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| FXF > SEC Filings for FXF > Form 10-K on 14-Jan-2013 | All Recent SEC Filings |
14-Jan-2013
Annual Report
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 Swiss Franc, as the value of the Shares relates directly to the value of the Swiss Francs 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 in this report for a description of other risks and uncertainties that may affect an investment in the Shares.
Neither Guggenheim Specialized Products, LLC d/b/a Guggenheim Investments (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.
Movements in the Price of Swiss Franc
The investment objective of the Trust is for the Shares to reflect the price of the Swiss Franc plus accrued interest, 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 Swiss Francs. Each outstanding Share represents a proportional interest in the Swiss Francs held by the Trust. The following chart provides recent trends on the price of the Swiss Franc. The chart illustrates movements in the price of the Swiss Franc in USD and is based on the Noon Buying Rate (prior to November 13, 2008) and the Closing Spot Rate (as of and after November 13, 2008).
[[Image Removed: LOGO]]
NAV per Share; Valuation of the Swiss Franc
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 the NYSE (prior
to October 30, 2007) and NYSE Arca (on or after October 30, 2007) and (3) the
Noon Buying Rate (prior to November 13, 2008) and the Closing Spot Rate (as of
and after November 13, 2008), expressed as a multiple of 100 Swiss Francs:
[[Image Removed: LOGO]]
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, JP Morgan Chase Bank, N.A., London Branch, maintains two deposit accounts for the Trust, a primary deposit account which is expected to earn interest and a secondary deposit account which 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 October 31, 2012 was an annual nominal rate of -0.002%. The following chart provides the daily rate paid by the Depository since the Shares began trading:
[[Image Removed: LOGO]]
In exchange for a fee, the Sponsor bears most of the expense incurred by the Trust. As a result, the only ordinary expense of the Trust during the periods 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 Swiss Franc from the secondary deposit account to pay the accrued Sponsor's fee for the previous month plus other Trust expenses, 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, then the Trustee converts the excess into USD at a 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 October 31, 2012.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Sponsor's management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period covered by this report.
In addition to the description below, please refer to Note 2 to the consolidated financial statements for further discussion of our accounting policies.
The functional currency of the Trust is the Swiss Franc in accordance with ASC 830, Foreign Currency Translation.
Results of Operations
As of October 31, 2010, the number of Swiss Francs owned by the Trust was 347,402,559, resulting in a redeemable capital share value of $353,104,641. During the year ended October 31, 2011, an additional 7,850,000 shares were
created in exchange for 777,065,512 Swiss Francs and 6,800,000 shares were redeemed in exchange for 672,485,065 Swiss Francs. In addition, 2,152,179 Swiss Francs were withdrawn to pay the portion of the Sponsor's fee that exceeded the interest earned. As of October 31, 2011, the number of Swiss Francs owned by the Trust was 449,830,826, resulting in a redeemable capital share value of $516,375,375. During the year ended October 31, 2012, an additional 450,000 shares were created in exchange for 44,410,006 Swiss Francs and 1,850,000 shares were redeemed in exchange for 182,562,860 Swiss Francs. In addition, 1,511,553 Swiss Francs were withdrawn to pay the portion of the Sponsor's fee that exceeded the interest earned. As of October 31, 2012, the number of Swiss Francs owned by the Trust was 310,166,419, resulting in a redeemable capital share value of $332,968,198.
A decrease in the Trust's redeemable capital share value from $516,375,375 at October 31, 2011 to $332,968,198 at October 31, 2012, was primarily the result of a decrease in the Shares outstanding from 4,550,000 at October 31, 2011 to 3,150,000 at October 31, 2012 coupled with a decrease in the Closing Spot Rate from 1.1484 at October 31, 2011 to 1.0739 at October 31, 2012. An increase in the Trust's redeemable capital share value from $353,104,641 at October 31, 2010 to $516,375,375 at October 31, 2011, was primarily the result of an increase in the Shares outstanding from 3,500,000 at October 31, 2010 to 4,550,000 at October 31, 2011 coupled with an increase in the Closing Spot Rate from 1.0168 at October 31, 2010 to 1.1484 at October 31, 2011.
No interest income was earned during the years ended October 31, 2012, October 31, 2011 and October 31, 2010, due to an annual nominal interest rate which remained at or below 0% through those periods as set forth in the chart above. During the month of October, 2012, the interest rate fell below 0%, thus creating an interest expense to the Trust of $136.
The Sponsor's fee accrues daily at an annual nominal rate of 0.40% of the Swiss Francs in the Trust. Due primarily to a decrease in the weighted-average Swiss Francs in the Trust, the Sponsor's fee decreased from $2,501,694 for the year ended October 31, 2011 to $1,548,042 for the year ended October 31, 2012. The primary expense of the Trust during the year ended October 31, 2012 was the Sponsor's fee. Due primarily to an increase in the weighted-average Swiss Francs in the Trust, the Sponsor's fee increased from $1,331,736 for the year ended October 31, 2010 to $2,501,694 for the year ended October 31, 2011. The only expense of the Trust during the year ended October 31, 2011 was the Sponsor's fee.
The Trust's net loss for the year ended October 31, 2012 was $1,548,042 as a result of the Sponsor's fee of $1,547,906 and interest expense of $136 exceeding interest income of $0. The Trust's net loss for the year ended October 31, 2011 was $2,501,694, due to the Sponsor's fee of $2,501,694 exceeding interest income of $0. The Trust's net loss for the year ended October 31, 2010 was $1,331,736 as a result of the Sponsor's fee of $1,331,736 exceeding interest income of $0.
Cash dividends were not paid by the Trust in the years ended October 31, 2012, October 31, 2011 and October 31, 2010, as the Trust's interest income did not exceed the Trust's expenses during those periods.
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