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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 69 added, 37 removed, 246 unchanged (30% of the section changed)

139 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, 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., Bank of America Securities, 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 $19.8 million and $12.3 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash flow provided by (used in) operating activities was $40.6 million and $35.4 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, $13.6 million was paid to purchase United States Treasury Obligations and $14.0 million was received from sales and maturing United States Treasury Obligations.

During the three months ended March 31, 2023, $101.8 million was paid to purchase United States Treasury Obligations and $138.0 million was received from sales and maturing United States Treasury Obligations.

$82.8 million was received from sales of affiliated investments and $85.3 million was paid to purchase affiliated investments during the three months ended March 31, 2024.

$129.6 million was received from sales of affiliated investments and $143.2 million was paid to purchase affiliated investments during the three months ended March 31, 2023.

During the six months ended June 30, 2024, $66.2 million was paid to purchase United States Treasury Obligations and $83.0 million was received from sales and maturing United States Treasury Obligations.

During the six months ended June 30, 2023, $183.8 million was paid to purchase United States Treasury Obligations and $241.0 million was received from sales and maturing United States Treasury Obligations.

$157.5 million was received from sales of affiliated investments and $162.8 million was paid to purchase affiliated investments during the six months ended June 30, 2024.

$270.1 million was received from sales of affiliated investments and $275.8 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 $(19.8) million and $(12.3) million during the three months ended March 31, 2024 and 2023, respectively.

This included $20.0 million and $14.1 million from Shares purchased by Authorized Participants and $39.6 million and $26.4 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 $0.2 million.

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

The Fund’s net cash flow provided by (used in) financing activities was $(40.6) million and $(35.4) million during the six months ended June 30, 2024 and 2023, respectively.

This included $29.4 million and $36.8 million from Shares purchased by Authorized Participants and $69.8 million and $72.2 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 $0.2 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 Opt Yield Crude Oil Index ER TM ”).

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Similarly, no representation is being made that the Fund will generate profits or losses similar to the Fund’s past performance or changes in the Index closing levels.

COMPARISON OF MARKET, NAV AND DBIQ OPT YIELD CRUDE OIL INDEX ER TM FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

COMPARISON OF MARKET, NAV AND DBIQ OPT YIELD CRUDE OIL INDEX ER TM 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, 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.

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

The section “Summary of the DBIQ-OY CL 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 CL TR by disclosing the change in market value of the 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 CL 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 CL TR by disclosing the change in market value of the 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 CL TR), and the Fund does not attempt to outperform or underperform the Index.

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Summary of the DBIQ-OY CL 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

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 increased from $13.92 per Share to $15.54 per Share.

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

Shares traded at a low of $13.81 per Share (0.79%) on January 2, 2024 and a high of $15.54 per Share (+11.64%) on March 28, 2024.

For the three months ended June 30, 2024, the NYSE Arca market value of each Share increased from $15.54 per Share to $15.87 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 $14.50 per Share (-6.66%) on June 4, 2024 and a high of $16.12 per Share (+3.73%) on April 15, 2024.

The total return for the Fund on a market value basis was +2.12%.

Crude oil prices gained in the first quarter of 2024 as escalating tensions in the Middle East and Ukraine raised supply disruption risk.

Crude oil experienced a small loss in the second quarter of 2024.

While some of that loss was driven by broader risk off sentiment due to the repeated delays of Federal Reserve rate cut expectations, other drivers included fading geopolitical risk premium, US crude inventory builds due to unplanned refinery outages and unattractive refining margins, and OPEC announcing plans to gradually bring back barrels later this year.

While OPEC also announced an extension of some cuts, this was largely expected and had a minimal impact on prices.

For the three months ended June 30, 2023, the NYSE Arca market value of each Share decreased from $14.58 per Share to $14.13 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 $13.32 per Share (-8.64%) on May 3, 2023 and a high of $15.64 per Share (+7.27%) on April 12, 2023.

The total return for the Fund on a market value basis was -3.09%.

In the second quarter of 2023, crude oil prices were pressured by the slower than expected recovery in China and recession concerns driven by US Federal Reserve policy, banking sector stress, and political controversy surrounding the US debt ceiling, fueling a broader risk-off sentiment.

Russian oil supplies also continued to flow despite the ban on imports in some countries which contributed to increased oil supply.

Further, higher interest rates led to higher storage costs, which resulted in a great deal of both financial and physical destocking.

Fund Share Net Asset Performance

For the three months ended June 30, 2024, the NAV of each Share increased from $15.57 per Share to $15.86 per Share.

Rising commodity futures contract prices for Light Sweet Crude Oil during the three months ended June 30, 2024 contributed to an overall 0.71% increase in the level of the Index and to a 2.06% increase in the level of the DBIQ-OY CL TR.

The total return for the Fund on a NAV value basis was +1.86%.

Net income (loss) for the three months ended June 30, 2024 was $4.0 million, primarily resulting from $3.2 million of income, net realized gain (loss) of $1.8 million, net change in unrealized gain (loss) of $(0.6) million and net operating expenses of $0.4 million.

For the three months ended June 30, 2023, the NAV of each Share decreased from $14.59 per Share to $14.15 per Share.

Falling commodity futures contract prices for Light Sweet Crude Oil during the three months ended June 30, 2023 contributed to an overall 3.97% decrease in the level of the Index and to a 2.73% decrease in the level of the DBIQ-OY CL TR.

The total return for the Fund on a NAV value basis was -3.02%.

Net income (loss) for the three months ended June 30, 2023 was $(7.3) million, primarily resulting from $3.1 million of income, net realized gain (loss) of $(2.4) million, net change in unrealized gain (loss) of $(7.5) million and net operating expenses of $0.5 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 $13.92 per Share to $15.87 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 $13.81 per Share (-0.79%) on January 2, 2024 and a high of $16.12 per Share (+15.81%) on April 15, 2024.

The total return for the Fund on a market value basis was +14.01%.

Crude oil performed positively in the first half of 2024.

Prices gained as escalating tensions in the Middle East and Russia/Ukraine raised supply concerns, ending the first half of the year up around 15%.

In addition to geopolitics, an improving macro backdrop amid a resilient US economy, and expected Federal Reserve easing also supported broader risk assets like energy.

Furthermore, the extended OPEC+ production cuts also helped to tighten global balances, providing a sturdy floor for prices.

For the three months ended March 31, 2023, the NYSE Arca market value of each Share decreased from $15.21 per Share to $14.58 per Share.

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

Shares traded at a low of $13.10 per Share (-13.88%) on March 17, 2023 and a high of $15.60 per Share ( +2.56%) on January 23, 2023.

However, this tailwind eased in the second quarter as the Federal Reserve stuck to its higher for longer rhetoric amid persistent inflation, weighing down the entire energy complex.

Other factors like fading geopolitical risk premium, US inventory builds and OPEC’s production plans also played a role.

For the six months ended June 30, 2023, the NYSE Arca market value of each Share decreased from $15.21 per Share to $14.13 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 $13.10 per Share (-13.88%) on March 17, 2023 and a high of $15.64 per Share (+2.83%) on April 12, 2023.

The total return for the Fund on a market value basis was -6.79%.

Crude oil posted negative performance in the first quarter of 2023.

Prices ping-ponged between gains and losses in January and February on crude inventory builds (due to seasonal refinery maintenance and strong production), Federal Reserve interest rate hike concerns, the five hundred thousand barrel per day (kb/d) Russian “production cut”, mandated US Strategic Petroleum Reserve releases, and optimistic signs out of China.

However, broader financial sector fears pushed crude prices into negative territory in the first half of March.

Crude oil prices ended the first two quarters of 2023 in negative territory.

While prices oscillated during the first quarter on crude inventory builds, Federal Reserve rate hike concerns, the Russian “production cut”, mandated US Strategic Petroleum Reserve (SPR) releases, and some optimistic signs out of China, losses were extended in the second quarter.

Headwinds from the disappointing recovery in China and recession concerns driven by US Federal Reserve policy, banking sector stress, and political controversy surrounding the US debt ceiling continued to blow hard, while Russian oil supplies continued to make their way onto the market adding to oil inventories.

Front month crude oil prices were down over 8% year to date.

Fund Share Net Asset Performance

For the three months ended March 31, 2024, the NAV of each Share increased from $13.96 per Share to $15.57 per Share.

Rising commodity futures contract prices for Light Sweet Crude Oil during the three months ended March 31, 2024 contributed to an overall 10.37% increase in the level of the Index and to a 11.84% increase in the level of the DBIQ-OY CL TR.

For the six months ended June 30, 2024, the NAV of each Share increased from $13.96 per Share to $15.86 per Share.

Rising commodity futures contract prices for Light Sweet Crude Oil during the six months ended June 30, 2024 contributed to an overall

11.15% increase in the level of the Index and to a 14.15% increase in the level of the DBIQ-OY CL TR.

The total return for the Fund on a NAV value basis was +13.61%.

Net income (loss) for the three months ended March 31, 2024 was $26.8 million, primarily resulting from $3.3 million of income, net realized gain (loss) of $(0.1) million, net change in unrealized gain (loss) of $24.1 million and net operating expenses of $0.5 million.

For the three months ended March 31, 2023, the NAV of each Share decreased from $15.18 per Share to $14.59 per Share.

Falling commodity futures contract prices for Light Sweet Crude Oil during the three months ended March 31, 2023 contributed to an overall 4.80% decrease in the level of the Index and to a 3.69% decrease in the level of the DBIQ-OY CL TR.

Net income (loss) for the six months ended June 30, 2024 was $30.8 million, primarily resulting from $6.5 million of income, net realized gain (loss) of $1.7 million, net change in unrealized gain (loss) of $23.5 million and net operating expenses of $0.9 million.

For the six months ended June 30, 2023, the NAV of each Share decreased from $15.18 per Share to $14.15 per Share.

Falling commodity futures contract prices for Light Sweet Crude Oil during the six months ended June 30, 2023 contributed to an overall 8.58% decrease in the level of the Index and to a 6.31% decrease in the level of the DBIQ-OY CL TR.

The total return for the Fund on a NAV value basis was -6.79%.

Net income (loss) for the three months ended March 31, 2023 was $(11.1) million, primarily resulting from $3.1 million of income, net realized gain (loss) of $$(1.0) million, net change in unrealized gain (loss) of $(12.7) million and net operating expenses of $0.5 million.

Net income (loss) for the six months ended June 30, 2023 was $(18.5) million, primarily resulting from $6.2 million of income, net realized gain (loss) of $(3.4) million, net change in unrealized gain (loss) of $(20.2) million and net operating expenses of $1.0 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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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:

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

Light Sweet Crude Oil

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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