10-K: Invesco CurrencyShares Euro Trust Reports Annual Results for 2023

The Invesco CurrencyShares Euro Trust's 2023 annual report details the trust's performance, financial condition, and operational activities, highlighting the impact of currency fluctuations and interest rates on its holdings.

Summary

• The Invesco CurrencyShares Euro Trust is a grantor trust that aims to reflect the price of the euro in USD, less expenses.
• The trust issues shares in blocks of 50,000 (a Basket) in exchange for euro and distributes euro upon redemption of Baskets.
• The trust's primary expense is the Sponsor's fee, which is 0.40% annually of the euro held by the trust.
• For the year ended December 31, 2023, the trust incurred $1,034,961 in Sponsor's fees.
• The trust's net comprehensive income for 2023 was $4,268,764, compared to a loss of $1,785,713 in 2022.
• The trust's assets primarily consist of euro deposits held at JPMorgan Chase Bank, N.A., London Branch.
• The interest rate on the primary deposit account was 2.70% as of December 31, 2023.
• The trust distributed $3,825,434 to shareholders in 2023, which equates to $1.48 per share.
• The trust had 2,150,000 shares outstanding as of December 31, 2023, down from 2,900,000 shares at the end of 2022.
• The market value of the voting and non-voting common equity held by non-affiliates was $252,025,000 as of the last business day of the second fiscal quarter.

Sentiment

Score: 7

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

Positives

• The trust achieved a net comprehensive income of $4,268,764 in 2023, a significant turnaround from the loss in 2022.
• The interest rate on the primary deposit account increased to 2.70% as of December 31, 2023, which is beneficial for the trust's income.
• The trust distributed $3,825,434 to shareholders in 2023, providing a return to investors.
• The trust maintains a simple and cost-effective structure for investors to gain exposure to the euro.
• The trust's operations are transparent, with the NAV and other information available on the trust's website.

Negatives

• The trust's value is directly tied to the euro, making it susceptible to fluctuations in the euro/USD exchange rate.
• The trust's expenses, primarily the Sponsor's fee, can reduce the amount of euro represented by each share over time.
• The trust is not actively managed, so it cannot take action to protect against or take advantage of currency fluctuations.
• The trust's deposit accounts are not insured by the FDIC or any other federal agency, exposing the trust to potential losses if the Depository becomes insolvent.
• The trust's shares may trade at a price above or below the NAV per share due to market supply and demand.

Risks

• Fluctuations in the price of the euro 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 euro represented by each share.
• The interest rate paid by the Depository may not be the best rate available, and the Depository may change the rate, including reducing it to zero or below zero.
• The trust is subject to cyber security risks, which could disrupt operations and cause financial losses.
• The trust is not registered as an investment company under the Investment Company Act of 1940, so shareholders do not have the protections afforded to investors in registered investment companies.
• The Depository's insolvency could result in a loss of the euro held in the deposit accounts.
• The Deposit Accounts are not entitled to payment at any office of JPMorgan Chase Bank, N.A. located in the United States.
• International armed conflicts may result in volatility in currency prices that could adversely affect the fund's performance.
• Pandemics and other public health emergencies could disrupt the global economy and adversely impact the trust's performance.
• Changes to United States tariff and trade policies may increase the volatility of foreign exchange rates.

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 to reflect actual results or changes in expectations.

Management Comments

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

Industry Context

This report reflects the performance of a currency-based exchange-traded fund (ETF), which is influenced by global economic conditions, currency exchange rates, and interest rate policies. The trust's performance is directly linked to the euro's value against the US dollar, making it sensitive to geopolitical and economic events affecting the Eurozone.

Comparison to Industry Standards

• The Invesco CurrencyShares Euro Trust is a passive investment vehicle, unlike actively managed currency funds that attempt to outperform the market.
• The trust's expense ratio of 0.40% is typical for currency ETFs, but investors should compare this to other similar products.
• The trust's performance is directly tied to the euro's performance, which is a common characteristic of currency ETFs.
• Unlike some other investment vehicles, the trust does not use derivatives, which reduces complexity but also limits potential for enhanced returns or hedging strategies.
• The trust's reliance on a single depository, JPMorgan Chase Bank, N.A., London Branch, is a common practice but introduces a concentration risk.

Management Changes

Related Party Transactions

• The Sponsor, Invesco Specialized Products, LLC, is a related party of the Trust.
• The Trust pays the Sponsor a fee, which accrues daily at an annual nominal rate of 0.40% of the euro in the Trust.

Stakeholder Impact

• Shareholders are impacted by the fluctuations in the euro/USD exchange rate and the trust's expenses.
• Shareholders receive distributions of excess interest earned by the trust.
• Authorized Participants are impacted by the creation and redemption process of Baskets.
• The Depository, JPMorgan Chase Bank, N.A., London Branch, is impacted by the trust's deposit accounts.

Next Steps

• The trust will continue to operate as a passive investment vehicle, tracking the price of the euro.
• The trust will continue to distribute excess interest to shareholders on a monthly basis.
• The trust will continue to monitor and manage cybersecurity risks.

Key Dates

Keywords

Euro, Currency, Invesco, Trust, FXE, Exchange Rate, ETF, Foreign Exchange, Investment, Sponsor