemable Capital Shares |
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Balance at December 31, 2022 |
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$ |
— |
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$ |
— |
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1,200,000 |
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$ |
80,581,281 |
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Purchases of Shares |
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— |
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— |
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50,000 |
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3,410,985 |
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Redemption of Shares |
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— |
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— |
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(100,000 |
) |
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(6,760,652 |
) |
Net Increase (Decrease) due to Share Transactions |
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— |
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— |
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(50,000 |
) |
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(3,349,667 |
) |
Distributions |
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(117,945 |
) |
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(117,945 |
) |
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— |
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Net Comprehensive Income (Loss) |
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139,560 |
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139,560 |
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— |
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Adjustment of Redeemable Capital Shares to
Redemption Value related to Retained Earnings |
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(21,615 |
) |
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(21,615 |
) |
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21,615 |
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Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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(962,678 |
) |
Balance at March 31, 2023 |
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$ |
— |
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$ |
— |
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1,150,000 |
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$ |
76,290,551 |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
3
Invesco CurrencyShares® Australian Dollar Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Three Months Ended March 31, 2022
(Unaudited)
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Retained Earnings |
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Total Shareholders' Equity |
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Shares |
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Redeemable Capital Shares |
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Balance at December 31, 2021 |
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$ |
— |
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$ |
— |
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1,350,000 |
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$ |
97,402,356 |
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Purchases of Shares |
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— |
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— |
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50,000 |
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3,583,297 |
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Redemption of Shares |
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— |
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— |
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(50,000 |
) |
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(3,528,348 |
) |
Net Increase (Decrease) due to Share Transactions |
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— |
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— |
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— |
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54,949 |
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Net Comprehensive Income (Loss) |
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(94,045 |
) |
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(94,045 |
) |
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— |
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Adjustment of Redeemable Capital Shares to
Redemption Value related to Retained Earnings |
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94,045 |
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94,045 |
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(94,045 |
) |
Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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3,141,434 |
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Balance at March 31, 2022 |
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$ |
— |
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$ |
— |
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1,350,000 |
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$ |
100,504,694 |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
4
Invesco CurrencyShares® Australian Dollar Trust
Statements of Cash Flows
For the Three Months Ended March 31, 2023 and 2022
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net Comprehensive Income (Loss) |
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$ |
139,560 |
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$ |
(94,045 |
) |
Adjustments to reconcile net comprehensive
income (loss) to net cash provided by (used in) operating activities: |
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Change in operating assets and liabilities: |
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Receivable from accrued interest |
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(21,774 |
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— |
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Accrued Sponsor’s fee |
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(541 |
) |
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(5,569 |
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Net cash provided by (used in) operating activities |
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117,245 |
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(99,614 |
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Cash flows from financing activities |
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Distributions paid to shareholders |
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(117,945 |
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— |
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Proceeds from purchases of redeemable capital Shares |
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3,410,985 |
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3,583,297 |
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Redemptions of redeemable capital Shares |
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(13,464,109 |
) |
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(3,528,348 |
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Net cash provided by (used in) financing activities |
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(10,171,069 |
) |
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54,949 |
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Effect of exchange rate on cash |
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(971,595 |
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3,141,434 |
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Net change in cash |
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(11,025,419 |
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3,096,769 |
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Cash at beginning of period |
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87,261,788 |
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97,441,463 |
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Cash at end of period |
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$ |
76,236,369 |
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$ |
100,538,232 |
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
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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 CurrencyShares® Australian Dollar Trust
Notes to Unaudited Financial Statements
March 31, 2023
Note 1 – Background
On September 28, 2017, Guggenheim Capital, LLC (“Guggenheim”) and Invesco Ltd. entered into a Transaction Agreement (the “Transaction Agreement”), pursuant to which Guggenheim agreed to transfer all of the membership interests of Guggenheim Specialized Products, LLC (the “Sponsor”) to Invesco Capital Management LLC (“Invesco Capital Management”).
The Transaction Agreement was consummated on April 6, 2018 (the “Closing”) and immediately following the Closing, Invesco Capital Management changed the name of the Sponsor to Invesco Specialized Products, LLC.
Note 2 – Organization
The Invesco CurrencyShares® Australian Dollar Trust (the “Trust”) was formed under the laws of the State of New York on June 8, 2006 when the Sponsor deposited 100 Australian Dollars in the Trust’s primary deposit account held by JPMorgan Chase Bank, N.A., London Branch (the “Depository”). The Sponsor is a Delaware limited liability company whose sole member is Invesco Capital Management. The Trust has an unlimited number of shares authorized for issuance.
The investment objective of the Trust is for the Trust’s shares (the “Shares”) to reflect the price in U.S. Dollars (“USD”) of the Australian Dollar plus accrued interest, if any, less the Trust’s expenses and liabilities. The Shares are intended to provide investors with a simple, cost-effective means of gaining investment benefits similar to those of holding Australian Dollars. The Trust’s assets primarily consist of Australian Dollars on demand deposit in two deposit accounts maintained by the Depository: a primary deposit account which may earn interest and a secondary deposit account which does not earn interest. The secondary deposit account is used to account for any interest that may be received and paid out on creations and redemptions of blocks of 50,000 Shares (“Baskets”). The secondary account is also used to account for interest earned, if any, on the primary deposit account, pay Trust expenses and distribute any excess interest to holders of Shares (“Shareholders”) on a monthly basis.
This Quarterly Report (the “Report”) covers the three months ended March 31, 2023 and 2022. The accompanying unaudited financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trust’s financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 24, 2023.
Note 3 – Summary of Significant Accounting Policies
The financial statements of the Trust have been prepared using U.S. GAAP.
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 Trust 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.Foreign Currency Translation
For Net Asset Value (“NAV”) calculation purposes, Australian Dollar deposits (cash) are translated at the Closing Spot Rate, which is the Australian Dollar/USD exchange rate as determined and published by The WM Company at 4:00 PM (London time / London fixing) on each day that NYSE Arca, Inc. (“NYSE Arca”) is open for regular trading.
The Trust maintains its books and records in Australian Dollars. For financial statement reporting purposes, the U.S. Dollar is the reporting currency. As a result, the financial records of the Trust are translated from Australian Dollars to USD. The Closing Spot Rate on the last day of the period is used for translation in the statements of financial condition. The average Closing Spot Rate for the period is used for translation in the statements of comprehensive income and the statements of cash flows. The redeemable capital Shares are adjusted to redemption value and these adjustments are recorded against retained earnings.
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Interest on the primary deposit account, if any, accrues daily as earned and is received or paid on a monthly basis. Any interest below zero for the period is reflected as interest expense on currency deposits. The Depository may change the rate at which interest accrues, including reducing the interest rate to zero or below zero, based upon changes in market conditions or based on the Depository’s liquidity needs.
To the extent that the interest earned by the Trust, if any, exceeds the sum of the Sponsor’s fee for the prior month plus other Trust expenses, if any, the Trust will distribute, as a dividend (herein referred to as dividends or distributions), the excess interest earned in Australian Dollars effective on the first business day of the subsequent month. The Trustee (as defined below) will direct that the excess Australian Dollars be converted into USD at the prevailing market rate and the Trustee will distribute the USD as promptly as practicable to Shareholders on a pro-rata basis (in accordance with the number of Shares that they own).
The table below shows distributions per Share and in total for the periods presented:
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Distributions per Share |
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$ |
0.09 |
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$ |
— |
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Distributions paid |
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$ |
117,945 |
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$ |
— |
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An income distribution for the month ended March 31, 2023 was paid on April 11, 2023 to holders of record as of April 4, 2023 at a rate of $0.04697 per Share and a total distribution of $54,016.
F.Routine Operational, Administrative and Other Ordinary Expenses
The Sponsor is responsible for all routine operational, administrative and other ordinary expenses of the Trust, including, but not limited to, the Trustee’s monthly fee, NYSE Arca listing fees, SEC registration fees, typical maintenance and transaction fees of the Depository, printing and mailing costs, audit fees and expenses, up to $100,000 per year in legal fees and expenses, and applicable license fees. The Trust does not reimburse the Sponsor for the routine operational, administrative and other ordinary expenses of the Trust. Accordingly, such expenses are not reflected in the Statements of Comprehensive Income of the Trust.
G.Non-Recurring Fees and Expenses
In certain cases, the Trust will pay for some expenses in addition to the Sponsor’s fee. These exceptions include expenses not assumed by the Sponsor (i.e., expenses other than those identified in the preceding paragraph), expenses resulting from negative interest rates, taxes and governmental charges, expenses and costs of any extraordinary services performed by the Trustee or the Sponsor on behalf of the Trust or action taken by the Trustee or the Sponsor to protect the Trust or the interests of Shareholders, indemnification of the Sponsor under the Depositary Trust Agreement, audit fees and legal expenses in excess of $100,000 per year. The only expense of the Trust during the three months ended March 31, 2023 and 2022 was the Sponsor’s fee.
The Trust is treated as a “grantor trust” for federal income tax purposes and, therefore, no provision for federal income taxes is required. Interest, gains and losses are passed through to the Shareholders.
Shareholders generally will be treated, for U.S. federal income tax purposes, as if they directly owned a pro-rata share of the assets held in the Trust. Shareholders also will be treated as if they directly received their respective pro-rata portion of the Trust’s income, if any, and as if they directly incurred their respective pro-rata portion of the Trust’s expenses. The acquisition of Shares by a U.S. Shareholder as part of a creation of a Basket will not be a taxable event to the Shareholder.
The Sponsor’s fee accrues daily and is payable monthly. For U.S. federal income tax purposes, an accrual-basis U.S. Shareholder generally will be required to take into account as an expense its allocable portion of the USD-equivalent of the amount of the Sponsor’s fee that is accrued on each day, with such USD-equivalent being determined by the currency exchange rate that is in effect on the respective day. To the extent that the currency exchange rate on the date of payment of the accrued amount of the Sponsor’s fee differs from the currency exchange rate in effect on the day of accrual, the U.S. Shareholder will recognize a currency gain or loss for U.S. federal income tax purposes.
The Trust does not expect to generate taxable income except for interest income (if any) and gain (if any) upon the sale of Australian Dollars. A non-U.S. Shareholder generally will not be subject to U.S. federal income tax with respect to gain recognized upon the sale or other disposition of Shares, or upon the sale of Australian Dollars by the Trust, unless: (1) the non-U.S. Shareholder is an individual and is present in the United States for 183 days or more during the taxable year of the sale or other disposition, and the gain is treated as being from United States sources; or (2) the gain is effectively connected with the conduct by the non-U.S. Shareholder of a trade or business in the United States.
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A non-U.S. Shareholder’s portion of any interest income earned by the Trust generally will not be subject to U.S. federal income tax unless the Shares owned by such non-U.S. Shareholder are effectively connected with the conduct by the non-U.S. Shareholder of a trade or business in the United States.
Note 4 – Australian Dollar Deposits
Australian Dollar principal deposits are held in an Australian Dollar-denominated, interest-bearing demand account. The interest rate in effect as of March 31, 2023 was an annual nominal rate of 1.22%. For the three months ended March 31, 2023, there were Australian Dollar principal deposits of 4,949,033 and Australian Dollar principal redemptions of 9,898,066, resulting in an ending Australian Dollar principal balance of 113,827,761. This equates to 76,236,369 USD. For the year ended December 31, 2022, there were Australian Dollar principal deposits of 34,667,570, Australian Dollar principal redemptions of 49,506,491 and Australian Dollar withdrawals (to pay expenses) of 407,222, resulting in an ending Australian Dollar principal balance of 118,776,794. This equates to 80,548,483 USD (which includes USD redemptions payable).
Net interest, if any, associated with creation and redemption activity is held in an Australian Dollar-denominated non-interest-bearing account, and any balance is distributed in full as part of the monthly income distributions, if any.
Note 5 – Concentration Risk
All of the Trust’s assets are Australian Dollars, which creates a concentration risk associated with fluctuations in the price of the Australian Dollar. Accordingly, a decline in the Australian Dollar to USD exchange rate will have an adverse effect on the value of the Shares. Factors that may have the effect of causing a decline in the price of the Australian Dollar include national debt levels and trade deficits, domestic and foreign inflation rates, domestic and foreign interest rates, investment and trading activities of institutions and global or regional political, economic or financial events and situations. Substantial sales of Australian Dollars by the official sector (central banks, other governmental agencies and related institutions that buy, sell and hold Australian Dollars as part of their reserve assets) could adversely affect an investment in the Shares.
All of the Trust’s Australian Dollars are held by the Depository. Accordingly, a risk associated with the concentration of the Trust’s assets in accounts held by a single financial institution exists and increases the potential for loss by the Trust and the Trust’s beneficiaries in the event that the Depository becomes insolvent.
Note 6 – Service Providers and Related Party Agreements
The Trustee
The Bank of New York Mellon (the “Trustee”), a banking corporation with trust powers organized under the laws of the State of New York, serves as the Trustee. The Trustee is responsible for the day-to-day administration of the Trust, including keeping the Trust’s operational records.
The Sponsor
The Sponsor of the Trust generally oversees the performance of the Trustee and the Trust’s principal service providers. The Sponsor is Invesco Specialized Products, LLC, a Delaware limited liability company and a related party of the Trust. The Trust pays the Sponsor a Sponsor’s fee, which accrues daily at an annual nominal rate of 0.40% of the Australian Dollars in the Trust (including all unpaid interest but excluding unpaid fees, each as accrued through the immediately preceding day) and is paid monthly.
Note 7 – Share Purchases and Redemptions
Shares are issued and redeemed continuously in Baskets in exchange for Australian Dollars. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. Only Authorized Participants (as defined below) may place orders to create and redeem Baskets. An Authorized Participant is a Depository Trust Company (“DTC”) participant that is a registered broker-dealer or other institution eligible to settle securities transactions through the book-entry facilities of the DTC and which has entered into a contractual arrangement with the Trust and the Sponsor governing, among other matters, the creation and redemption process. Authorized Participants may redeem their Shares at any time in Baskets.
Due to expected continuing creations and redemptions of Baskets and the two-day period for settlement of each creation or redemption, the Trust reflects Shares created as a receivable on the trade date. Shares redeemed are reflected as a liability on the trade date. Outstanding Shares are reflected at redemption value, which is the NAV per Share at the period end date. Adjustments to redeemable capital Shares at redemption value are recorded directly to redeemable capital shares and retained earnings.
The Trustee calculates the Trust’s NAV each business day. To calculate the NAV, the Trustee subtracts the Sponsor’s accrued fee through the previous day from the Australian Dollars held by the Trust (including all unpaid interest, if any, accrued through the preceding day) and calculates the value of the Australian Dollars in USD based upon the Closing Spot Rate. If, on a particular evaluation day, the Closing Spot Rate has not been determined and announced by 6:00 PM (London time), then the most recent Closing Spot Rate will be used to determine the NAV of the Trust unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate to use as the basis for the valuation. If the Trustee and the Sponsor determine that the most recent Closing Spot Rate is not an appropriate basis for valuation of the Trust’s Australian Dollars, they will determine an alternative basis for the
8
valuation. The Trustee also determines the NAV per Share, which equals the NAV of the Trust, divided by the number of outstanding Shares. Shares deliverable under a purchase order are considered outstanding for purposes of determining NAV per Share; Shares deliverable under a redemption order are not considered outstanding for this purpose.
Note 8 – Commitments and Contingencies
The Trust’s organizational documents provide for the Trust to indemnify the Sponsor and any affiliate of the Sponsor that provides services to the Trust to the maximum extent permitted by applicable law, subject to certain exceptions for disqualifying conduct by the Sponsor or such an affiliate. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Further, the Trust has not had prior claims or losses pursuant to these contracts. Accordingly, the Sponsor expects the risk of loss to be remote.
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Information
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate” and other similar words. Forward-looking statements are based upon our current expectations and beliefs concerning future developments and their potential effects on us. Such forward-looking statements are not guarantees of future performance. Various factors may cause our actual results to differ materially from those expressed in our forward-looking statements. These factors include fluctuations in the price of the Australian Dollar, as the value of the Shares relates directly to the value of the Australian Dollars held by the Trust and price fluctuations could materially adversely affect an investment in the Shares. Readers are urged to review the “Risk Factors” section contained in the Trust’s most recent annual report on Form 10-K for a description of other risks and uncertainties that may affect an investment in the Shares.
Neither Invesco Specialized Products, LLC (the “Sponsor”) nor any other person assumes responsibility for the accuracy or completeness of forward-looking statements contained in this report. The forward-looking statements are made as of the date of this report, and will not be revised or updated to reflect actual results or changes in the Sponsor’s expectations or predictions.
Overview/Introduction
The Invesco CurrencyShares® Australian Dollar Trust (the “Trust”) is a grantor trust that was formed on June 8, 2006. The Shares began trading on the New York Stock Exchange under the ticker symbol “FXA” on June 26, 2006. The primary listing of the Shares was transferred to NYSE Arca, Inc. (“NYSE Arca”) on October 30, 2007. The Trust issues shares (the “Shares”) in blocks of 50,000 (a “Basket”) in exchange for deposits of Australian Dollars and distributes Australian Dollars in connection with the redemption of Baskets.
The investment objective of the Trust is for the Shares to reflect the price in USD of the Australian Dollar plus accrued interest, if any, less the expenses of the Trust’s operations. The Shares are intended to offer investors an opportunity to participate in the market for the Australian Dollar through an investment in securities. The Shares are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding the Australian Dollar. The Shares are bought and sold on NYSE Arca like any other exchange-listed security. The Shares are backed by the assets of the Trust, which does not hold or use derivative products. The Trust is a passive investment vehicle and does not have any officers, directors or employees. The Trust does not engage in any activities designed to obtain profit from, or ameliorate losses caused by, changes in the price of the Australian Dollar. Investing in the Shares does not insulate the investor from certain risks, including price volatility. The value of the holdings of the Trust is reported on the Trust’s website, www.invesco.com/etfs, each business day.
Definition of Net Asset Value
The Trustee calculates, and the Sponsor publishes, the Trust’s Net Asset Value (“NAV”) each business day. To calculate the NAV, the Trustee adds to the amount of Australian Dollars in the Trust at the end of the preceding day accrued but unpaid interest, if any, Australian Dollars receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor’s fee, Australian Dollars payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in USD based on the Australian Dollar/USD exchange rate as determined by The WM Company at 4:00 PM (London time / London fixing) (the “Closing Spot Rate”) on each day that NYSE Arca is open for regular trading. If, on a particular evaluation day, the Closing Spot Rate has not been determined and announced by 6:00 PM (London time), then the most recent Closing Spot Rate is used to determine the NAV of the Trust unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate to use as the basis for the valuation.
The Trustee also determines the NAV per Share, which equals the NAV of the Trust divided by the number of outstanding Shares. The NAV of the Trust and the NAV per Share are published by the Sponsor on each day that NYSE Arca is open for regular trading and are posted on the Trust’s website, www.invesco.com/etfs.
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Movements in the Price of the Australian Dollar
The investment objective of the Trust is for the Shares to reflect the price in USD of the Australian Dollar plus accrued interest, if any, less the expenses of the Trust’s operations. The Shares are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding Australian Dollars. Each outstanding Share represents a proportional interest in the Australian Dollars held by the Trust. The following chart provides recent trends on the price of the Australian Dollar. The chart illustrates movements in the price of the Australian Dollar in USD and is based on the Closing Spot Rate:
NAV per Share; Valuation of the Australian Dollar
The following chart illustrates the movement in the price of the Shares based on (1) NAV per Share, (2) the “bid” and “ask” midpoint offered on NYSE Arca and (3) the Closing Spot Rate, expressed as a multiple of 100 Australian Dollars:
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Liquidity and Capital Resources
The Trust does not have any material cash requirements as of the end of the latest fiscal period. The Sponsor is not aware of any known trends, demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, material changes to the Trust’s liquidity and capital resources needs. The Trust’s Depository, JPMorgan Chase Bank, N.A., London Branch, maintains two deposit accounts for the Trust, a primary deposit account that may earn interest and a secondary deposit account that does not earn interest. Interest on the primary deposit account, if any, accrues daily and is paid monthly. The interest rate in effect as of March 31, 2023 was an annual nominal rate of 1.22%. The following chart provides the daily rate paid by the Depository since March 31, 2018:
In exchange for a fee, the Sponsor bears most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s fee. Each month the Depository deposits into the secondary deposit account accrued but unpaid interest, if any, and the Trustee withdraws Australian Dollars from the secondary deposit account to pay the accrued Sponsor’s fee for the previous month plus other Trust expenses (including, without limitation, expenses resulting from negative interest rates), if any. When the interest deposited, if any, exceeds the sum of the Sponsor’s fee for the prior month plus other Trust expenses, if any, the Trustee converts the excess into USD at the prevailing market rate and distributes the USD as promptly as practicable to Shareholders on a pro-rata basis (in accordance with the number of Shares that they own). Distributions paid during the current reporting period follow (annualized yield reflects the estimated annual yield an investor would receive if a monthly distribution stayed the same for the entire year going forward, and is calculated by annualizing the monthly distribution and dividing
by the Trust NAV for the dates listed below):
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FXA Distribution History |
Date |
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Value |
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NAV |
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Yield |
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Annualized Yield |
1/3/2023 |
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$ |
0.02741 |
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$ |
67.15 |
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0.04% |
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0.48% |
2/1/2023 |
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$ |
0.03884 |
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$ |
69.79 |
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0.06% |
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0.66% |
3/1/2023 |
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$ |
0.03391 |
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$ |
66.78 |
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0.05% |
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0.66% |
Critical Accounting Estimates
The financial statements and accompanying notes are prepared in accordance with U.S. GAAP. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. In addition, please refer to Note 3 to the financial statements of the Trust for further discussion of the Trust’s accounting policies and Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates on Form 10-K for the year ended December 31, 2022.
Results of Operations
During the three months ended March 31, 2023 and 2022, the Trust’s net comprehensive income (loss) was, in part, impacted by market volatility resulting from the US banking sector turmoil for 2023, and uncertainty caused by the novel coronavirus known as
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COVID-19, as well as the Russia-Ukraine conflict, for 2022, which are considered to be unusual or infrequent events. Although the full and direct impact of the COVID-19 pandemic, the Russia-Ukraine conflict, and the US banking sector turmoil, on the Trust’s net comprehensive income (loss) during the three months ended March 31, 2023 and 2022 cannot be known, it is believed that they have each independently impacted the Closing Spot Rate, the interest rate paid by the Depository, and the global economy and markets generally, including the number of Shares created and redeemed by the Trust.
The Australian Dollar (AUD/USD) ended the first quarter of 2023 slightly lower. Despite its strong rally in January as Australian inflation surged to a 33-year high, raising prospects for more aggressive rate hikes from the Reserve Bank of Australia (RBA), and the US dollar weakened, the AUD flipped into losses through the rest of the quarter. The USD rebounded in February following resilient labor market data and stickier-than-expected inflation in the US, reversing speculation that the Fed will take a softer stance on rate hikes. The “commodity currency” (given commodities account for a large share of the country’s exports) was further pressured by the downturn in commodities caused by the slower-than-expected rebound in China and as mentioned, renewed “hawkish Fed” bets. The pair did gain a bit in the second half of March on renewed weakness in the USD, though it wasn’t enough to shift the fund into positive territory.
The Australian Dollar (AUD/USD) ended the first quarter of 2022 as the best performing G10 currency, receiving a significant boost from gains across the commodities complex, and specifically energy, as the military conflict in Ukraine escalated throughout the quarter and oil prices increased. With Australia being a net energy exporter and commodities accounting for a large share of the country’s exports, higher goods prices boosted demand for the Australian Dollar (which is known as a “commodity currency”), which outweighed downward pressure from an ultra-dovish Australian central bank.
Additionally, the interest rate paid by the Depository has generally trended downward over the past several years, slightly offset by improvements in the past several quarters, to the current interest rate of 1.22%, as set forth in the FXA Rate Chart above. As long as the Sponsor’s fee and the interest expense on currency deposits, if any, exceed interest income, the Trust will incur a net comprehensive loss.
