INVESCO DB MULTI-SECTOR COMMODITY TRUST - INVESCO DB AGRICULTURE FUND This information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (the "Report"). This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. The matters discussed throughout this Report that are not historical facts are forward-looking statements. These forward-looking statements are based on the Fund's and Invesco Capital Management LLC's (the "Managing Owner") current expectations, estimates and projections about the future results, performance, prospects and opportunities of the Fund and the Fund's business and industry and their beliefs and assumptions about future events and speak only as of the date on which they are made. Words such as "anticipate," "expect," "intend," "plan," "believe," "seek," "outlook" and "estimate," as well as similar words and phrases, signify forward-looking statements. Forward-looking statements are not guarantees of future results. Conditions and important factors, risks and uncertainties in the markets for financial instruments that the Fund trades, in the markets for related physical commodities, in the legal and regulatory regimes applicable to the Managing Owner, the Fund, and the Fund's service providers, and in the broader economy may cause actual results to differ materially from those expressed by such forward-looking statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Fund and the Managing Owner undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.
Overview/Introduction
Invesco Capital Management LLC ("Invesco") has served as the managing owner (the
"Managing Owner"), commodity pool operator and commodity trading advisor of the
Trust and the Fund since February 23, 2015 . The Managing Owner is registered
with the Commodity Futures Trading Commission (the "CFTC") as a commodity pool
operator and a commodity trading advisor, and it is a member firm of the
National Futures Association ("NFA").
The Fund seeks to track changes, whether positive or negative, in the level of
the DBIQ Optimum Yield Precious Metals Index Excess Return™ (the "Index") over
time, plus the excess, if any, of the sum of the Fund's interest income from its
holdings of United States Treasury Obligations ("Treasury Income"), dividends
from its holdings in money market mutual funds (affiliated or otherwise) ("Money
Market Income") and dividends or distributions of capital gains from its
holdings of T-Bill ETFs (as defined below) ("T-Bill ETF Income") over the
expenses of the Fund. The Fund invests in futures contracts in an attempt to
track its Index. The Index is intended to reflect the change in market value of
the precious metals sector. The commodities comprising the Index are gold and
silver (each an "Index Commodity", and collectively, the "Index Commodities ").
The Fund may invest directly in United States Treasury Obligations. The Fund may
also gain exposure to United States Treasury Obligations through investments in
exchange-traded funds ("ETFs") (affiliated or otherwise) that track indexes that
measure the performance of United States Treasury Obligations with a maximum
remaining maturity of up to 12 months ("T-Bill ETFs"). The Fund holds as
collateral United States Treasury Obligations, money market mutual funds and
T-Bill ETFs (affiliated or otherwise), if any, for margin and/or cash management
purposes. While the Fund's performance reflects the appreciation and
depreciation of those holdings, the Fund's performance, whether positive or
negative, is driven primarily by its strategy of trading futures contracts with
the aim of seeking to track the Index.
The Fund pursues its investment objective by investing in a portfolio of
exchange-traded commodity futures contracts that expire in a specific month and
trade on a specific exchange (the "Index Contracts") in the Index Commodities .
The notional amounts of each Index Commodity included in the Index are broadly
in proportion to historic levels of the world's production and stocks of the
Index Commodities . The Fund also holds United States Treasury Obligations and
T-Bill ETFs, if any, for deposit with Morgan Stanley & Co. LLC , the Fund's
commodity broker (the "Commodity Broker") as margin, to the extent permissible
under CFTC rules and United States Treasury Obligations, cash, money market
mutual funds and T-Bill ETFs (affiliated or otherwise), if any, on deposit with
The Bank of New York Mellon (the "Custodian"), for cash management purposes. The
aggregate notional value of the commodity futures contracts owned by the Fund is
expected to approximate the aggregate net asset value ("NAV") of the Fund, as
opposed to the aggregate Index value.
The CFTC and certain futures exchanges impose position limits on futures
contracts, including on Index Contracts. As the Fund approaches or reaches
position limits with respect to an Index Commodity, the Fund may commence
investing in Index Contracts that reference other Index Commodities . In those
circumstances, the Fund may also trade in futures contracts based on commodities
other than Index Commodities that the Managing Owner reasonably believes tend to
exhibit trading prices that correlate with an Index Contract. In addition, the
Managing Owner may determine to invest in other futures contracts if at any time
it is impractical or inefficient to gain full or partial exposure to an Index
Commodity through the use of Index Contracts. These other futures contracts may
or may not be based on an Index Commodity. When they are not, the Managing Owner
may seek to select futures contracts that it reasonably believes tend to exhibit
trading prices that correlate with an Index Contract.
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The Shares are intended to provide investment results that generally correspond
to the changes, positive or negative, in the levels of the Index over time. The
value of the Shares is expected to fluctuate in relation to changes in the value
of the Fund's portfolio. The market price of the Shares may not be identical to
the NAV per Share, but these two valuations are expected to be very close.
Index Description
The Managing Owner pays
These fees constitute a portion of the routine operational, administrative and
other ordinary expenses which are paid out of the management fee paid to the
Managing Owner ("Management Fee") and are not charged to or reimbursed by the
Fund.
Neither the Managing Owner nor any affiliate of the Managing Owner has any
rights to influence the selection of the futures contracts underlying the Index.
The Managing Owner has entered into a license agreement with the Index Sponsor
to use the Index.
The Fund is not sponsored or endorsed by Deutsche Bank AG, DWS Investment
Management Americas, Inc. or any subsidiary or affiliate of Deutsche Bank AG or
DWS Investment Management Americas, Inc. (collectively, "Deutsche Bank "). The
DBIQ Optimum Yield Precious Metals Index Excess Return™ (the "Index") is the
exclusive property of DWS Investment Management Americas, Inc. "DBIQ" and
"Optimum Yield" are service marks of Deutsche Bank AG and have been licensed for
use for certain purposes by DWS Investment Management Americas, Inc. Neither
Deutsche Bank nor any other party involved in, or related to, making or
compiling the Index makes any representation or warranty, express or implied,
concerning the Index, the Fund or the advisability of investing in securities
generally. Neither Deutsche Bank nor any other party involved in, or related to,
making or compiling the Index has any obligation to take the needs of the
Managing Owner or its clients into consideration in determining, composing or
calculating the Index. Neither Deutsche Bank nor any other party involved in, or
related to, making or compiling the Index is responsible for or has participated
in the determination of the timing of, prices at, quantities or valuation of the
Fund. Neither Deutsche Bank nor any other party involved in, or related to,
making or compiling the Index has any obligation or liability in connection with
the administration or trading of the Fund.
NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR
COMPILING THE INDEX, WARRANTS OR GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NEITHER DEUTSCHE BANK NOR ANY OTHER
PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE INDEX, MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY INVESCO CAPITAL
MANAGEMENT LLC FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. NEITHER
DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR
COMPILING THE INDEX, MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL DEUTSCHE BANK OR ANY OTHER PARTY
INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE INDEX HAVE ANY LIABILITY FOR
DIRECT, INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR ANY OTHER DAMAGES OR
LOSSES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
EXCEPT AS EXPRESSLY PROVIDED TO THE CONTRARY, THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DEUTSCHE BANK AND
INVESCO CAPITAL MANAGEMENT LLC.
No purchaser, seller or holder of the Shares of this Fund, or any other person
or entity, should use or refer to any Deutsche Bank trade name, trademark or
service mark to sponsor, endorse, market or promote this Fund without first
contacting Deutsche Bank to determine whether Deutsche Bank's permission is
required. Under no circumstances may any person or entity claim any affiliation
with Deutsche Bank without the written permission of Deutsche Bank.
The Index Sponsor may from time-to-time subcontract the provision of the calculation and other services described below to one or more third parties.
The Index is composed of notional amounts of each of the underlyingIndex Commodities . The notional amount of each Index Commodity included in the Index is intended to reflect the changes in market value of each such Index Commodity within the Index. The closing level of the Index is calculated on each business day by the Index Sponsor based on the closing price of the commodity futures contracts for each of theIndex Commodities and the notional amount of such Index Commodity. The Index is rebalanced annually in November to ensure that each of theIndex Commodities is weighted in the same proportion that suchIndex Commodities were weighted onDecember 2, 1988 . The composition of the Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of theIndex Commodities . 21
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The following table reflects the Fund weights of each Index Commodity or related
futures contracts, as applicable, as of
Index Commodity Fund Weight (%) Gold 81.58 % Silver 18.42 Closing Level as ofJune 30, 2020 : 100.00 % Please see http://www.invesco.com/ETFs with respect to the most recently available weighted composition of the Fund and the composition of the Index. The CFTC and certain futures exchanges impose position limits on Index Contracts. The Managing Owner may determine to invest in other futures contracts if at any time it is impractical or inefficient to gain full or partial exposure to an Index Commodity through the use of Index Contracts. These other futures contracts may or may not be based on an Index Commodity. When they are not, the Managing Owner may seek to select futures contracts that it reasonably believes tend to exhibit trading prices that correlate with an Index Contract. As the Fund approaches or reaches position limits with respect to an Index Commodity, the Fund may commence investing in Index Contracts that reference otherIndex Commodities . In those circumstances, the Fund may also trade in futures contracts based on commodities other thanIndex Commodities that the Managing Owner reasonably believes tend to exhibit trading prices that correlate with an Index Contract. Market Risk Trading in futures contracts involves the Fund entering into contractual commitments to purchase a particular commodity at a specified date and price. The market risk associated with the Fund's commitments to purchase commodities is limited to the gross or face amount of the contracts held. The Fund's exposure to market risk is also influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Fund's trading as well as the development of drastic market occurrences could ultimately lead to a loss of all or substantially all of the investors' capital.
Credit Risk
When the Fund enters into futures contracts, the Fund is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded onUnited States and on most foreign futures exchanges is the clearing house associated with the particular exchange. In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance by one of their members and, as such, is designed to disperse and mitigate the credit risk posed by any other one member. In cases where the clearing house is not backed by the clearing members (i.e., some foreign exchanges), it may be backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the Fund. The Commodity Broker, when acting as the Fund's futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the Fund all assets of the Fund relating to domestic futures trading. The Commodity Broker is not allowed to commingle such assets with other assets of the Commodity Broker. In addition, CFTC regulations also require the Commodity Broker to hold in a secure account assets of the Fund related to foreign futures trading. While these legal requirements are designed to protect the customers of futures commission merchants, a failure by the Commodity Broker to comply with those requirements would be likely to have a material adverse effect on the Fund in the event that the Commodity Broker became insolvent or suffered other financial distress.
Liquidity
The Fund's entire source of capital is derived from the Fund's offering of Shares to Authorized Participants. The Fund in turn allocates its net assets to commodity futures trading. A significant portion of the NAV is held inUnited States Treasury Obligations, which may be used as margin for the Fund's trading in commodity futures contracts and United States Treasury Obligations, money market mutual funds, cash and T-Bill ETFs, if any, which may be used for cash management purposes. The percentage that United States Treasury Obligations bear to the total net assets will vary from period to period as the market values of the Fund's commodity interests change. A portion of the Fund'sUnited States Treasury Obligations are held for deposit with the Commodity Broker to meet margin requirements. All remaining cash, money market mutual funds, T-Bill ETFs, if any, and United States Treasury Obligations are on deposit with the Custodian. Interest earned on the Fund's interest-bearing funds and dividends from the Fund's holdings of money market mutual funds are paid to the Fund. Any dividends or distributions of capital gains received from the Fund's holdings of T-Bill ETFs, if any, are paid to the Fund. The Fund's commodity futures contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations or for other reasons. For example,U.S. futures exchanges and some foreign exchanges have regulations that limit the 22
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amount of fluctuation in futures contract prices that may occur during a single
business day. These limits are generally referred to as "daily price fluctuation
limits" or "daily limits," and the maximum or minimum price of a contract on any
given day as a result of these limits is referred to as a "limit price". Once a
limit price has been reached in a particular contract, it is usually the case
that no trades may be made at a different price than specified in the limit. The
duration of limit prices generally varies. Limit prices may have the effect of
precluding the Fund from trading in a particular contract or requiring the Fund
to liquidate contracts at disadvantageous times or prices. Either of those
outcomes could adversely affect the Fund's ability to pursue its investment
objective.
Because the Fund trades futures contracts, its capital is at risk due to changes
in the value of futures contracts (market risk) or the inability of
counterparties (including the Commodity Broker and/or exchange clearinghouses)
to perform under the terms of the contracts (credit risk).
On any business day, an Authorized Participant may place an order with the
Transfer Agent to redeem one or more blocks of 200,000 Shares ("Creation
Units"). Redemption orders must be placed by 10:00 a.m., Eastern Time . The day
on which the Managing Owner receives a valid redemption order is the redemption
order date. The day on which a redemption order is settled is the redemption
order settlement date. As provided below, the redemption order settlement date
may occur up to two business days after the redemption order date. Redemption
orders are irrevocable. The redemption procedures allow Authorized Participants
to redeem Creation Units. Individual Shareholders may not redeem directly from
the Fund. Instead, individual Shareholders may only redeem Shares in integral
multiples of 200,000 and only through an Authorized Participant.
Unless otherwise agreed to by the Managing Owner and the Authorized Participant
as provided in the next sentence, by placing a redemption order, an Authorized
Participant agrees to deliver the Creation Units to be redeemed through DTC's
book-entry system to the Fund no later than the redemption order settlement date
as of 2:45 p.m., Eastern Time , on the business day immediately following the
redemption order date. Upon submission of a redemption order, the Authorized
Participant may request the Managing Owner to agree to a redemption order
settlement date up to two business days after the redemption order date. By
placing a redemption order, and prior to receipt of the redemption proceeds, an
Authorized Participant's DTC account is charged the non-refundable transaction
fee due for the redemption order.
Redemption orders may be placed either (i) through the Continuous Net Settlement
("CNS") clearing processes of the National Securities Clearing Corporation (the
"NSCC") (the "CNS Clearing Process") or (ii) if outside the CNS Clearing
Process, only through the facilities of The Depository Trust Company ("DTC" or
the "Depository") (the "DTC Process"), or a successor depository, and only in
exchange for cash. By placing a redemption order, and prior to receipt of the
redemption proceeds, an Authorized Participant's DTC account is charged the
non-refundable transaction fee due for the redemption order and such fee is not
borne by the Fund.
Capital Resources
The Fund does not have any material commitments for capital expenditures as of the end of the latest fiscal period.
The Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. Cash Flows A primary cash flow activity of the Fund is to raise capital from Authorized Participants through the issuance of Shares. This cash is used to invest inUnited States Treasury Obligations, money market mutual funds and T-Bill ETFs, if any, and to meet margin requirements as a result of the positions taken in futures contracts to match the fluctuations of the Index. As of the date of this Report, each ofBank of America Merrill Lynch ,BMO Capital Markets Corp. ,BNP Paribas Securities Corp. ,Cantor Fitzgerald & Co. ,Citadel Securities LLC ,Citigroup Global Markets Inc. ,Credit Suisse Securities (USA) LLC ,Deutsche Bank Securities Inc. ,Goldman Sachs & Co. ,Goldman Sachs Execution & Clearing LP ,Interactive Brokers LLC ,Jefferies LLC ,JP Morgan Securities Inc. ,Merrill Lynch Professional Clearing Corp. ,Morgan Stanley & Co. LLC ,Nomura Securities International Inc. ,RBC Capital Markets LLC ,SG Americas Securities LLC ,UBS Securities LLC ,Virtu Americas LLC andVirtu Financial Capital Markets LLC has executed a Participant Agreement and are the only Authorized Participants.
Operating Activities
Net cash flow provided by (used in) operating activities was$16.6 million and$0.5 million for the six months endedJune 30, 2020 and 2019, respectively. These amounts primarily include net income (loss), net purchases and sales of money market mutual funds and net purchases and sales of United States Treasury Obligations and affiliated investments. The Fund invests inUnited States Treasury Obligations, money market mutual funds and T-Bill ETFs (affiliated or otherwise), if any, for margin and/or cash management purposes. While the Fund's performance reflects the appreciation and depreciation of those holdings, the Fund's performance, whether positive or negative, is driven primarily by its strategy of trading futures contracts with the aim of seeking to track the Index. During the six months endedJune 30, 2020 ,$89.9 million was paid to purchase United States Treasury Obligations and$90.0 million was received from sales and maturing United States Treasury Obligations. During the six months endedJune 30, 2019 ,$188.9 million was paid to purchase United States Treasury Obligations and$181.9 million was received from sales and maturing United 23
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States Treasury Obligations.
Financing Activities
The Fund's net cash flow provided by (used in) financing activities was$(16.8) million and$(0.5) million during the six months endedJune 30, 2020 and 2019, respectively. This included$41.5 million and$36.6 million from Shares purchased by Authorized Participants and$58.3 million and$36.1 million from Shares redeemed by Authorized Participants during the six months endedJune 30, 2020 and 2019, respectively. There were no amounts due to the Custodian for the six months endedJune 30, 2020 . During the six months endedJune 30, 2019 , amounts due to the Custodian decreased by$1.0 million .
Results of Operations
FOR THE THREE AND SIX MONTHS ENDED
The following graphs illustrate the percentage changes in (i) the market price
of the Shares (as reflected by the line "Market"), (ii) the Fund's NAV (as
reflected by the line "NAV"), and (iii) the closing levels of the Index (as
reflected by the line "DBIQ-Opt Yield Precious Metals Index ER"). Whenever the
Treasury Income, Money Market Income and T-Bill ETF Income, if any, earned by
the Fund exceeds Fund expenses, the price of the Shares generally exceeds the
level of the Index primarily because the Share price reflects Treasury Income,
Money Market Income and T-Bill ETF Income from the Fund's collateral holdings
whereas the Index does not consider such income. There can be no assurances that
the price of the Shares or the Fund's NAV will exceed the Index levels.
No representation is being made that the Index will or is likely to achieve
closing levels consistent with or similar to those set forth herein. Similarly,
no representation is being made that the Fund will generate profits or losses
similar to the Fund's past performance or changes in the Index closing levels.
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COMPARISON OF MARKET, NAV AND DBIQ-OPT YIELD PRECIOUS METALS INDEX ERTM
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
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NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND'S FUTURE
PERFORMANCE.
[[Image Removed]]
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND'S FUTURE
PERFORMANCE.
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[[Image Removed]]
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND'S FUTURE
PERFORMANCE.
[[Image Removed]]
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND'S FUTURE
PERFORMANCE.
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Performance Summary
This Report covers the three and six months ended
The Index is intended to reflect the change in market value of theIndex Commodities . In turn, the notional amounts of each Index Commodity are broadly in proportion to historic levels of the world's production and stocks of suchIndex Commodities . Past Index results are not necessarily indicative of future changes, positive or negative, in the Index closing levels. The DBIQ Optimum Yield Precious Metals Index Total Return™ (the "DBIQ-OY Precious Metals TR™") consists of the same components as the Index plus 3-month United States Treasury Obligations returns. Past results of the DBIQ-OY Precious Metals TR™ are not necessarily indicative of future changes, positive or negative, in the closing levels of the DBIQ-OY Precious Metals TR™. The section "Summary of the DBIQ-OY Precious Metals TR™ and Underlying Index Commodity Returns for the Three and Six Months EndedJune 30, 2020 and 2019" below provides an overview of the changes in the closing levels of the DBIQ-OY Precious Metals TR™ by disclosing the change in market value of each underlying component Index Commodity through a "surrogate" (and analogous) index that also reflects 3-month United States Treasury Obligations returns. Please note also that the Fund's objective is to track the Index (not the DBIQ-OY Precious Metals TR™), and the Fund does not attempt to outperform or underperform the Index. The Index employs the optimum yield roll method with the objective of mitigating the negative effects of contango, the condition in which distant delivery prices for futures exceed spot prices, and maximizing the positive effects of backwardation, a condition opposite of contango.
Summary of the DBIQ-OY Precious Metals TR™ and Underlying Index Commodity
Returns for the Three and Six Months Ended June 30, 2020 and 2019
AGGREGATE RETURNS FOR INDICES IN THE DBIQ-OY Precious Metals TR™
Three Months Ended Six Months Ended
June 30, June 30,
Underlying Index 2020 2019 2020 2019
DB Gold Indices 14.36 % 8.78 % 17.97 % 9.72 %
DB Silver Indices 32.66 0.33 4.57 (2.41 )
AGGREGATE RETURN 17.34 % 7.10 % 15.25 % 7.24 %
If the Fund's Treasury Income, Money Market Income and T-Bill ETF Income were to
exceed the Fund's fees and expenses, the aggregate return on an investment in
the Fund would be expected to outperform the Index and underperform the DBIQ-OY
Precious Metals TR™. The only difference between (i) the Index (the "Excess
Return Index") and (ii) the DBIQ-OY Precious Metals TR™ (the "Total Return
Index") is that the Excess Return Index does not include interest income from
fixed income securities while the Total Return Index does include such a
component. Thus, the difference between the Excess Return Index and the Total
Return Index is attributable entirely to the interest income attributable to the
fixed income securities reflected in the Total Return Index. The Total Return
Index does not actually hold any fixed income securities. If the Fund's Treasury
Income, Money Market Income and T-Bill ETF Income, if any, exceeds the Fund's
fees and expenses, then the amount of such excess is expected to be distributed
periodically. The market price of the Shares is expected to closely track the
Excess Return Index. The aggregate return on an investment in the Fund over any
period is the sum of the capital appreciation or depreciation of the Shares over
the period, plus the amount of any distributions during the period.
Consequently, the Fund's aggregate return is expected to outperform the Excess
Return Index by the amount of the excess, if any, of the Fund's Treasury Income,
Money Market Income and T-Bill ETF Income over its fees and expenses. As a
result of the Fund's fees and expenses, however, the aggregate return on the
Fund is expected to underperform the Total Return Index. If the Fund's fees and
expenses were to exceed the Fund's Treasury Income, Money Market Income and
T-Bill ETF Income, if any, the aggregate return on an investment in the Fund is
expected to underperform the Excess Return Index.
FOR THE THREE MONTHS ENDED
Fund Share Price Performance
For the three months endedJune 30, 2020 , the NYSE Arca market value of each Share increased from$40.95 per Share to$47.83 per Share. The Share price low and high for the three months endedJune 30, 2020 and related change from the Share price onMarch 31, 2020 was as follows: Shares traded at a low of$40.91 per Share (-0.09%) onApril 1, 2020 , and a high of$47.83 per Share (+16.80%) onJune 30, 2020 . The total return for the Fund, on a market value basis, was 16.80%. For the three months endedJune 30, 2019 , the NYSE Arca market value of each Share increased from$36.25 per Share to$38.77 per Share. The Share price low and high for the three months endedJune 30, 2019 and related change from the Share price onMarch 31, 2019 was as follows: Shares traded at a low of$35.39 per Share (-2.36%) onMay 22, 2019 , and a high of$39.06 per Share (+7.75%) onJune 25, 2019 . The total return for the Fund, on a market value basis, was 6.95%. 27
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Fund Share Net Asset Performance
For the three months endedJune 30, 2020 , the NAV of each Share increased from$40.90 per Share to$47.91 per Share. Rising commodity futures contracts prices for gold and silver futures contracts during the three months endedJune 30, 2020 contributed to an overall 17.30% increase in the level of the Index and to a 17.34% increase in the level of the DBIQ-OY Precious Metals TR™. The total return for the Fund, on a NAV basis, was 17.14%. Net income (loss) for the three months endedJune 30, 2020 was$22.3 million , primarily resulting from income of$0.1 million , net realized gain (loss) of$(0.6) million , net change in unrealized gain (loss) of$23.0 million and net operating expenses of$0.2 million . For the three months endedJune 30, 2019 , the NAV of each Share increased from$36.28 per Share to$38.80 per Share. Rising commodity futures contracts prices for gold and silver futures contracts during the three months endedJune 30, 2019 contributed to an overall 6.48 % increase in the level of the Index and to a 7.10% increase in the level of the DBIQ-OY Precious Metals TR™. The total return for the Fund, on a NAV basis, was 6.94%. Net income (loss) for the three months endedJune 30, 2019 was$7.4 million , primarily resulting from income of$0.6 million , net realized gain (loss) of$0.0 million , net change in unrealized gain (loss) of$6.9 million and net operating expenses of$0.2 million .
FOR THE SIX MONTHS ENDED
Fund Share Price Performance
For the six months endedJune 30, 2020 , the NYSE Arca market value of each Share increased from$41.61 per Share to$47.83 per Share. The Share price low and high for the six months endedJune 30, 2020 and related change from the Share price onDecember 31, 2019 was as follows: Shares traded at a low of$37.44 per Share (-10.01%) onMarch 19, 2020 , and a high of$47.83 per Share (+14.95%) onJune 30, 2020 . The total return for the Fund, on a market value basis, was 14.95%. For the six months endedJune 30, 2019 , the NYSE Arca market value of each Share increased from$36.37 per Share to$38.77 per Share. The Share price low and high for the six months endedJune 30, 2019 and related change from the Share price onDecember 31, 2018 was as follows: Shares traded at a low of$35.39 per Share (-2.69%) onMay 22, 2019 , and a high of$39.06 per Share (+7.38%) onJune 25, 2019 . The total return for the Fund, on a market value basis, was 6.60%.
Fund Share Net Asset Performance
For the six months endedJune 30, 2020 , the NAV of each Share increased from$41.69 per Share to$47.91 per Share. Rising commodity futures contract prices for gold and silver futures contracts during the six months endedJune 30, 2020 , contributed to an overall 14.88% increase in the level of the Index and to a 15.25% increase in the level of the DBIQ-OY Precious Metals TR™. The total return for the Fund, on a NAV basis, was 14.92%.
Net income (loss) for the six months ended
For the six months endedJune 30, 2019 , the NAV of each Share increased from$36.29 per Share to$38.80 per Share. Rising commodity futures contract prices for gold futures contracts partially offset falling commodity futures contract prices for silver futures contracts during the six months endedJune 30, 2019 , contributing to an overall 6.00% increase in the level of the Index and to a 7.24% increase in the level of the DBIQ-OY Precious Metals TR™. The total return for the Fund, on a NAV basis, was 6.92%.
Net income (loss) for the six months ended
Critical Accounting Policies
The financial statements and accompanying notes are prepared in accordance withU.S. GAAP. The preparation of these financial statements relies on estimates and assumptions that impact the Fund's financial position and results of operations. These estimates and assumptions affect the Fund's application of accounting policies. In addition, please refer to Note 2 to the financial statements of theFund for further discussion of the Fund'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 endedDecember 31, 2019 .
Off-Balance Sheet Arrangements and Contractual Obligations
In the normal course of its business, the Fund is a party to financial
instruments with off-balance sheet risk. The term "off-balance sheet risk"
refers to an unrecorded potential liability that, even though it does not appear
on the balance sheet, may result in a future obligation or loss. The financial
instruments used by the Fund are commodity futures, the values of which are
based upon an underlying asset and generally represent future commitments which
have a reasonable possibility to be settled in cash or through physical
delivery. The financial instruments are traded on an exchange and are
standardized contracts.
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The Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind, other than agreements entered into in the normal course of business noted above, which may include indemnification provisions related to certain risks service providers undertake in providing services to the Fund. While the Fund's exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Fund's financial position. The Managing Owner expects the risk of loss relating to indemnification to be remote. The Fund has financial obligations to the Managing Owner and the Commodity Broker under the Trust Agreement and its agreement with the Commodity Broker (the "Commodity Broker Agreement"), respectively. Management Fee payments made to the Managing Owner, pursuant to the Trust Agreement, are calculated as a fixed percentage of the Fund's NAV. Commission payments to the Commodity Broker, pursuant to the Commodity Broker Agreement, are on a contract-by-contract, or round-turn, basis. As such, the Managing Owner cannot anticipate the amount of payments that will be required under these arrangements for future periods as NAVs and trading activity will not be known until a future date. The Fund's agreement with the Commodity Broker may be terminated by either party for various reasons. All Management Fees and commission payments are paid to the Managing Owner and the Commodity Broker, respectively.
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