| Summary of Significant Accounting Policies | (5) Summary of Significant Accounting Policies (a) Basis of Presentation The financial statements of the Fund have been prepared using U.S. generally accepted accounting principles (“U.S. GAAP”). The Fund has determined that it meets the definition of an investment company and has prepared the financial statements in conformity with U.S. GAAP for investment companies in conformity with accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 — Investment Companies (b) Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. Actual results could differ from those estimates. (c) Financial Instruments and Fair Value Investment transactions are recorded in the Statements of Financial Condition on a trade date basis at fair value with changes in fair value recognized in earnings in each period. U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. U.S. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods or market conditions may result in transfers in or out of an investment’s assigned level:
Level 1:
Prices are determined using quoted prices in an active market for identical assets.
Level 2:
Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.
Level 3:
Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. United States Treasury Obligations are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as developments related to specific securities, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. All debt obligations involve some risk of default with respect to interest and/or principal payments. Currency futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day NAV per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded. When market closing prices are not available, the Managing Owner may value an asset of the Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards. The levels assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. The following is a summary of the tiered valuation input levels as of March 31, 2017:
Level 1
Level 2
Level 3
Total
United States Treasury Obligations
$
—
$
34,979,122
$
—
$
34,979,122
Money Market Mutual Fund
2,541,926
—
—
2,541,926
2,541,926
34,979,122
—
37,521,048
Currency Futures Contracts (a)
528,539
—
—
528,539
Total Investments
$
3,070,465
$
34,979,122
$
—
$
38,049,587
(a)
Unrealized appreciation/(depreciation). The following is a summary of the tiered valuation input levels as of December 31, 2016:
Level 1
Level 2
Level 3
Total
United States Treasury Obligations
$
—
$
30,970,236
$
—
$
30,970,236
Money Market Mutual Fund
1,502,575
—
—
1,502,575
1,502,575
30,970,236
—
32,472,811
Currency Futures Contracts (a)
112,424
—
—
112,424
Total Investments
$
1,614,999
$
30,970,236
$
—
$
32,585,235
(a)
Unrealized appreciation/(depreciation). (d) Deposits with Commodity Broker and Custodian The Fund deposits cash and United States Treasury Obligations with its Commodity Broker subject to the CFTC regulations and various exchange and broker requirements. The combination of the Fund’s deposits with its Commodity Broker of cash and United States Treasury Obligations and the unrealized profit or loss on open futures contracts represents the Fund’s overall equity in its broker trading account. To meet the Fund’s maintenance margin requirements, the Fund holds United States Treasury Obligations. The Fund transfers cash to the Commodity Broker to satisfy variation margin requirements. The Fund earns interest on any excess cash deposited with the Commodity Broker and incurs interest expense on any deficit balance with the Commodity Broker. The Fund may deposit T-Bill ETFs and money market mutual funds with the Commodity Broker as margin, to the extent permissible under CFTC rules. The Fund’s remaining cash, United States Treasury Obligations, money market mutual fund, and T-Bill ETFs are on deposit with its Custodian. The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the Custodian. Such balances, if any at period-end, are shown on the Statements of Financial Condition under the payable caption Due to Custodian. (e) Investment Transactions and Investment Income Investment transactions are accounted for on a trade date basis. Realized gains (losses) from the sale or disposition of securities or derivatives are determined on a specific identification basis and recognized in the Statements of Income and Expenses in the period in which the contract is closed or the sale or disposition occurs, respectively. Interest income on United States Treasury Obligations is recognized on an accrual basis when earned. Premiums and discounts are amortized or accreted over the life of the United States Treasury Obligations. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. (f) Receivable/(Payable) for Shares Issued and Redeemed On any business day, an Authorized Participant may place an order to create or redeem Shares of the Fund. Cash settlement occurs at the creation order settlement date or the redemption order settlement date as discussed in Note 7. (g) Income Taxes The Fund is classified as a partnership for U.S. federal income tax purposes. Accordingly, the Fund will generally not incur U.S. federal income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as investors are individually liable for income taxes, if any, on their allocable share of the Fund’s income, gain, loss, deductions and other items. The Managing Owner has reviewed all of the Fund’s open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain tax positions taken or expected to be taken in future tax returns. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, the Managing Owner will monitor the Fund’s tax positions taken under the interpretation (and consult with its tax counsel from time to time when appropriate) to determine if adjustments to conclusions are necessary based on factors including, but not limited to, on-going analysis of tax law, regulation, and interpretations thereof. The major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States, 2013. (h) Currency Futures Contracts The Fund utilizes derivative instruments to achieve its investment objective. A futures contract is an agreement between counterparties to purchase or sell a specified underlying security or index for a specified price at a future date. All of the Fund’s currency futures contracts are held and used for trading purposes. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral with the Commodity Broker. During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as a receivable or payable on the Statements of Financial Condition. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. Realized gains (losses) and changes in unrealized appreciation (depreciation) on open positions are determined on a specific identification basis and recognized in the Statements of Income and Expenses in the period in which the contract is closed or the changes occur, respectively. The Fair Value of Derivative Instruments is as follows:
March 31, 2017
December 31, 2016
Risk Exposure/Derivative Type (a)
Assets
Liabilities
Assets
Liabilities
Currency risk
Currency Futures Contracts
$
528,539
$
—
$
112,424
$
—
(a)
Includes cumulative appreciation (depreciation) of currency futures contracts. Only current day’s variation margin receivable (payable) is reported in the March 31, 2017 and December 31, 2016 Statements of Financial Condition. The Effect of Derivative Instruments on the Statements of Income and Expenses is as follows:
For the Three Months Ended
Location of Gain or (Loss) on Derivatives
March 31,
Risk Exposure/Derivative Type
Recognized in Income
2017
2016
Currency risk
Currency Futures Contracts
Net Realized Gain (Loss)
$
232,612
$
522,592
Net Change in Unrealized Gain (Loss)
416,115
1,551,012
Total
$
648,727
$
2,073,604
The table below summarizes the average monthly notional value of futures contracts outstanding during the period:
For the Three Months Ended
March 31,
2017
2016
Average Notional Value - Short
$
(34,134,848
)
$
(45,859,615
) The brokerage agreement with the Commodity Broker provides for the net settlement of all financial instruments covered by the agreement in the event of default or termination of any one contract. The Managing Owner will utilize any excess cash held at the Commodity Broker to offset any realized losses incurred in the currency futures contracts, if available. To the extent that any excess cash held at the Commodity Broker is not adequate to cover any realized losses, a portion of the United States Treasury Obligations and T-Bill ETFs, if any, on deposit with the Commodity Broker will be sold to make additional cash available. For financial reporting purposes, the Fund offsets financial assets and financial liabilities that are subject to netting arrangements. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The following table presents derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of March 31, 2017, net by contract:
Gross Offset in the
Net Amounts Presented in
Gross Amounts Not Offset in the Statement of Financial Condition
Gross Amounts Recognized
Statement of Financial Condition
the Statement of Financial Condition
Financial Instruments (a)
Cash Collateral Pledged (a)
Net Amount
Assets
Currency Futures Contracts
$
528,539
$
(503,883
)
$
24,656
$
—
$
—
$
24,656
Liabilities
Currency Futures Contracts
$
(503,883
)
$
503,883
$
—
$
—
$
—
$
—
The following table presents derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of December 31, 2016, net by contract:
Gross Amounts Offset in the
Net Amounts Presented in
Gross Amounts Not Offset in the Statement of Financial Condition
Gross Amounts Recognized
Statement of Financial Condition
the Statement of Financial Condition
Financial Instruments (a)
Cash Collateral Pledged (a)
Net Amount
Assets
Currency Futures Contracts
$
134,300
$
—
$
134,300
$
—
$
—
$
134,300
Liabilities
Currency Futures Contracts
$
—
$
—
$
—
$
—
$
—
$
—
(a)
As of March 31, 2017 and December 31, 2016, a portion of the Fund’s U.S. Treasury Obligations were required to be deposited as maintenance margin in support of the Fund’s futures positions. (i) Brokerage Commissions and Fees The Fund incurs all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities by the Commodity Broker. These costs are recorded as Brokerage Commissions and Fees in the Statements of Income and Expenses. The Commodity Broker’s brokerage commissions and trading fees are determined on a contract-by-contract basis. On average, total charges paid to the Commodity Broker and the Predecessor Commodity Broker, as applicable, were less than $6.00 and $6.00 per round-turn trade for the Three Months Ended March 31, 2017 and 2016, respectively. (j) Routine Operational, Administrative and Other Ordinary Expenses After the Closing Date, the Managing Owner assumed all routine operational, administrative and other ordinary expenses of the Fund, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees and printing, mailing and duplication costs. Prior to the Closing Date, the Predecessor Managing Owner assumed all routine operational, administrative and other ordinary expenses of the Fund. Accordingly, such expenses are not reflected in the Statements of Income and Expenses of the Fund. (k) Non-Recurring Fees and Expenses The Fund pays all non-recurring and unusual fees and expenses (referred to as extraordinary fees and expenses in the Trust Agreement), if any, of itself, as determined by the Managing Owner. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities, litigation costs or indemnification or other unanticipated expenses. Such non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount. For the Three Months Ended March 31, 2017 and 2016, the Fund did not incur such expenses. |
