Invesco CurrencyShares Euro Trust 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 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, Inc. (“NYSE Arca”) on October 30, 2007. 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 investment objective of the Trust is for the Shares to reflect the price in USD of 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. 11 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 euro. The chart illustrates movements in the price of euro in USD and is based on the Closing Spot Rate: NAV per Share; Valuation of 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: 12 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 June 30, 2021 was an annual nominal rate of -0.65%. The following chart provides the daily rate paid by the Depository since June 30, 2016: 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 June 30, 2021. 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 Policies on Form 10-K for the year ended December 31, 2020. Results of Operations During the six months ended June 30, 2021, an additional 1,000,000 Shares were created in exchange for 93,761,912 euro and 1,200,000 Shares were redeemed in exchange for 112,503,301 euro. In addition, 1,244,359 euro were withdrawn to pay the Sponsor’s fee and the interest expense on currency deposits, due to the negative interest rate. As of June 30, 2021, the number of euro owned by the Trust was 247,893,983, resulting in a redeemable capital Share value of $293,727,749. During the year ended December 31, 2020, an additional 4,550,000 Shares were created in exchange for 428,947,584 euro and 4,400,000 Shares were redeemed in exchange for 414,936,856 euro. In addition, 2,238,467 euro were withdrawn to pay the Sponsor's fee and the interest expense on currency deposits, due to the negative interest rate. As of December 31, 2020, the number of euro owned by the Trust was 267,879,731, resulting in a redeemable capital Share value of $327,516,510. 13 A de crease in the Trust’s redeemable capital Share value from $ 327,516,510 at December 31, 2020 to $ 293,727,749 at June 30, 2021 , was primarily the result of a de crease in the number of Shares outstanding from 2, 850 ,000 at December 31, 2020 t o 2,650,000 at June 30, 2021 coupled with a decrease in the Closing Spot Rate from 1.2235 at December 31, 20 20 to 1.1859 at June 30, 2021 . No interest income was earned during the three and six months ended June 30, 2021 and 2020, due to an annual nominal interest rate which remained at or below 0.00% through those periods, as set forth in the FXE Daily Rate 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 an increase in the weighted-average euro in the Trust, the Sponsor’s fee increased from $233,262 for the three months ended June 30, 2020 to $287,530 for the three months ended June 30, 2021, and increased from $502,708 for the six months ended June 30, 2020 to $616,733 for the six months ended June 30, 2021. Because the annual interest rate paid by the Depository remained below 0.00% at the end of June 30, 2021, the Trust incurred interest expense on currency deposits. Due primarily to an increase in the weighted-average euro in the Trust, interest expense on currency deposits increased from $296,567 for the three months ended June 30, 2020 to $474,079 for the three months ended June 30, 2021, and increased from $639,507 for the six months ended June 30, 2020 to $892,426 for the six months ended June 30, 2021. The only expenses of the Trust during the three and six months ended June 30, 2021 and 2020 were the Sponsor’s fee and interest expense on currency deposits. The Trust’s net comprehensive income (loss) for the three months ended June 30, 2021 was $(761,609) due to the Sponsor’s fee of $287,530 and interest expense on currency deposits of $474,079 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the three months ended June 30, 2020 was $(529,829) due to the Sponsor’s fee of $233,262 and interest expense on currency deposits of $296,567 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the six months ended June 30, 2021 was $(1,509,159) due to the Sponsor’s fee of $616,733 and interest expense on currency deposits of $892,426 exceeding interest income of $0. The Trust’s net comprehensive income (loss) for the six months ended June 30, 2020 was $(1,142,215) due to the Sponsor’s fee of $502,708 and interest expense on currency deposits of $639,507 exceeding interest income of $0. Cash dividends were not paid by the Trust for the three and six months ended June 30, 2021 and 2020 as the Trust’s interest income did not exceed the Trust’s expenses during those periods. Item 3. Quantitative and Qualitative Disclosures About Market Risk Except as described above with respect to fluctuations in the USD/euro 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 instruments.