10-K: Invesco CurrencyShares Australian Dollar Trust Reports Fiscal Year 2023 Results

The Invesco CurrencyShares Australian Dollar Trust's annual report details the trust's performance and financial condition for the fiscal year ended December 31, 2023.

Summary

• The Invesco CurrencyShares Australian Dollar Trust is a grantor trust that aims to reflect the price of the Australian Dollar in USD, less expenses.
• The trust issues shares in blocks of 50,000 (a Basket) in exchange for Australian Dollars and distributes Australian Dollars upon redemption of Baskets.
• The trust's primary expense is the sponsor's fee, which is 0.40% annually of the Australian Dollars held by the trust.
• For the year ended December 31, 2023, the trust incurred $290,525 in sponsor fees.
• The trust's net comprehensive income for 2023 was $796,270, compared to a loss of $180,023 in 2022.
• The trust's assets primarily consist of Australian Dollar deposits held at JPMorgan Chase Bank, N.A., London Branch.
• The interest rate on the primary deposit account was 1.92% as of December 31, 2023.
• The trust distributed $0.66 per share in 2023, totaling $731,919.
• The trust had 1,150,000 shares outstanding as of December 31, 2023, down from 1,200,000 at the end of 2022.
• The market value of the voting and non-voting common equity held by non-affiliates was $72,567,000 as of the last business day of the second fiscal quarter.

Sentiment

Score: 7

Explanation: The document shows a positive turnaround in financial performance with increased income and distributions, but also highlights risks associated with currency fluctuations and the trust's structure. The sentiment is cautiously optimistic.

Positives

• The trust experienced a significant turnaround in net comprehensive income, moving from a loss in 2022 to a profit in 2023.
• The interest rate on the primary deposit account increased to 1.92% as of December 31, 2023, which is beneficial for the trust's income.
• The trust made distributions to shareholders totaling $731,919 in 2023.
• The trust maintains effective internal control over financial reporting.

Negatives

• The trust's value is directly tied to the Australian Dollar, making it susceptible to currency fluctuations.
• The trust's expenses, primarily the sponsor's fee, reduce the amount of Australian Dollars represented by each share over time.
• The trust is not actively managed, so no attempts are made to mitigate losses from currency fluctuations.
• The trust's deposit accounts are not insured by the FDIC or any other federal agency.
• The trust's deposit accounts are held at a London branch of a US bank, subject to English insolvency law, which could complicate recovery in case of insolvency.

Risks

• Fluctuations in the price of the Australian Dollar could materially and adversely affect the value of the shares.
• The trust's expenses may exceed interest earned, leading to a gradual decline in the amount of Australian Dollars represented by each share.
• The interest rate paid by the Depository may not be the best rate available and could be reduced to zero or below zero.
• The trust is not actively managed and does not attempt to mitigate losses from currency fluctuations.
• Disruptions in the ability to create and redeem Baskets may adversely impact the price of the shares.
• Substantial sales of Australian Dollars by the official sector could adversely affect an investment in the shares.
• International armed conflicts and pandemics may result in volatility in currency prices.
• Changes to United States tariff and trade policies may increase the volatility of foreign exchange rates.
• The deposit accounts are not entitled to payment at any office of JPMorgan Chase Bank, N.A. located in the United States.
• Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940.
• The Depository owes no fiduciary duties to the Trust or the Shareholders and could resign or be removed by the Sponsor, which would trigger early termination of the Trust.
• Cyber attacks pose operational and information security risks to the trust and its service providers.

Future Outlook

The report contains forward-looking statements, but the sponsor does not assume responsibility for their accuracy or completeness and will not revise or update them.

Management Comments

• Management of Invesco Specialized Products, LLC, as sponsor of the Invesco CurrencyShares Australian Dollar Trust, is responsible for establishing and maintaining adequate internal control over financial reporting.
• The Principal Executive Officer and Principal Financial and Accounting Officer concluded that the Trust's disclosure controls and procedures were effective as of December 31, 2023.

Industry Context

This report is specific to the Invesco CurrencyShares Australian Dollar Trust, which is designed to track the price of the Australian Dollar. The performance of the trust is influenced by global economic conditions, currency exchange rates, and interest rates, which are common factors affecting similar currency-based investment products.

Comparison to Industry Standards

• The Invesco CurrencyShares Australian Dollar Trust is similar to other currency-backed exchange-traded products, such as the CurrencyShares Euro Trust (FXE) and the CurrencyShares Japanese Yen Trust (FXY), which also aim to track the value of a specific currency.
• The trust's expense ratio of 0.40% is comparable to other passively managed currency ETFs.
• The trust's reliance on a single depository, JPMorgan Chase Bank, N.A., London Branch, is a common practice in the industry, but it also introduces a concentration risk.
• The trust's structure as a grantor trust is a standard approach for currency-backed ETFs, which avoids the complexities of being registered as an investment company under the Investment Company Act of 1940.

Management Changes

Related Party Transactions

• The trust pays a sponsor's fee to Invesco Specialized Products, LLC, which is a related party.

Stakeholder Impact

• Shareholders are exposed to the risks and rewards of Australian Dollar fluctuations.
• Shareholders receive distributions from excess interest earned by the trust.
• Authorized Participants facilitate the creation and redemption of shares.
• The Depository holds the trust's Australian Dollar deposits.

Next Steps

• The trust will continue to operate as a passive investment vehicle, tracking the price of the Australian Dollar.
• The trust will continue to issue and redeem shares in Baskets with Authorized Participants.
• The trust will continue to distribute excess interest to shareholders on a monthly basis.

Key Dates

Keywords

Australian Dollar, Currency Trust, FXA, Invesco, Exchange Traded Fund, ETF, Foreign Exchange, CurrencyShares, Grantor Trust, Financial Report