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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 77 added, 44 removed, 287 unchanged (30% of the section changed)

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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 DX 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, 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 $1.8 million and $21.2 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash flow provided by (used in) operating activities was $10.8 million and $26.6 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 which are held at fair value on the Statements of Financial Condition.

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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 DX Contracts with the aim of seeking to track the Index.

During the three months ended March 31, 2024, $4.9 million was paid to purchase United States Treasury Obligations and $5.0 million was received from sales and maturing United States Treasury Obligations.

During the three months ended March 31, 2023, $40.5 million was paid to purchase United States Treasury Obligations and $31.0 million was received from sales and maturing United States Treasury Obligations.

$8.3 million was received from sales of affiliated investments and $4.7 million was paid to purchase affiliated investments during the three months ended March 31, 2024.

$74.2 million was received from sales of affiliated investments and $44.4 million was paid to purchase affiliated investments during the three months ended March 31, 2023.

During the six months ended June 30, 2024, $29.2 million was paid to purchase United States Treasury Obligations and $30.0 million was received from sales and maturing United States Treasury Obligations.

During the six months ended June 30, 2023, $80.9 million was paid to purchase United States Treasury Obligations and $72.0 million was received from sales and maturing United States Treasury Obligations.

$23.9 million was received from sales of affiliated investments and $11.3 million was paid to purchase affiliated investments during the six months ended June 30, 2024.

$102.2 million was received from sales of affiliated investments and $66.4 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 $(1.8) million and $(21.8) million during the three months ended March 31, 2024 and 2023, respectively.

This included $0.9 million and $20.6 million from Shares purchased by Authorized Participants and $2.7 million and $42.4 million from Shares redeemed by Authorized Participants during the three months ended March 31, 2024 and 2023, respectively.

The Fund’s net cash flow provided by (used in) financing activities was $(10.8) million and $(27.2) million during the six months ended June 30, 2024 and 2023, respectively.

This included $2.7 million and $35.8 million from Shares purchased by Authorized Participants and $13.5 million and $62.9 million from Shares redeemed by Authorized Participants during the six months ended June 30, 2024 and 2023, respectively.

No distributions were paid to Shareholders during the six months ended June 30, 2024.

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 “Deutsche Bank Short USD Currency Portfolio Index-Excess Return 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 DEUTSCHE BANK SHORT USD CURRENCY PORTFOLIO INDEX EXCESS RETURN TM FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

COMPARISON OF MARKET, NAV AND DEUTSCHE BANK SHORT USD CURRENCY PORTFOLIO INDEX EXCESS RETURN 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 Index and the Short Index–TR TM are not necessarily indicative of future changes, positive or negative, in the Index closing levels.

The section “Summary of the Deutsche Bank Short USD Currency Portfolio Index–Total Return TM and Underlying DX Contract Returns for the Three Months Ended March 31, 2024 and 2023” below provides an overview of the changes in the closing levels of the Short Index–TR TM by disclosing the change in closing levels of the underlying DX Contracts of the Index through a “surrogate” (and analogous) index that also reflects the return of 3-month United States Treasury Bills.

The section “Summary of the Deutsche Bank Short USD Currency Portfolio Index–Total Return TM and Underlying DX Contract 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 Short Index–TR TM by disclosing the change in closing levels of the underlying DX Contracts of the Index through a “surrogate” (and analogous) index that also reflects the return of 3-month United States Treasury Bills.

Please note also that the Fund’s objective is to track the Index (not the Short Index–TR) and the Fund does not attempt to outperform or underperform the Index.

Summary of the Deutsche Bank Short USD Currency Portfolio Index–Total Return TM and Underlying DX Contract Returns for the Three Months Ended March 31, 2024 and 2023

Summary of the Deutsche Bank Short USD Currency Portfolio Index–Total Return TM and Underlying DX Contract Returns for the Three and Six Months Ended June 30, 2024 and 2023

AGGREGATE RETURNS FOR THE

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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 $18.43 per Share to $17.99 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 $17.87 per Share (-3.01%) on February 13, 2024, and a high of $18.28 per Share (-0.81%) on January 8, 2024.

For the three months ended June 30, 2024, the NYSE Arca market value of each Share decreased from $17.99 per Share to $17.90 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 $17.67 per Share (-1.75%) on April 16, 2024, and a high of $18.17 per Share (+1.03%) on June 3, 2024.

The total return for the Fund on a market value basis was -0.50%.

dollar performed positively in the first quarter of 2024, leading to losses for the Fund.

While the dollar had fallen to end 2023 on expectations for imminent rate cuts, the Federal Reserve stuck to its higher for longer rhetoric through the first two months of 2024 and inflation proved stickier than expected, forcing the market to delay easing expectations.

A resilient US economy also provided support.

For the three months ended March 31, 2023, the NYSE Arca market value of each Share increased from $18.50 per Share to $18.78 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 $18.20 per Share (-1.62%) on March 8, 2023, and a high of $18.96 per Share (+2.49%) on February 1, 2023.

While not following a smooth path, the US dollar moved higher in the second quarter of 2024, leading to losses for the Fund.

The key driver was the Federal Reserve’s more hawkish stance amid persistent US inflation.

While the markets had expected for the central bank to start cutting rates imminently, those hopes were repeatedly dashed through the quarter.

In comparison, many global economies, including Switzerland, Sweden, Canada, and the European Central Bank (ECB), had kicked off their easing (i.e., lowering interest rates) cycles.

Higher interest rates generally make a country’s currency more attractive to hold.

For the three months ended June 30, 2023 the NYSE Arca market value of each Share increased from $18.78 per Share to $18.82 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 $18.53 per Share (-1.33%) on May 25, 2023, and a high of $19.08 per Share (+1.60%) on April 13, 2023.

The total return for the Fund on a market value basis was +0.21%.

Despite whipsawing through the quarter, the U.S.

dollar ended first quarter 2023 slightly lower, leading to positive performance for the Fund.

The dollar retreated rapidly in January as anticipation for a dovish pivot in the Federal Reserve's interest rate hike plans reduced the dollar’s investment appeal.

However, in February, expectations for the Federal Reserve turned more hawkish amid stickier-than-expected U.S.

inflation and a strong U.S.

labor market, helping the U.S.

dollar reverse all earlier losses.

Finally, in March, while the dollar initially continued higher on the financial sector turmoil (safe haven appeal), returning speculation for a softer Federal Reserve stance amid the heightened uncertainty sent prices lower to end the quarter.

Easing concerns for a banking crisis as governments stepped in to limit the spread also reduced overall safe haven demand.

The US dollar moved slightly higher in the second quarter of 2023, but continued to bounce back and forth on swaying Federal Reserve rate hike expectations.

In April, banking sector volatility leading up to the failure of First Republic Bank, the second largest default in US history and the third failure since March 2023, resulted in heightened market expectations for a Federal Reserve pause.

In comparison, other central banks like the European Central Bank (ECB), Bank of England (BoE) and Bank of Canada (BoC) continued to tighten, boosting those respective currencies, and making the US dollar less attractive.

However, the Federal Reserve not only did not pause rate hikes but continued to signal in May that there could be more to come before year end, thus the positive performance for the US dollar in May.

While the US dollar is typically seen as a safe haven currency, given the turmoil and economic uncertainty that was taking place in the US, the Swiss Franc (CHF) benefited from the rise in safe haven demand instead.

The dollar returned to losses in June after the Federal Reserve officially paused its tightening cycle.

Fund Share Net Asset Performance

For the three months ended March 31, 2024, the NAV of each Share decreased from $18.42 per Share to $17.98 per Share.

Falling currency futures contracts prices for short DX Contracts during the three months ended March 31, 2024 contributed to a 3.45% decrease in the level of the Index and to a 2.17% decrease in the level of the Short Index–TR TM .

For the three months ended June 30, 2024, the NAV of each Share decreased from $17.98 per Share to $17.90 per Share.

Falling currency futures contracts prices for short DX Contracts during the three months ended June 30, 2024 contributed to a 1.60% decrease in the level of the Index and to a 0.27% decrease in the level of the Short Index–TR TM .

The total return for the Fund on a NAV basis was -0.45%.

Net income (loss) for the three months ended March 31, 2024 was $(1.5) million, primarily resulting from $0.9 million of income, net realized gain (loss) of $(0.3) million, net change in unrealized gain (loss) of $(2.0) million and net operating expenses of $0.1 million.

For the three months ended March 31, 2023, the NAV of each Share increased from $18.50 per Share to $18.78 per Share.

Rising currency futures contracts prices for short DX Contracts during the three months ended March 31, 2023 contributed to a 0.64% increase in the level of the Index and to a 1.83% increase in the level of the Short Index–TR TM .

Net income (loss) for the three months ended June 30, 2024 was $(0.3) million, primarily resulting from $0.7 million of income, net realized gain (loss) of $(1.4) million, net change in unrealized gain (loss) of $0.5 million and net operating expenses of $0.1 million.

For the three months ended June 30, 2023, the NAV of each Share increased from $18.78 per Share to $18.83 per Share.

Rising currency futures contracts prices for short DX Contracts during the three months ended June 30, 2023 contributed to a 0.78% decrease in the level of the Index and to a 0.50% increase in the level of the Short Index–TR TM .

The total return for the Fund on a NAV basis was +0.27%.

Net income (loss) for the three months ended March 31, 2023 was $0.8 million, primarily resulting from $1.0 million of income, net realized gain (loss) of $(1.5) million, net change in unrealized gain (loss) of $1.5 million and net operating expenses of $0.2 million.

Net income (loss) for the three months ended June 30, 2023 was $(0.1) million, primarily resulting from $1.0 million of income, net realized gain (loss) of $1.2 million, net change in unrealized gain (loss) of $(2.2) million and net operating expenses of $0.2 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 decreased from $18.43 per Share to $17.90 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 $17.67 per Share (-4.10%) on April 16, 2024, and a high of $18.28 per Share (-0.81%) on January 8, 2024.

The total return for the Fund on a market value basis was -2.88%.

The US dollar performed positively in the first half of 2024, leading to losses for the Fund.

While the dollar had fallen to end 2023 on expectations for imminent rate cuts, the Federal Reserve stuck to its higher-for-longer rhetoric as US inflation proved more persistent than expected, forcing the market to repeatedly delay easing expectations.

In comparison, many global economies including Switzerland, Sweden, Canada, and the European Central Bank (ECB) had kicked off their easing (i.e., lowering interest rates) cycles;

higher interest rates tend to make holding the currency more attractive.

A resilient US economy and heightened geopolitical tensions also provided some support.

For the six months ended June 30, 2023, the NYSE Arca market value of each Share decreased from $18.50 per Share to $18.82 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 $18.20 per Share (-1.62%) on March 8, 2023, and a high of $19.08 per Share (+3.14%) on April 13, 2023.

The total return for the Fund on a market value basis was +1.73%.

The US dollar posted a small gain in the first half of 2023.

While the dollar moved lower in the first quarter, benefiting the Fund, prices recovered in the second quarter.

To start the year, the dollar retreated rapidly on anticipation for a dovish pivot in the Federal Reserve’s rate hike plans.

However, in February, expectations for the Federal Reserve turned more hawkish amid more persistent-than-expected US inflation and a strong US labor market, helping the US dollar reverse all earlier losses.

In March, while the dollar initially continued higher, returning speculation for a softer Federal Reserve stance amid the heightened uncertainty sent prices lower to end the quarter.

Despite continued talks for a pause in US rate hikes, which actually happened in June, the dollar remained relatively well supported in the second quarter on hawkish Federal Reserve comments (the central bank signaled in May that there could be more rate hikes to come before year end).

The dollar returned to losses in June though, after the Federal Reserve officially paused its tightening cycle.

Fund Share Net Asset Performance

For the six months ended June 30, 2024, the NAV of each Share decreased from $18.42 per Share to $17.90 per Share.

Falling currency futures contracts prices for short DX Contracts during the six months ended June 30, 2024 contributed to a 5.00% decrease in the level of the Index and to a 2.43% decrease in the level of the Short Index–TR TM .

The total return for the Fund on a NAV basis was -2.82%.

Net income (loss) for the six months ended June 30, 2024 was $(1.8) million, primarily resulting from $1.6 million of income, net realized gain (loss) of $(1.7) million, net change in unrealized gain (loss) of $(1.4) million and operating expenses of $0.2 million.

For the six months ended June 30, 2023, the NAV of each Share increased from $18.50 per Share to $18.83 per Share.

Rising currency futures contracts prices for short DX Contracts during the six months ended June 30, 2023 contributed to a 0.14% decrease in the level of the Index and to a 2.33% increase in the level of the Short Index–TR TM .

The total return for the Fund on a NAV basis was +1.78%.

Net income (loss) for the six months ended June 30, 2023 was $0.7 million, primarily resulting from $2.0 million of income, net realized gain (loss) of $(0.3) million, net change in unrealized gain (loss) of $(0.7) million and operating expenses of $0.3 million.

Critical Accounting Estimates

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VaR is measured over a specified holding period (one day) and to a specified level of statistical confidence (99th percentile).

However, the inherent uncertainty in the markets in which the Fund trades and the recurrence in the markets traded by the Fund of market movements far

exceeding expectations could result in actual trading or non-trading losses far beyond the indicated VaR or the Fund’s experience to date (i.e., “risk of ruin”).

However, the inherent uncertainty in the markets in which the Fund trades and the recurrence in the markets traded by the Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated VaR or the Fund’s experience to date (i.e., “risk of ruin”).

In light of these considerations, as well as the risks and uncertainties intrinsic to all future projections, the following VaR presentation does not constitute any assurance or representation that the Fund’s losses in any market sector will be limited to VaR.

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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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Changes in Internal Control Over Financial Reporting

There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the Fund’s quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

There has been no change in internal control over financial reporting (as defined in the Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the Fund’s quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

OTHER INFORMATION

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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