Mail Stop 4569
September 8, 2005
By U.S. Mail and facsimile to (313) 234-2800
Mr. Carl G. Verboncouer
Chief Executive Officer and Treasurer
Rydex Investments
9601 Blackwell Road - Suite 500
Rockville, Maryland 20850
Re: Euro Currency Trust
Amendment One to Registration Statement on Form S-1
Filed on August 12, 2005
File Number 333-125581
Dear Mr. Verboncouer:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note your response to comment number 2 and will process your
amendment with missing information (e.g., exhibits, financials,
missing text throughout, such as in the section on experts, etc.).
Since this missing information triggers a number of disclosure
matters, we will need sufficient time to process the amendment
when
it is included. Please understand that its effect on disclosure
throughout the document may cause us to raise issues in areas not
previously commented on, and we may take a significant amount of
time
to review your document. Also, the staff will not be in a
position
to comment further on your disclosure until you provide your
audited
financial statements and relevant stub period disclosure.
2. We consider the sale of shares by the Fund to Authorized
Participants and the resale of these shares by Authorized
Participants to investors as one offering by the Fund through the
Authorized Participants, which are acting as underwriters. Please
confirm to us that the Authorized Participants will distribute
this
prospectus in connection with their sales to other investors.
Also,
please revise your document, including the prospectus cover page,
the
description of subscription procedures, and the plan of
distribution,
to clearly describe the terms of the offering to persons who
purchase
your shares from the Authorized Participants. Please ensure that
the
material terms of those offerings, including the offering price,
are
clearly disclosed.
3. Since the Authorized Purchasers who will be purchasing units in
this offering will be re-selling these units to investors, please
identify the Authorized Purchasers as underwriters pursuant to
Section 2(11) of the Securities Act of 1933. In addition, please
revise your disclosure accordingly.
4. We note your response to comment number 10. Please provide us
with copies of any sales literature that you create.
5. We note your response to prior comment 7. Since the Authorized
Participants will be acting as underwriters, securities purchased
directly from the Trust by the Authorized participants must have a
price. Consequently, revise this section to state the price or
the
specific pricing formula that will be used to sell the securities
purchased by the Authorized participants to the retail market.
6. In the event that the Authorized Participants intend to engage
in
market-making, specialist-trading, or other activities, please
provide your analysis as to how those transactions will be priced
and
whether the Authorized Participants would have on-going prospectus
delivery obligations after the initial sale of the securities.
7. We note your response to prior comment 11. Please provide your
analysis as to how the sale of the baskets prior to the
effectiveness
of this registration statement does not constitute a violation of
Section 5 as a private sale that would be integrated into the
public
offering. Also, please advise the staff how negotiating with
Hunter
Structured Products LLC during the pendency of this registration
statement does not constitute either general solicitation or an
unregistered offer.
8. Please confirm that you will identify Authorized Participants
as
an underwriter using a pre-effective or post-effective amendment
prior to the Authorized Participant commencing selling of the
Trust`s
shares.
Glossary, page ii
9. Move this section so that it appears after the disclosure
required
by Items 501-503 of Regulation SK.
Prospectus Summary, page 1
10. Revise your disclosure to identify whether you have sought to
have the Trust`s units listed for trading on any other market.
11. Revise this section to clarify that the Sponsor will take a
minimum of 4.8% of the Trust`s net asset value annually as fees.
Also, please identify the amount of all other known fees, like the
annual fee paid to Foley & Lardner LLP.
12. We note your reference to Euro Currency Trust securities as a
"cost-effective" way to access the market for euros. However, a
shareholder would be subject to fees totaling as much as 4.8% per
annum or more while their capital is invested in the Trust`s
securities. Please balance your discussion on page 2, as well as
the
similar discussion on page 18, to discuss the fees that an
investor
is subject to when investing in the securities rather than
directly
in the currency.
The Offering, page 3
13. Add a section that clarifies that investors are subject to any
fees charged by their brokerage in order to purchase or trade the
Trust`s securities.
Summary Financial Condition, page 8
14. We note your response to comment number 18. We see that you
deleted the example that we mentioned, however, it is unclear
whether
or not the $1 million fee will still be borne ultimately by the
investor. Please tell us if this fee still exists and if it will
be
borne by the investor. Also, please revise to disclose:
a. if you anticipate any non-ordinary recurring expenses; and
b. what types of "other Trust expenses" in terms of frequency and
magnitude that might arise from time to time as mentioned on page
4.
The interest rate earned by the Trust, although competitive, may
not
be the..., page 11
15. We note your response to comment number 29, however, given the
materiality of the termination of the Trust, this should be
included
as a risk factor. Please revise your disclosure.
Creation and Redemption of Shares, page 27
16. We note your response to comment number 14. Please revise to
make it clear from the diagram that the investors can also sell
their
shares.
Trust Expenses, page 20
17. We note your response to comment number 33. The investor needs
clear disclosure on fees so that the price of the security tracks
the
euro and the fees do not distort the price. Given the impact that
expenses have on the return to investors, please revise to
disclose a
table or diagram in accordance with the prior comment number 33.
18. Provide the staff, with a view towards improved disclosure,
with
a chart or tabular presentation showing all fees that may be
charged
on an investment in the Trust or may be charged to the Trust and
paid
out of the Trust`s assets.
Description of the Depositary Trust Agreement, page 26
19. The deposit of the euros appears to be commingled with other
depositors, which could create a credit risk in the event of
insolvency claims. Please disclose whether or not euros that are
deposited into the account are individually allocated, and if not,
please include a risk factor in this regard.
Expenses of the Trust, page 33
20. We note your statement that the main expenses that the Trust
will
incur with the the 0.4% monthly management fee paid to the
Sponsor.
Please revise this section to discuss how the fees owed to the
Distributor and to Foley & Lardner LLP will be paid. Also, please
explain when extra expenses will come out of the Sponsor`s fee and
when they will be charged directly to the Trust.
Legal Matters, page 41
21. Revise this section or another portion of the prospectus to
identify the amount of the annual fee paid to Foley & Lardner LLP.
Signature Page
22. Revise to include the signatures of a majority of the members
of
the board of directors of PADCO Advisors. Please refer to
Instruction 1 to the signature page of Form S-1.
Exhibit 5.1
23. Please revise to disclose in your legal opinion your
determination of whether or not the securities are duly
authorized.
24. Please revise the last paragraph to remove the implication
that
receipt purchasers cannot rely upon this opinion.
25. In the first full paragraph on page 2 of your legal opinion,
you
assume that "the party who executed the document had proper
authority." Counsel cannot assume that the officers signing the
certificates have the legal authority to do so; this is a
conclusion
of law which is a necessary requirement of the legal opinion.
26. Please revise this opinion to clarify that the representations
or
statements of officers and directors upon which you rely or upon
which you base your assumptions are factual in nature and do not
constitute legal conclusions. For example, in the first full
paragraph on page 2 of your legal opinion you assume that all
representations and statements set forth in certain documents are
true and correct. Please revise your disclosure accordingly.
Exhibit 8.1
27. Please revise the last paragraph to remove the language
limiting
reliance upon the tax opinion to the addressee of the opinion.
Any
implication that purchasers of the Trust`s receipts cannot rely
upon
the opinion is inappropriate.
Statement of Financial Condition, page F-3
28. Please revise the line item "Redeemable Capital Shares..." to
reflect the number of shares issued and outstanding and the number
of
shares authorized for issuance. Refer to Regulation S-X, Rule 5-
02.30.
Notes to Financial Statement, page F-4
Note 2D: Revenue Recognition
29. Please revise to include a description of the accounting
treatment and impact on gains and losses for changes in the
exchange
rates between trade date and settlement date for euro purchases
and
redemptions.
30. Please revise this footnote to describe the revenue
recognition
associated with the sales of euros in order to pay expenses.
Exhibit A (Response to Comment 48)
General
31. Please tell us the period for which audited financial
statements
are to be filed by amendment and the name of your independent
auditors.
Statement of Financial Condition
32. For the first period of presentation of financial condition,
please revise the description of the period to reflect the first
period end.
33. Please revise the line item "Redeemable Capital Shares..." to
reflect the number of shares issued and outstanding and the number
of
shares authorized for issuance. Refer to Regulation S-X, Rule 5-
02.30.
Income Statement
34. You plan to recognize gains and losses from the sales of euros
to
fund redemptions and from the unrealized euro appreciation.
However,
euros will also be sold in order to pay the expenses of the Trust.
Please revise your realized gain (loss) caption accordingly.
Statement of Changes in Shareholders` Equity
35. Please revise to label the first line balance at beginning of
the
period and label the final line balance as of end of the period.
36. Revise this statement or provide disclosure in the footnotes
of
the changes in the number of shares outstanding for each period
for
which a statement of operations is required to be presented.
Refer
to Regulation S-X, Article 5-03.30 for further guidance.
Notes to Financial Statements-General
37. Please add a footnote to describe the items included in the
balance cash and cash equivalents for use in the statement of cash
flows. Refer to paragraph 8 of SFAS 95.
Note 2C: Federal Income Taxes
38. In your future filings, please expand your disclosures to
include
the amounts passed through to the shareholders for income tax
purposes. Also, disclose a reconciliation of taxable income to
book
net income.
Note 2D: Revenue Recognition
39. Please revise to include a description of the accounting
treatment and impact on gains and losses for changes in the
exchange
rates between trade date and settlement date for euro purchases
and
redemptions.
40. Please revise this footnote to describe the revenue
recognition
associated with the sales of euros in order to pay expenses.
Note 5: Related Parties
41. Please revise to include the disclosures required under
paragraph
2 of SFAS 57.
* * * * *
Market Regulation
42. You indicate that Authorized Participants will pay the
Transaction Fee to create and redeem Baskets in dollars. Please
indicate whether these payments will be kept in dollar-denominated
accounts, and if so, where they will be held, or alternatively
converted to Euros and commingled with the Trust`s other assets.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review by showing deleted
sections as strikethrough and added sections as underlining.
Please
furnish a cover letter with your amendment that keys your
responses
to our comments and provides any requested information. Detailed
cover letters greatly facilitate our review. Please understand
that
we may have additional comments after reviewing your amendment and
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
??should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
??the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
??the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in connection with our review
of
your filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Donald Walker at (202) 551-3490 or Margaret
Fitzgerald at (202) 551-3556 if you have questions regarding
comments
on the financial statements and related matters. Please contact
Timothy A. Geishecker at (202) 551-3422 or me at (202) 551-3419
with
any other questions.
Sincerely,
Christian Windsor
Special Counsel
cc: Patrick Daugherty, Esq.
Jonathan S. Mallin, Esq.
Foley & Lardner LLP
One Detroit Center
500 Woodward Avenue, Suite 2700
Detroit, MI 48226-3489