FXF 10-Q
Invesco CurrencyShares Swiss Franc Trust (FXF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
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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
Invesco CurrencyShares® Swiss Franc Trust
Sponsored by Invesco Specialized Products, LLC
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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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 (d232.405 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.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 Redeemable Capital Shares as of September 30, 2021:
INVESCO CURRENCYSHARES® SWISS FRANC TRUST
QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
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PART I. |
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1 |
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ITEM 1. |
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1 |
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8 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3. |
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ITEM 4. |
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PART II. |
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16 |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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17 |
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19 |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Invesco CurrencyShares® Swiss Franc Trust
Statements of Financial Condition
September 30, 2021 and December 31, 2020
(Unaudited)
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September 30, 2021 |
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December 31, 2020 |
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Assets |
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Swiss Franc deposits, interest bearing |
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$ |
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$ |
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Subscriptions receivable |
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— |
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Total Assets |
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$ |
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$ |
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Liabilities |
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Accrued Sponsor’s fee |
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$ |
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$ |
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Accrued interest expense on currency deposits |
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Total Liabilities |
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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, par value, |
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Shareholders’ Equity: |
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Retained Earnings |
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Total Liabilities, Redeemable Capital Shares and Shareholders’ Equity |
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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 CurrencyShares ® Swiss Franc Trust
Statements of Comprehensive Income
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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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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Total Income |
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Expenses |
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Sponsor’s fee |
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( |
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( |
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Interest Expense on currency deposits |
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Total Expenses |
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( |
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Net Comprehensive Income (Loss) |
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$ |
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$ |
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$ |
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$ |
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Basic and Diluted Earnings (Loss) per Share |
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$ |
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$ |
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$ |
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$ |
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Weighted-average Shares Outstanding |
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See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.
2
Invesco CurrencyShares® Swiss Franc Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Three Months Ended September 30, 2021
(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 June 30, 2021 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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— |
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— |
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— |
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— |
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Redemption of Shares |
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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 Comprehensive Income (Loss) |
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— |
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Adjustment of Redeemable Capital Shares to Redemption Value related to Retained Earnings |
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Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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Balance at September 30, 2021 |
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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 CurrencyShares® Swiss Franc Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Three Months Ended September 30, 2020
(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 June 30, 2020 |
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$ |
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$ |
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$ |
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Purchases of Shares |
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— |
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— |
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Redemption of Shares |
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— |
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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 Comprehensive Income (Loss) |
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( |
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( |
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— |
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Adjustment of Redeemable Capital Shares to Redemption Value related to Retained Earnings |
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( |
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Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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Balance at September 30, 2020 |
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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 CurrencyShares® Swiss Franc Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Nine Months Ended September 30,2021
(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, 2020 |
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$ |
— |
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$ |
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$ |
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Purchases of Shares |
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— |
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— |
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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 Comprehensive Income (Loss) |
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( |
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( |
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— |
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Adjustment of Redeemable Capital Shares to Redemption Value related to Retained Earnings |
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( |
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Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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( |
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Balance at September 30, 2021 |
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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 CurrencyShares® Swiss Franc Trust
Statements of Changes in Shareholders’ Equity and Redeemable Capital Shares
For the Nine Months Ended September 30, 2020
(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, 2019 |
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$ |
— |
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$ |
— |
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$ |
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Purchases of Shares |
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— |
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— |
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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 Comprehensive Income (Loss) |
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( |
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( |
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— |
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Adjustment of Redeemable Capital Shares to Redemption Value related to Retained Earnings |
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Adjustment of Redeemable Capital Shares to Redemption Value |
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— |
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— |
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Balance at September 30, 2020 |
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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 CurrencyShares® Swiss Franc Trust
Statements of Cash Flows
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
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Nine Months Ended September 30, |
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2021 |
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2020 |
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Cash flows from operating activities |
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Net Comprehensive Income (Loss) |
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$ |
( |
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$ |
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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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Accrued interest expense |
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Accrued Sponsor's fee |
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Net cash provided by (used in) operating activities |
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Cash flows from financing activities |
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Proceeds from purchases of redeemable capital Shares |
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Redemptions of redeemable capital Shares |
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Net cash provided by (used in) financing activities |
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Effect of exchange rate on cash |
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Net change in cash |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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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.
7
Invesco CurrencyShares® Swiss Franc Trust
Notes to Unaudited Financial Statements
September 30, 2021
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® Swiss Franc Trust (the “Trust”) was formed under the laws of the State of New York on
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 Swiss Franc 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 Swiss Francs. The Trust’s assets primarily consist of Swiss Francs on demand deposit in
This Quarterly Report (the “Report”) covers the three and nine months ended September 30, 2021 and 2020. 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, 2020, as filed with the SEC on February 26, 2021.
Note 3 – Summary of Significant Accounting Policies
A. Basis of Presentation
The financial statements of the Trust have been prepared using U.S. GAAP.
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 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, Swiss Franc deposits (cash) are translated at the Closing Spot Rate, which is the Swiss Franc/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.
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The Trust maintains its books and records in Swiss Francs. 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 Swiss Francs 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.
D. Interest Income
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.
E. Distributions
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 Swiss Francs effective on the first business day of the subsequent month. The Trustee (as defined below) will direct that the excess Swiss Francs 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).
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 $
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 $
H. Federal Income Taxes
The Trust is treated as a “grantor trust” for federal income tax purposes and, therefore,
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 Swiss Francs. 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 Swiss Francs by the Trust, unless: (1) the non-U.S. Shareholder is an individual and is present in the United States for
9
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 - Swiss Franc Deposits
Swiss Franc principal deposits are held in a Swiss Franc-denominated, interest-bearing demand account. The interest rate in effect as of September 30, 2021 was an annual nominal rate of -
Net interest, if any, associated with creation and redemption activity is held in a Swiss Franc-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 Swiss Francs, which creates a concentration risk associated with fluctuations in the price of the Swiss Franc. Accordingly, a decline in the Swiss Franc 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 Swiss Franc 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 Swiss Francs by the official sector (central banks, other governmental agencies and related institutions that buy, sell and hold Swiss Francs as part of their reserve assets) could adversely affect an investment in the Shares.
All of the Trust’s Swiss Francs 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
Note 7 - Share Purchases and Redemptions
Shares are issued and redeemed continuously in Baskets in exchange for Swiss Francs. 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 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.
10
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 Swiss Francs held by the Trust (including all unpaid interest, if any, accrued through the preceding day) and calculates the value of the Swiss Francs 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 Swiss Francs, they will determine an alternative 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. 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.
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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 Swiss Franc, as the value of the Shares relates directly to the value of the Swiss Francs 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® Swiss Franc 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 “FXF” 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 Swiss Francs and distributes Swiss Francs 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 Swiss Franc 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 Swiss Franc 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 Swiss Franc. 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 Swiss Franc. 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 Swiss Francs in the Trust at the end of the preceding day accrued but unpaid interest, if any, Swiss Francs receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor’s fee, Swiss Francs payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in USD based on the Swiss Franc/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 Swiss Franc
The investment objective of the Trust is for the Shares to reflect the price in USD of the Swiss Franc 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 Swiss Francs. Each outstanding Share represents a proportional interest in the Swiss Francs held by the Trust. The following chart provides recent trends on the price of the Swiss Franc. The chart illustrates movements in the price of the Swiss Franc in USD and is based on the Closing Spot Rate:
NAV per Share; Valuation of the Swiss Franc
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 Swiss Francs:
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Liquidity
The Sponsor is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to the Trust’s liquidity 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 September 30, 2021 was an annual nominal rate of -0.75%. The following chart provides the daily rate paid by the Depository since September 30, 2016:
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 Swiss Francs 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). The Trust did not make any distributions during the quarter ended September 30, 2021.
Critical Accounting Policies
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 Policies on Form 10-K for the year ended December 31, 2020.
Results of Operations
During the nine months ended September 30, 2021, an additional 750,000 Shares were created in exchange for 68,217,981 Swiss Francs and 1,150,000 Shares were redeemed in exchange for 104,425,070 Swiss Francs. In addition, 2,205,284 Swiss Francs were withdrawn to pay the Sponsor’s fee and the interest expense on currency deposits, due to the negative interest rate. As of September 30, 2021, the number of Swiss Francs owned by the Trust was 221,543,866, resulting in a redeemable capital Share value of $237,256,976. During the year ended December 31, 2020, an additional 2,500,000 Shares were created in exchange for 229,209,797 Swiss Francs and 1,050,000 Shares were redeemed in exchange for 96,359,052 Swiss Francs. In addition, 2,082,480 Swiss Francs were withdrawn to pay the Sponsor’s fee and the interest expense on currency deposits, due to the negative interest rate. As of December 31, 2020, the number of Swiss Francs owned by the Trust was 259,956,239, resulting in a redeemable capital Share value of $293,802,451.
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A decrease in the Trust’s redeemable capital Share value from $293,802,451 at December 31, 2020 to $237,256,976 at September 30, 2021, was primarily the result of a decrease in the number of Shares outstanding from 2,850,000 at December 31, 2020 to 2,450,000 at September 30, 2021 coupled with a decrease in the Closing Spot Rate from 1.131 at December 31, 2020 to 1.072 at September 30, 2021.
No interest income was earned during the three and nine months ended September 30, 2021 and 2020 due to an annual nominal interest rate which remained at or below 0.00% through those periods, as set forth in the FXF Daily Rate chart above.
The Sponsor’s fee accrues daily at an annual nominal rate of 0.40% of the Swiss Francs in the Trust. Due primarily to an increase in the weighted-average Swiss Francs in the Trust, the Sponsor’s fee increased from $220,015 for the three months ended September 30, 2020 to $254,864 for the three months ended September 30, 2021, and increased from $539,842 for the nine months ended September 30, 2020 to $822,218 for the nine months ended September 30, 2021. Because the annual interest rate paid by the Depository remained below 0.00% at the end of September 30, 2021, the Trust incurred interest expense on currency deposits. Due primarily to an increase in the weighted-average Swiss Francs in the Trust, interest expense on currency deposits increased from $419,638 for the three months ended September 30, 2020 to $484,884 for the three months ended September 30, 2021 and increased from $1,030,391 for the nine months ended September 30, 2020 to 1,564,067 for the nine months ended September 30, 2021. The only expenses of the Trust during the three and nine months ended September 30, 2021 and 2020 were the Sponsor’s fee and interest expense on currency deposits.
The Trust’s net comprehensive income (loss) for the three months ended September 30, 2021 was $(739,748), due to the Sponsor’s fee of $254,864 and interest expense on currency deposits of $484,884 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the three months ended September 30, 2020 was $(639,653) due to the Sponsor’s fee of $220,015 and interest expense on currency deposits of $419,638 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the nine months ended September 30, 2021 was $(2,386,285), due to the Sponsor’s fee of 822,218 and interest expense on currency deposits of 1,564,067 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the nine months ended September 30, 2020 was $(1,570,233), due to the Sponsor’s fee of $539,842 and interest expense on currency deposits of $1,030,391 exceeding interest income of $0.
Cash dividends were not paid by the Trust for the three and nine months ended September 30, 2021 and 2020 as the Trust’s interest income did not exceed the Trust’s expenses during those periods.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Except as described above with respect to fluctuations in the Swiss Franc/USD exchange rate and changes in the nominal annual interest rate paid by the Depository on Swiss Francs held by the Trust, the Trust is not subject to market risk. The Trust does not hold securities and does not invest in derivative instruments.
Item 4. Controls and Procedures
Under the supervision and with the participation of the management of the Sponsor, including Anna Paglia, its Principal Executive Officer, and Kelli Gallegos, its Principal Financial and Accounting Officer, Investment Pools, the Trust carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report, and, based upon that evaluation, Anna Paglia, the Principal Executive Officer of the Sponsor, and Kelli Gallegos, the Principal Financial and Accounting Officer, Investment Pools, of the Sponsor, concluded that the Trust's disclosure controls and procedures were effective to provide reasonable assurance that information the Trust is required to disclose in the reports that it files or submits with the Securities and Exchange Commission (the “SEC”) under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and to provide reasonable assurance that information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act is accumulated and communicated to management of the Sponsor, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the Trust's quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There are no material changes from the risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, filed February 26, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) There have been no unregistered sales of Shares. No Shares are authorized for issuance by the Trust under equity compensation plans.
(b) Not applicable.
(c) Although the Trust did not redeem Shares directly from its shareholders, the Trust redeemed Baskets from Authorized Participants during the three months ended September 30, 2021 as follows:
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Period of Redemption |
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Total Number of Shares Redeemed |
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Average Price Paid per Share |
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July 1, 2021 to July 31, 2021 |
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100,000 |
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$ |
98.45 |
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August 1, 2021 to August 31, 2021 |
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— |
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$ |
— |
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September 1, 2021 to September 30, 2021 |
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|
100,000 |
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|
$ |
97.60 |
|
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Total |
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|
200,000 |
|
|
$ |
98.02 |
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
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Exhibit No. |
Description |
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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4.5 |
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4.6 |
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4.7 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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104 |
The cover page of the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Invesco CurrencyShares® Swiss Franc Trust |
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By: |
Invesco Specialized Products, LLC |
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its Sponsor |
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Dated: November 4, 2021 |
By: |
/s/ Anna Paglia |
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Name: |
Anna Paglia |
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Title: |
Principal Executive Officer |
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Dated: November 4, 2021 |
By: |
/s/ Kelli Gallegos |
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Name: |
Kelli Gallegos |
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Title: |
Principal Financial and Accounting Officer, |
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Investment Pools |
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