The Fund was formed as a Delaware statutory trust on April 12, 2006. The Predecessor
Managing Owner seeded the Fund with a capital contribution of $1,000 in exchange
for 40 General Shares of the Fund. The General Shares were sold to the Managing
Owner by the Predecessor Managing Owner pursuant to the terms of the Agreement.
The fiscal year end of the Fund is December 31st. The term of the Fund is perpetual
(unless terminated earlier in certain circumstances) as provided for in the
Fifth Amended and Restated Declaration of Trust and Trust Agreement of the Fund
(the “Trust Agreement”). The Fund has an unlimited number of Shares
authorized for issuance.
The Fund offers common units of beneficial interest (the “Shares”)
only to certain eligible financial institutions (the “Authorized Participants”)
in one or more blocks of 200,000 Shares, called a Basket. The proceeds from
the offering of Shares are invested in the Fund. The Fund commenced investment
operations on September 15, 2006. The Fund commenced trading on the American
Stock Exchange (which became the NYSE Alternext US LLC (the “NYSE Alternext”))
on September 18, 2006 and is now listed on the NYSE Arca, Inc. (the “NYSE
Arca”) as of November 25, 2008.
Each of Deutsche Bank Securities Inc., Merrill Lynch Professional Clearing
Corp., Virtu Financial Capital Markets LLC, Citigroup Global Markets Inc., J.P.
Morgan Securities Inc., Credit Suisse Securities (USA) LLC, Virtu Financial
BD LLC, Knight Capital Americas LLC, Timber Hill LLC, Morgan Stanley & Co.
LLC, Jefferies & Company Inc., Nomura Securities International Inc., RBC
Capital Markets, LLC, UBS Securities LLC, Cantor Fitzgerald & Co., BNP Paribas
Securities Corp., Goldman, Sachs & Co., Goldman Sachs Execution & Clearing,
L.P. and Citadel Securities LLC has executed a Participant Agreement.
The Fund invests the proceeds from the offering of Shares in exchange-traded
currency futures comprising the Deutsche Bank G10 Currency Future Harvest Index—Excess
Return™, (the “Index”), with a view to tracking changes, whether
positive or negative, in the level of the Index calculated on an excess return
basis, over time, plus the excess, if any, of the Fund’s income from its
holdings of United States Treasury Obligations over the expenses of the Fund.
The Fund holds United States Treasury Obligations on deposit with the Custodian
(as defined below) and with the Commodity Broker (as defined below) as margin.
The Index is designed to reflect the performance of certain currencies. The
currencies comprising the Index, at any time (each an “Index Currency”,
and collectively, the “Index Currencies”) are six of the following
Group of Ten currencies: United States Dollars, Euros, Japanese Yen, Canadian
Dollars, Swiss Francs, British Pounds, Australian Dollars, New Zealand Dollars,
Norwegian Krone and Swedish Krona, or, collectively, the Eligible Index Currencies.
At any time, the Index will consist of long futures contracts on the three Eligible
Index Currencies associated with the highest interest rates and short futures
contracts on the three Eligible Index Currencies associated with the lowest
interest rates. The ratio of the notional value of futures contracts in the
Index to collateral used to margin those contracts is generally 2:1 when the
Index re-balances quarterly. However, if the United States Dollar is one of
the Eligible Index Currencies associated with either the three highest or three
lowest interest rates, the Index will not establish a futures position, and
the ratio of the notional value of futures contracts to collateral used to margin
those contracts will be 1.66:1 when the Index re-balances. The Fund has in the
past invested at the quarterly re-balance in excess of the targeted 2:1 ratio
of aggregate notional value of futures to collateral used to margin those contracts.
The Managing Owner pays the Index Sponsor (as defined below) a licensing fee
and an index services fee for performing its duties. These fees constitute a
portion of the routine operational, administrative and other ordinary expenses
which are paid out of the Management Fee and are not charged to or reimbursed
by the Fund.
The Index has been calculated using historical data since March 12, 1993. The
Index is composed of notional amounts of each Index Currency. The notional amounts
of the Index Currencies included in the Index are based on the Index Closing
Level as of the Index Re-Weighting Period. The Index Closing Level reflects
an arithmetic weighted return of the change in the Index Currencies exchange
rates against the USD since March 12, 1993. March 1993 was chosen as a starting
period because it represents the earliest date on which reliable data for all
the Eligible Index Currencies exists. On March 12, 1993, the closing Index level
was USD 100. Between March 12, 1993 to December 31, 2015, the Index level as
calculated on an excess return basis has ranged from as high as USD 315.27 (July
25, 2007) to as low as USD 94.03 (July 30, 1993). Past Index results are not
necessarily indicative of future changes, positive or negative, in the Index.
To track the Index, the Fund generally will establish long futures positions
in the three Eligible Index Currencies associated with the highest interest
rates and short futures positions in the three Eligible Index Currencies associated
with the lowest interest rates and will adjust its holdings quarterly as the
Index is adjusted. However, if the United States Dollar (“USD”)
is among the Index Currencies from time-to-time, the Fund will not establish
a long or short futures position (as the case may be) in USD, because USD is
the Fund’s home currency and, as a consequence, the Fund can never enjoy
profit or suffer loss from long or short futures positions in USD. When the
USD is not associated with the highest or lowest interest rates among the Eligible
Index Currencies, the aggregate notional value of the Fund’s futures contracts
at the time they are established will be double the value of the Fund’s
holdings of United States Treasury, which means the Fund will have a leverage
ratio at such time of 2:1. If the USD is associated with the highest or lowest
interest rates among the Eligible Index Currencies, the aggregate notional value
of the Fund’s futures contracts at the time they are established will
be approximately 1.66 times the value of the Fund’s holdings of United
States Treasury, which means the Fund will have a leverage ratio at such time
of approximately 1.66:1. Holding futures positions with a notional amount in
excess of the Fund’s net asset value constitutes a form of leverage. The
use of leverage will increase the potential for both trading profits and losses,
depending on the changes, positive and negative, in the Index. The Fund’s
ability to track the Index will not be affected by the presence or absence of
the USD among the Index Currencies. Because the notional value of the Fund’s
futures positions can rise or fall over time, the leverage ratio could be higher
or lower between quarterly adjustments of the Index Currencies.
The Managing Owner was formed on February 7, 2003. The Managing Owner is an
affiliate of Invesco Ltd. The Managing Owner was formed to be the managing owner
of investment vehicles such as exchange-traded funds and has been managing non-commodity
futures based exchange-traded funds since 2003 and a commodity futures based
exchange-traded fund since 2014. The Managing Owner serves as the commodity
pool operator, commodity trading advisor and swap firm of the Fund. The Managing
Owner is registered as a commodity pool operator and commodity trading advisor
with the CFTC and is a member of the National Futures Association (the “NFA”).
As a registered commodity pool operator and commodity trading advisor, with
respect to the Fund, the Managing Owner must comply with various regulatory
requirements under the Commodity Exchange Act (the “CEAct”) and
the rules and regulations of the CFTC and the NFA, including investor protection
requirements, antifraud prohibitions, disclosure requirements, and reporting
and recordkeeping requirements. The Managing Owner also is subject to periodic
inspections and audits by the CFTC and NFA.
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