# Invesco CurrencyShares Euro Trust: Form 10-Q for the period ended Sep 30, 2019

- Company: [Invesco CurrencyShares Euro Trust](/companies/fxe.md) (CIK 1328598)
- Form: 10-Q
- Filed: 2019-11-08
- Accepted by EDGAR: Nov 8, 2019, 22:30 ET
- Period: 2019-09-30
- Accession: 0001564590-19-042355
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1328598/000156459019042355/fxe-10q_20190930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1328598/000156459019042355/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-07-01 to 2019-09-30 | $0 | us-gaap:Revenues |
| Revenue | 9 months, 2019-01-01 to 2019-09-30 | $0 | us-gaap:Revenues |
| Interest expense | 3 months, 2019-07-01 to 2019-09-30 | $239.4k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2019-01-01 to 2019-09-30 | $724.4k | us-gaap:InterestExpense |
| Income tax | 9 months, 2019-01-01 to 2019-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-07-01 to 2019-09-30 | −$475.5k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2019-01-01 to 2019-09-30 | −$1.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-07-01 to 2019-09-30 | −$0.21 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2019-01-01 to 2019-09-30 | −$0.65 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2019-01-01 to 2019-09-30 | −$1.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2019-09-30 | $253.9m | us-gaap:Cash |
| Total assets | at 2019-09-30 | $253.9m | us-gaap:Assets |
| Total liabilities | at 2019-09-30 | $158.0k | us-gaap:Liabilities |
| Shares outstanding | at 2019-09-30 | 2,450,000 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 10,917 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 euro, as the value of the Shares relates directly to the value of the euro 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® Euro Trust (the “Trust”) is a grantor trust that was formed on December 5, 2005. The Trust issues shares (the “Shares”) in blocks of 50,000 (a “Basket”) in exchange for deposits of euro and distributes euro in connection with the redemption of Baskets. The Shares began trading on the New York Stock Exchange under the ticker symbol “FXE” on December 12, 2005. 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 in USD of the euro 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 euro 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 euro. 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 euro. 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 euro in the Trust at the end of the preceding day accrued but unpaid interest, if any, euro receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor’s fee, euro payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in USD based on the euro/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.

### Movements in the Price of the Euro

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

### NAV per Share; Valuation of the Euro

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 euro:

### 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, 2019 was an annual nominal rate of -0.40%. The following chart provides the daily rate paid by the Depository since September 30, 2014:

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 euro 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, 2019.

### 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 Estimates in the Form 10-K transition report of the Trust for the period ended December 31, 2018.

### Results of Operations

As of December 31, 2018, the number of euro owned by the Trust was 277,323,973, resulting in a redeemable capital Share value of $316,828,837. During the nine months ended September 30, 2019, an additional 1,850,000 Shares were created in exchange for 176,189,533 euro and 2,300,000 Shares were redeemed in exchange for 219,334,306 euro. In addition, 1,301,938 euro were withdrawn to pay the portion of the Sponsor’s fee that exceeded the interest earned. As of September 30, 2019, the number of euro owned by the Trust was 232,877,262, resulting in a redeemable capital Share value of $253,724,741.

A decrease in the Trust’s redeemable capital Share value from $316,828,837 at December 31, 2018 to $253,724,741 at September 30, 2019, was primarily the result of a decrease in the number of Shares outstanding from 2,900,000 at December 31, 2018 to 2,450,000 at September 30, 2019 coupled with a decrease in the Closing Spot Rate from 1.1432 at December 31, 2018 to 1.0902 at September 30, 2019.

No interest income was earned during the three months ended September 30, 2018 and the three months ended September 30, 2019, and no interest income was earned during the nine months ended September 30, 2018 and the nine months ended September 30, 2019, due to an annual nominal interest rate which remained at or below 0.00% through those periods, as set forth in the chart above.

The Sponsor’s fee accrues daily at an annual nominal rate of 0.40% of the euro in the Trust. Due primarily to a decrease in the weighted-average euro in the Trust, the Sponsor’s fee decreased from $247,428 for the three months ended September 30, 2018 to $236,042 for the three months ended September 30, 2019, and the Sponsor’s fee decreased from $912,340 for the nine months ended September 30, 2018 to $710,680 for the nine months ended September 30, 2019. Because the annual interest rate paid by the depository remained below 0.00%, the Trust incurred interest expense. Due primarily to a decrease in the weighted-average euro in the Trust, interest expense decreased from $253,063 for the three months ended September 30, 2018 to $239,411 for the three months ended September 30, 2019, and interest expense decreased from $937,417 for the nine months ended September 30, 2018 to $724,441 for the nine months ended September 30, 2019. The only expenses of the Trust during the nine months ended September 30, 2019 were the Sponsor’s fee and interest expense.

The Trust’s net comprehensive income (loss) for the three months ended September 30, 2019 was $(475,453) due to the Sponsor’s fee of $236,042 and interest expense of $239,411 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the nine months ended September 30, 2019 was $(1,435,121) due to the Sponsor’s fee of $710,680 and interest expense of $724,441 exceeding interest income of $0.

Cash dividends were not paid by the Trust for the nine months ended September 30, 2018 and the nine months ended September 30, 2019 as the Trust’s interest income did not exceed the Trust’s expenses during those periods.

## Market risk

As filed, 302 characters.

Except as described above with respect to fluctuations in the euro/USD exchange rate and changes in the nominal annual interest rate paid by the Depository on euro 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, 1,878 characters.

Under the supervision and with the participation of the management of the Sponsor, including Daniel Draper, 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 Rule 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, Daniel Draper, 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, 2019 that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.

## Risk factors

As filed, 3,398 characters.

***The value of the Shares relates directly to the value of the euro held by the Trust. Fluctuations in the price of the euro could materially and adversely affect the value of the Shares.***

The Shares are designed to reflect the price of the euro, plus accumulated interest, if any, less the Trust’s expenses. The price of the euro has fluctuated widely over the past several years, and volatility has increased in recent months, possibly due, in part, to concern over the sovereign debt levels of certain European Union members and the potential impact of this debt on the composition of the European Union members in the eurozone and the value of the euro. Several factors may affect the price of the euro, including:

- Sovereign debt levels and trade deficits;
- Domestic and foreign inflation rates and interest rates and investors’ expectations concerning those rates;
- Currency exchange rates;
- Investment and trading activities of mutual funds, hedge funds and currency funds; and
- Global or regional political, economic or financial events and situations.

In addition, the euro may not maintain its long-term value in terms of purchasing power in the future. When the price of the euro declines, the Sponsor expects the price of a Share to decline as well.

On June 23, 2016, the citizens of the United Kingdom, a European Union member that had not adopted the euro as its currency, voted to leave the European Union. In March 2017, the British government invoked Article 50 of the Treaty on European Union, which formally triggered a negotiation process with the European Union. In March 2018, the parties agreed to a transition period of 21 months — from March 29, 2019 until the end of 2020 — before the United Kingdom leaves the European Union completely, assuming approval of a withdrawal agreement. Withdrawal from the European Union is controversial in the United Kingdom notwithstanding the 2016 vote. In December 2018, the European Court of Justice ruled that, subject to certain conditions, a member state could revoke notification of its intention to withdraw from the European Union. The British government and the European Union negotiated a withdrawal agreement, but the British Parliament did not approve that agreement. On October 17, 2019, the British government and the European Union announced that a new withdrawal agreement had been negotiated, but the Parliament must approve the new withdrawal agreement before it will become effective. As a result, there remains considerable uncertainty around the withdrawal. Failure to obtain parliamentary approval of the new withdrawal agreement would mean that the United Kingdom would leave the European Union on January 31, 2020 with no agreement (a so-called “hard Brexit”), unless the United Kingdom requests, and is granted, another extension of Article 50 from the European Union. Any such extension of Article 50 would need to be unanimously approved by the 27 European Union member states. The consequences for the economies of the European Union members of the United Kingdom exiting the European Union are unknown and unpredictable, especially in the case of a hard Brexit, as is the future direction of the value of the euro and the Shares. These uncertainties could increase volatility in the market prices of the euro and the Shares. Increased volatility could, in itself, decrease the value of the Shares.

Filed Nov 8, 2019.
Source: SEC EDGAR, the filing index for accession 0001564590-19-042355. Last ingested by Listed: Oct 24, 2026, 15:11 ET. No prices; not investment advice.