# Invesco CurrencyShares Canadian Dollar Trust: Form 10-Q for the period ended Jul 31, 2018

- Company: [Invesco CurrencyShares Canadian Dollar Trust](/companies/fxc.md) (CIK 1353612)
- Form: 10-Q
- Filed: 2018-09-07
- Accepted by EDGAR: Sep 7, 2018, 20:12 ET
- Period: 2018-07-31
- Accession: 0001193125-18-269191
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1353612/000119312518269191/d598077d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1353612/000119312518269191/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-07-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2018-05-01 to 2018-07-31 | $339.6k | us-gaap:Revenues |
| Revenue | 9 months, 2017-11-01 to 2018-07-31 | $817.2k | us-gaap:Revenues |
| Income tax | 9 months, 2017-11-01 to 2018-07-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-05-01 to 2018-07-31 | $177.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2017-11-01 to 2018-07-31 | $313.5k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-05-01 to 2018-07-31 | $0.08 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2017-11-01 to 2018-07-31 | $0.14 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2017-11-01 to 2018-07-31 | $250.4k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2018-07-31 | $162.9m | us-gaap:Cash |
| Current assets | at 2018-07-31 | $163.0m | us-gaap:AssetsCurrent |
| Current liabilities | at 2018-07-31 | $55.9k | us-gaap:LiabilitiesCurrent |
| Shares outstanding | at 2018-07-31 | 0 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 11,131 characters.

### 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 Canadian Dollar, as the value of the Shares relates directly to the value of the Canadian Dollars 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.

### Trust Overview

The Invesco CurrencyShares® Canadian Dollar Trust (the “Trust”) is a grantor trust that was formed on June 8, 2006. The Trust issues shares (the “Shares”) in blocks of 50,000 (a “Basket”) in exchange for deposits of Canadian Dollars and distributes Canadian Dollars in connection with the redemption of Baskets. The Shares commenced trading on the New York Stock Exchange under the ticker symbol “FXC” on June 26, 2006. The primary listing of the Shares was transferred to NYSE Arca on October 30, 2007.

The investment objective of the Trust is for the Shares to reflect the price of the Canadian Dollars 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 Canadian Dollar 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 Canadian Dollar. 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 Canadian Dollar. Investing in the Shares does not insulate the investor from certain risks, including price volatility.

### 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 Canadian Dollars in the Trust at the end of the preceding day accrued but unpaid interest, if any, Canadian Dollars receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor’s fee, Canadian Dollars payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in USD based on the Canadian Dollar/USD exchange rate as determined by The WM Company as of 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 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.

### Movements in the Price of the Canadian Dollar

The investment objective of the Trust is for the Shares to reflect the price in USD of the Canadian Dollar 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 Canadian Dollars. Each outstanding Share represents a proportional interest in the Canadian Dollars held by the Trust. The following chart provides recent trends on the price of the Canadian Dollar. The chart illustrates movements in the price of the Canadian Dollar in USD and is based on the Closing Spot Rate:

### NAV per Share; Valuation of the Canadian Dollar

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 Canadian Dollars:

### 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 July 31, 2018 was an annual nominal rate of 0.85%. The following chart provides the daily rate paid by the Depository since July 31, 2013:

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 Canadian Dollars from the secondary deposit account to pay the accrued Sponsor’s fee for the previous month plus other Trust expenses, 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). Distributions paid during the current reporting period follow (annualized yield reflects the estimated annual yield an investor would receive if a monthly distribution stayed the same for the entire year going forward, and is calculated by annualizing the monthly distribution and dividing by the Trust NAV for the dates listed below):

*FXC Distribution History*

| Date | Value | NAV | Yield | Annualized Yield |
| --- | ---: | ---: | ---: | ---: |
| 7/2/2018 | $0.02927 | $75.02 | 0.04% | 0.47% |
| 6/1/2018 | $0.02320 | $76.07 | 0.03% | 0.36% |
| 5/1/2018 | $0.01538 | $76.97 | 0.02% | 0.24% |

13

### Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Sponsor’s management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period covered by this report.

In addition to the description below, please refer to Note 3 to the financial statements for further discussion of our accounting policies.

The functional currency of the Trust is the Canadian Dollar in accordance with ASC 830, Foreign Currency Translation.

### Results of Operations

As of October 31, 2017, the number of Canadian Dollars owned by the Trust was 226,889,725, resulting in a redeemable capital share value of $176,007,716. During the nine months ended July 31, 2018, 400,000 Shares were created in exchange for 39,458,191 Canadian Dollars and 550,000 Shares were redeemed in exchange for 54,255,284 Canadian Dollars. In addition, 4,300 Canadian Dollars were withdrawn to pay the portion of the Sponsor’s fee that exceeded interest earned. As of July 31, 2018, the number of Canadian Dollars owned by the Trust was 212,088,332, resulting in a redeemable capital Share value of $162,959,705.

A decrease in the Trust’s redeemable capital Share value from $176,007,716 at October 31, 2017 to $162,959,705 at July 31, 2018 was primarily the result of a decrease in the number of Shares outstanding from 2,300,000 at October 31, 2017 to 2,150,000 at July 31, 2018, and a decrease in the Closing Spot Rate from 0.7757 at October 31, 2017 to 0.7680 at July 31, 2018.

Interest income increased from $45,511 for the three months ended July 31, 2017 to $339,643 for the three months ended July 31, 2018, and increased from $92,307 for the nine months ended July 31, 2017 to $817,229 for the nine months ended July 31, 2018, attributable primarily to an increase in the annual nominal interest rate paid by the Depository, as set forth in the chart above.

The Sponsor’s fee accrues daily at an annual nominal rate of 0.40% of the Canadian Dollars in the Trust. Due primarily to a decrease in the weighted-average Canadian Dollars in the Trust and a decrease in the Closing Spot Rate, the Sponsor’s fee decreased from $187,853 for the three months ended July 31, 2017 to $162,663 for the three months ended July 31, 2018, and decreased from $567,541 for the nine months ended July 31, 2017 to $503,696 for the nine months ended July 31, 2018. The only expense of the Trust during the three months and nine months ended July 31, 2018 was the Sponsor’s fee.

The Trust’s net income for the three months ended July 31, 2018 was $176,980 due to interest income of $339,643 exceeding the Sponsor’s fee of $162,663. The Trust’s net income for the nine months ended July 31, 2018 was $313,533 due to interest income of $817,229 exceeding the Sponsor’s fee of $503,696.

Cash dividends per Share increased from $0.00 per Share for the three months ended July 31, 2017 to $0.07 per Share for the three months ended July 31, 2018, and cash dividends per Share increased from $0.00 per Share for the nine months ended July 31, 2017 to $0.12 per Share for the nine months ended July 31, 2018. This increase in cash dividends per Share was primarily the result of an increase in the annual nominal interest rate paid by the Depository.

## Market risk

As filed, 325 characters.

Except as described above with respect to fluctuations in the Canadian Dollar/USD exchange rate and changes in the nominal annual interest rate paid by the Depository on Canadian Dollars held by the Trust, the Trust is not subject to market risk. The Trust does not hold securities and does not invest in derivative products.

## Controls and procedures

As filed, 1,192 characters.

The Trust maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) designed to ensure that material information relating to the Trust is recorded, processed and disclosed on a timely basis. The Trust’s disclosure controls and procedures are designed by or under the supervision of the Sponsor’s principal executive officer and principal financial officer, who exercise oversight over the Trust as the Trust has no officers. The principal executive officer and principal financial officer of the Sponsor have evaluated the effectiveness of the Trust’s disclosure controls and procedures as of July 31, 2018. Based on that evaluation, the principal executive officer and principal financial officer of the Sponsor have concluded that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report.

There were no changes in the Trust’s internal control over financial reporting that occurred during the Trust’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

## Risk factors

As filed, 4,007 characters.

***Current Discussions between the SEC and PricewaterhouseCoopers LLP regarding PricewaterhouseCoopers LLP’s Independence Could Have Potentially Adverse Consequences for the Trust.***

PricewaterhouseCoopers LLP informed the Trust that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the Loan Rule). The Loan Rule prohibits accounting firms, such as PricewaterhouseCoopers LLP, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm.

The Loan Rule specifically provides that an accounting firm would not be independent if it or certain affiliates and covered persons receives a loan from a lender that is a record or beneficial owner of more than ten percent of an audit client’s equity securities (referred to as a “more than ten percent owner”). For purposes of the Loan Rule, audit clients include the Trust as well as all registered investment companies advised by the Sponsor and its affiliates, including other subsidiaries of the Sponsor’s parent company, Invesco Ltd. (collectively, the “Invesco Fund Complex”). PricewaterhouseCoopers LLP informed the Trust it and certain affiliates and covered persons have relationships with lenders who hold, as record owner, more than ten percent of the shares of certain funds within the Invesco Fund Complex, which may implicate the Loan Rule.

On June 20, 2016, the SEC Staff issued a “no-action” letter to another mutual fund complex (see Fidelity Management & Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances. On May 2, 2018, the SEC proposed amendments to the Loan Rule that, if adopted as proposed, would address many of the issues that led to issuance of the no-action letter. In connection with prior independence determinations, PricewaterhouseCoopers LLP communicated, as contemplated by the no-action letter, that it believes that it remains objective and impartial and that a reasonable investor possessing all the facts would conclude that PricewaterhouseCoopers LLP is able to exhibit the requisite objectivity and impartiality to report on the Trust’s financial statements as the independent registered public accounting firm. PricewaterhouseCoopers LLP also represented that it has complied with PCAOB Rule 3526(b)(1) and (2), which are conditions to the Trust relying on the no action letter, and affirmed that it is an independent accountant within the meaning of PCAOB Rule 3520. Therefore, the Sponsor, the Trust and PricewaterhouseCoopers LLP concluded that PricewaterhouseCoopers LLP could continue as the Trust’s independent registered public accounting firm. The Invesco Fund Complex relied upon the no-action letter in reaching this conclusion.

If in the future the independence of PricewaterhouseCoopers LLP is called into question under the Loan Rule by circumstances that are not addressed in the SEC’s no-action letter, the Trust will need to take other action in order for the Trust’s filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions could result in additional costs, impair the ability of the Trust to issue new shares or have other material adverse effects on the Trust. The SEC no-action relief was initially set to expire 18 months from issuance but has been extended by the SEC without an expiration date, except that the no-action letter will be withdrawn upon the effectiveness of any amendments to the Loan Rule designed to address the concerns expressed in the letter.

Filed Sep 7, 2018.
Source: SEC EDGAR, the filing index for accession 0001193125-18-269191. Last ingested by Listed: Oct 24, 2026, 15:11 ET. No prices; not investment advice.