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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 80 added, 43 removed, 270 unchanged (31% of the section changed)

75 unchanged sentences

The composition of the Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of the Index Commodities.

The following table reflects the Fund weights of each Index Commodity or related futures contracts, as applicable, as of March 31, 2024:

The following table reflects the Fund weights of each Index Commodity or related futures contracts, as applicable, as of June 30, 2024:

Index Commodity

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Copper-Grade A

Closing Level as of March 31, 2024:

Closing Level as of June 30, 2024:

Please see http://www.invesco.com/ETFs with respect to the most recently available weighted composition of the Fund and the composition of the Index.

62 unchanged sentences

This cash is used to invest in United States Treasury Obligations, money market mutual funds and T-Bill ETFs, if any, and to meet margin requirements as a result of the positions taken in futures contracts to match the fluctuations of the Index.

As of the date of this Report, each of ABN AMRO Clearing Chicago LLC, BofA Securities, Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Cantor Fitzgerald & Co., Citadel Securities LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co., Goldman Sachs Execution & Clearing LP, Interactive Brokers LLC, Jefferies LLC, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co.

As of the date of this Report, each of ABN AMRO Clearing Chicago LLC, Bank of America Securities, BMO Capital Markets Corp., BNP Paribas Securities Corp., BofA Securities, Inc., Cantor Fitzgerald & Co., Citadel Securities LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co., Goldman Sachs Execution & Clearing LP, Interactive Brokers LLC, Jane Street Capital LLC, Jefferies LLC, JP Morgan Securities Inc., Morgan Stanley & Co.

LLC, Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC, Virtu Americas LLC and Virtu Financial Capital Markets LLC has executed a Participant Agreement and are the only Authorized Participants.

Operating Activities

Net cash flow provided by (used in) operating activities was $1.3 million and $5.8 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash flow provided by (used in) operating activities was $(35.0) million and $39.7 million for the six months ended June 30, 2024 and 2023, respectively.

These amounts primarily include net income (loss), net purchases and sales of money market mutual funds and net purchases and sales of United States Treasury Obligations and affiliated investments.

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While the Fund's performance reflects the appreciation and depreciation of those holdings, the Fund's performance, whether positive or negative, is driven primarily by its strategy of trading futures contracts with the aim of seeking to track the Index.

During the three months ended March 31, 2024, $6.0 million was received from sales and maturing United States Treasury Obligations.

During the three months ended March 31, 2023, $135.4 million was paid to purchase United States Treasury Obligations and $147.0 million was received from sales and maturing United States Treasury Obligations.

$4.6 million was received from sales of affiliated investments and $10.0 million was paid to purchase affiliated investments during the three months ended March 31, 2024.

$168.4 million was received from sales of affiliated investments and $175.8 million was paid to purchase affiliated investments during the three months ended March 31, 2023.

During the six months ended June 30, 2024, $74.0 million was paid to purchase United States Treasury Obligations and $57.0 million was received from sales and maturing United States Treasury Obligations.

During the six months ended June 30, 2023, $191.0 million was paid to purchase United States Treasury Obligations and $284.0 million was received from sales and maturing United States Treasury Obligations.

$104.8 million was received from sales of affiliated investments and $86.0 million was paid to purchase affiliated investments during the six months ended June 30, 2024.

$381.0 million was received from sales of affiliated investments and $333.9 million was paid to purchase affiliated investments during the six months ended June 30, 2023.

Financing Activities

The Fund’s net cash flow provided by (used in) financing activities was $(1.3) million and $(7.7) million during the three months ended March 31, 2024 and 2023, respectively.

This included $3.5 million and $53.3 million from Shares purchased by Authorized Participants and $4.4 million and $61.1 million from Shares redeemed by Authorized Participants during the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, distributions paid to Shareholders were $0.4 million.

No distributions were paid to Shareholders during the three months ended March 31, 2023.

The Fund’s net cash flow provided by (used in) financing activities was $35.0 million and $(41.7) million during the six months ended June 30, 2024 and 2023, respectively.

This included $82.6 million and $79.0 million from Shares purchased by Authorized Participants and $(47.2) million and $(120.7) million from Shares redeemed by Authorized Participants during the six months ended June 30, 2024 and 2023, respectively.

During the six months ended June 30, 2024, distributions paid to Shareholders were $0.4 million.

No distributions were paid to Shareholders during the six months ended June 30, 2023.

Results of Operations

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

The following graphs illustrate the percentage changes in (i) the market price of the Shares (as reflected by the line “Market”), (ii) the Fund’s NAV (as reflected by the line “NAV”), and (iii) the closing levels of the Index (as reflected by the line “DBIQ-OY Industrial Metals ER”).

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COMPARISON OF MARKET, NAV AND DBIQ-OY INDUSTRIAL METALS ER

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,

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POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,

POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

Performance Summary

This Report covers the three months ended March 31, 2024 and 2023.

This Report covers the three and six months ended June 30, 2024 and 2023.

Past performance of the Fund is not necessarily indicative of future performance.

4 unchanged sentences

Past results of the DBIQ-OY Industrial Metals TR are not necessarily indicative of future changes, positive or negative, in the closing levels of the DBIQ-OY Industrial Metals TR.

The section “Summary of the DBIQ-OY Industrial Metals TR and Underlying Index Commodity Returns for the Three Months Ended March 31, 2024 and 2023” below provides an overview of the changes in the closing levels of the DBIQ-OY Industrial Metals TR by disclosing the change in market value of each underlying component Index Commodity through a “surrogate” (and analogous) index that also reflects 3-month United States Treasury Obligations returns.

The section “Summary of the DBIQ-OY Industrial Metals TR and Underlying Index Commodity Returns for the Three and Six Months Ended June 30, 2024 and 2023” below provides an overview of the changes in the closing levels of the DBIQ-OY Industrial Metals TR by disclosing the change in market value of each underlying component Index Commodity through a “surrogate” (and analogous) index that also reflects 3-month United States Treasury Obligations returns.

Please note also that the Fund’s objective is to track the Index (not the DBIQ-OY Industrial Metals TR), and the Fund does not attempt to outperform or underperform the Index.

1 unchanged sentence

Summary of the DBIQ-OY Industrial Metals TR and Underlying Index Commodity

Returns for the Three Months Ended March 31, 2024 and 2023

Returns for the Three and Six Months Ended June 30, 2024 and 2023

AGGREGATE RETURNS FOR INDICES IN THE DBIQ-OY INDUSTRIAL METALS TR

Three Months Ended

Six Months Ended

Underlying Index

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If the Fund’s fees and expenses were to exceed the Fund’s Treasury Income, Money Market Income and T-Bill ETF Income, if any, the aggregate return on an investment in the Fund is expected to underperform the Excess Return Index.

FOR THE THREE MONTHS ENDED MARCH 31, 2024 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED JUNE 30, 2024 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2023

Fund Share Price Performance

For the three months ended March 31, 2024, the NYSE Arca market value of each Share decreased from $18.31 per Share to $17.95 per Share.

The Share price low and high for the three months ended March 31, 2024 and related change from the Share price December 31, 2023 was as follows:

Shares traded at a low of $16.80 per Share (-8.25%) on February 9, 2024 and a high of $18.17 per Share (-0.76%) on March 15, 2024.

For the three months ended June 30, 2024, the NYSE Arca market value of each Share increased from $17.95 per Share to $20.11 per Share.

The Share price low and high for the three months ended June 30, 2024 and related change from the Share price on March 31, 2024 was as follows:

Shares traded at a low of $18.10 per Share (0.81%) on April 1, 2024 and a high of $21.65 per Share (20.58%) on May 24, 2024.

The total return for the Fund on a market value basis was +12.03%.

Industrial metals were mixed in the first quarter of 2024.

Copper managed to lock in gains and aluminum was slightly lower, while Zinc prices continued to plunge.

Copper prices were supported by the severe shortfalls in concentrate supplies and expanded Chinese smelter capacity, leading to plunging treatment and refining charges (i.e., the profit for smelters to refine the metal, and hence forcing cutbacks in refined metal supply).

Nickel prices gained mostly in February and early March as low prices started to feed into its cost curve leading to output cuts.

Iron Ore and Zinc, both heavily linked to China’s property sector, continued to suffer.

For the three months ended March 31, 2023, the NYSE Arca market value of each Share increased from $19.57 per Share to $20.19 per Share.

The Share price low and high for the three months ended March 31, 2023 and related change from the Share price December 31, 2022 was as follows:

Shares traded at a low of $19.19 per Share (-1.94% ) on January 4, 2023 and a high of $22.28 per Share (+13.82%) on January 26, 2023.

Industrial metals saw strong positive performance in the second quarter of 2024.

Zinc was the top performer among the three metals included in the Fund, with front month prices up over 20% as the consequences of tight concentrate supplies and plunging treatment charges rippled through the processing chains.

Copper and aluminum also continued their supply-driven gains through most of May, with copper even experiencing a short squeeze, sending prices to a record high.

However, both retreated on increased profit-taking and hawkish Federal Reserve rhetoric.

This dented broader investor risk appetite which had improved in the first quarter on hopes that the Federal Reserve would start cutting rates imminently.

Adding to the bullish sentiment, the US and United Kingdom ("UK") issued fresh sanctions on Russian copper, aluminum, and nickel in April.

However, physical markets did turn weaker in June as China remained well-supplied in copper and European zinc smelters announced plans to restart.

For the three months ended June 30, 2023, the NYSE Arca market value of each Share decreased from $20.19 per Share to $17.97 per Share.

The Share price low and high for the three months ended June 30, 2023 and related change from the Share price on March 31, 2023 was as follows:

Shares traded at a low of $17.50 per Share (-13.30% ) on May 25, 2023 and a high of $20.09 per Share (-0.50%) on April 18, 2023.

The total return for the Fund on a market value basis was -11.00%.

Industrial metal commodities had a strong start to 2023, with the Fund posting its largest quarterly gain since 2010, as growing geopolitical tensions over the war in Ukraine further strained markets that were already facing critically low supplies.

Following an over 40% rally in 2022, as China imposed production curbs to meet its climate ambitions, aluminum front month futures soared again to an all-time high this quarter, given Russia’s role as the world’s largest aluminum producer behind China.

Furthermore, heightened energy prices due to the war caused power costs to spike even higher, leading to additional cuts in smelter production across all metals, amid rapidly declining exchange inventories.

Following the slight positive performance in the first quarter, industrial metals plunged sharply in the second quarter of 2023 with aluminum, copper and zinc all detracting from the Fund’s performance.

Zinc fared the worst among the three with front month prices dropping nearly 20% through the quarter as Chinese demand continued to disappoint and smelters were expected to restart amid the plunge in energy prices.

Aluminum front month futures also fell over 10% on the same reasons, though production curtailments in Yunnan, China due to their hydropower shortage limited some of the downside.

China stimulus expectations also provided some support for copper, but the metal still posted a loss.

Fund Share Net Asset Performance

For the three months ended March 31, 2024, the NAV of each Share decreased from $18.28 per Share to $17.94 per Share.

Falling commodity futures contract prices for aluminum and zinc were partially offset by rising commodity futures contract prices for copper during the three months ended March 31, 2024, contributing to an overall 2.98% decrease in the level of the Index and to a 1.69% decrease in the level of the DBIQ-OY Industrial Metals TR.

For the three months ended June 30, 2024, the NAV of each Share increased from $17.94 per Share to $20.16 per Share.

Rising commodity futures contract prices for aluminum, zinc and copper during the three months June 30, 2024 contributed to an overall 11.20% increase in the level of the Index and to a 12.70% increase in the level of the DBIQ-OY Industrial Metals TR.

The total return for the Fund on a NAV basis was +12.37%.

Net income (loss) for the three months ended March 31, 2024 was $(2.2) million, primarily resulting from $1.6 million of income, net realized gain (loss) of $(0.1) million, net change in unrealized gain of $(3.5) million and net operating expenses of $0.2 million.

For the three months ended March 31, 2023, the NAV of each Share increased from $19.50 per Share to $20.21 per Share.

Rising commodity futures contract prices for aluminum, zinc and copper during the three months ended March 31, 2023 contributed to an overall 2.27% increase in the level of the Index and to a 3.48% increase in the level of the DBIQ-OY Industrial Metals TR.

Net income (loss) for the three months ended June 30, 2024 was $14.6 million, primarily resulting from $2.0 million of income, net realized gain (loss) of $6.7 million, net change in unrealized gain of $6.2 million and net operating expenses of $0.3 million.

For the three months ended June 30, 2023, the NAV of each Share decreased from $20.21 per Share to $17.94 per Share.

Falling commodity futures contract prices for aluminum, zinc and copper during the three months ended June 30, 2023 contributed to an overall 12.44% decrease in the level of the Index and to a 11.31% decrease in the level of the DBIQ-OY Industrial Metals TR.

The total return for the Fund on a NAV basis was -11.18%.

Net income (loss) for the three months ended March 31, 2023 was $5.8 million, primarily resulting from $3.6 million of income, net realized gain (loss) of $(12.1) million, net change in unrealized gain (loss) of $14.7 million and net operating expenses of $0.4 million.

Net income (loss) for the three months ended June 30, 2023 was $(24.4) million, primarily resulting from $3.1 million of income, net realized gain (loss) of $(30.8) million, net change in unrealized gain (loss) of $3.6 million and net operating expenses of $0.4 million.

FOR THE SIX MONTHS ENDED JUNE 30, 2024 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2023

Fund Share Price Performance

For the six months ended June 30, 2024, the NYSE Arca market value of each Share increased from $18.31 per Share to $20.11 per Share.

The Share price low and high for the six months ended June 30, 2024 and related change from the Share price on December 31, 2023 was as follows:

Shares traded at a low of $16.80 per Share (-8.25%) on February 9, 2024, and a high of $21.65 per Share (18.25%) on May 21, 2024.

The total return for the Fund on a market value basis was +9.83%.

Industrial metals ended the first half of 2024 in positive territory with all three metals included in the Fund posting gains.

Copper and zinc were supported by shortfalls in concentrate supplies and plunging treatment and refining charges, i.e., the profit for smelters to refine the metal, forcing cutbacks in refined metal supply.

Aluminum was the weakest of the three but still gained significantly on tightening physical fundamentals.

Adding to this, the US and UK issued fresh sanctions on Russian copper, aluminum, and nickel in April.

Furthermore, an improving macro backdrop, bolstered by expectations for a soft landing in the US and brighter Chinese outlook, underpinned stronger prices.

However, the sector did retreat sharply through June with Federal Reserve rate cut expectations repeatedly being pushed out and physical markets turning weaker – China remained well-supplied in copper and European zinc smelters announced plans to restart idled capacity.

For the six months ended June 30, 2023, the NYSE Arca market value of each Share decreased from $19.57 per Share to $17.97 per Share.

The Share price low and high for the six months ended June 30, 2023 and related change from the Share price on December 31, 2022 was as follows:

Shares traded at a low of $17.50 per Share (-10.58%) on May 25, 2023, and a high of $22.28 per Share (+13.82%) on January 26, 2023.

The total return for the Fund on a market value basis was -8.18%.

While industrial metals posted slight positive performance in the first quarter, the complex plunged sharply in the second quarter of 2023, leaving the Fund in deep negative territory year-to-date.

For the first quarter, while all of the Fund’s components rallied in January, continuing its China and “Fed-pivot” driven rally from year-end 2022, prices eased through February and the first half of March, pressured by hotter-than-expected labor data, resilient US inflation and a lack of bullish data out of China to support indications the country was reopening.

A broader risk-off move triggered by the turmoil in the banking sector also pressured the commodities in general to end the quarter.

However, in the second quarter, continued disappointing Chinese data, coupled with expectations for smelter restarts amid weak energy prices and easing supply concerns, dealt a heavy blow to the commodity sector.

Fund Share Net Asset Performance

For the six months ended June 30, 2024, the NAV of each Share increased from $18.28 per Share to $20.16 per Share.

Rising commodity futures contract prices for aluminum, zinc and copper during the six months ended June 30, 2024 contributed to an overall 7.88% increase in the level of the Index and to a 10.79% increase in the level of the DBIQ-OY Industrial Metals TR.

The total return for the Fund on a NAV basis was +10.29%.

Net income (loss) for the six months ended June 30, 2024 was $12.4 million, primarily resulting from $3.7 million of income, net realized gain (loss) of $6.6 million, net change in unrealized gain of $2.6 million and net operating expenses of $0.5 million.

For the six months ended June 30, 2023, the NAV of each Share decreased from $19.50 per Share to $17.95 per Share.

Falling commodity futures contract prices for aluminum and zinc were partially offset by rising commodity for copper during the six months ended June 30, 2023 contributed to an overall 10.45% decrease in the level of the Index and to a 8.22% decrease in the level of the DBIQ-OY Industrial Metals TR.

The total return for the Fund on a NAV basis was -7.95%.

Net income (loss) for the six months ended June 30, 2023 was $(18.6) million, primarily resulting from $6.8 million of income, net realized gain (loss) of $(42.9) million, net change in unrealized gain (loss) of $18.3 million and net operating expenses of $0.8 million.

Critical Accounting Estimates

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The Fund calculates VaR using the actual historical market movements of the Fund’s net assets.

The following table indicates the trading VaR associated with the Fund’s net assets as of March 31, 2024.

For the Three Months Ended

March 31, 2024

The following table indicates the trading VaR associated with the Fund’s net assets as of June 30, 2024.

For the Six Months Ended

June 30, 2024

Daily Volatility

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The following qualitative disclosures regarding the Fund’s market risk exposures—except for those disclosures that are statements of historical fact—constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.

The Fund’s primary market risk exposures are subject to numerous uncertainties, contingencies and risks.

The Fund’s primary market risk exposures are subject to numerous uncertainties, contingencies and

Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures of the Fund.

1 unchanged sentence

Investors may lose all or substantially all of their investment in the Fund.

The following were the primary trading risk exposures of the Fund as of March 31, 2024 by Index Commodity:

The following were the primary trading risk exposures of the Fund as of June 30, 2024 by Index Commodity:

The price of aluminum is volatile.

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis