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FXCH > SEC Filings for FXCH > Form 10-K on 14-Jan-2014All Recent SEC Filings

Show all filings for CURRENCYSHARES CHINESE RENMINBI TRUST

Form 10-K for CURRENCYSHARES CHINESE RENMINBI TRUST


14-Jan-2014

Annual Report


Item 7. 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 Chinese Renminbi, as the value of the Shares relates directly to the value of the Chinese Renminbi 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.


Table of Contents

Movements in the Price of Chinese Renminbi

The investment objective of the Trust is for the Shares to reflect the price in USD of the Chinese Renminbi 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 Chinese Renminbi. Each outstanding Share represents a proportional interest in the Chinese Renminbi held by the Trust. The following chart provides recent trends on the price of the Chinese Renminbi. The chart illustrates movements in the price of Chinese Renminbi in USD and is based on the Closing Spot Rate:

[[Image Removed: LOGO]]


Table of Contents

NAV per Share; Valuation of the Chinese Renminbi

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 500 Chinese Yuan:

[[Image Removed: LOGO]]


Table of Contents

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 October 31, 2013 was an annual nominal rate of 0.10%. 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 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 Chinese Renminbi 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, 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, 2013.

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 financial statements for further discussion of our accounting policies.

The functional currency of the Trust is the Chinese Renminbi in accordance with ASC 830, Foreign Currency Translation.


Table of Contents

Results of Operations

The Chinese Yuan is the unit of account for the Chinese Renminbi. The Trust was formed on August 16, 2011 when the Sponsor deposited 500 Chinese Yuan with the Depository in exchange for one Share. The Depository received 50,000,000 Chinese Yuan on behalf of the Trust in exchange for 100,000 Shares on September 29, 2011. Trading in the Shares of the Trust on NYSE Arca commenced on October 4, 2011. Through the fiscal period ended October 31, 2011 no additional Shares were created and the single seed share was redeemed in exchange for 500 Chinese Yuan. As of October 31, 2011 the number of Chinese Yuan owned by the Trust was 50,000,000, resulting in a redeemable capital share value of $7,819,874. During the year ended October 31, 2012, an additional 50,000 Shares were created in exchange for 24,965,639 Chinese Yuan and 100,000 Shares were redeemed in exchange for 49,922,284 Chinese Yuan. In addition, 116,788 Chinese Yuan were withdrawn to pay the portion of the Sponsor's fee that exceeded the interest earned. As of October 31, 2012 the number of Chinese Yuan owned by the Trust was 24,926,567, resulting in a redeemable capital share value of $3,992,673. During the year ended October 31, 2013, an additional 50,000 shares were created in exchange for 24,884,414 Chinese Yuan and no shares were redeemed. In addition, 106,855 Chinese Yuan were withdrawn to pay the portion of the Sponsor's fee that exceeded the interest earned. As of October 31, 2013, the number of Chinese Yuan owned by the Trust was 49,704,126, resulting in a redeemable capital share value of $8,162,610.

An increase in the Trust's redeemable capital share value from $3,992,673 at October 31, 2012 to $8,162,610 at October 31, 2013, was primarily the result of an increase in the number of shares outstanding from 50,000 at October 31, 2012 to 100,000 at October 31, 2013, and an increase in the Closing Spot Rate from 0.16022 at October 31, 2012 to 0.16427 at October 31, 2013. A decrease in the Trust's redeemable capital share value from $7,819,874 at October 31, 2011 to $3,992,673 at October 31, 2012, was primarily the result of a decrease in the Shares outstanding from 100,000 at October 31, 2011 to 50,000 at October 31, 2012. This decrease in capital share value was partially offset by an increase in the Closing Spot Rate from 0.15643 at October 31, 2011 to 0.16022 at October 31, 2012.

Interest income increased from $6,067 for the period ended October 31, 2012 to $6,156 for the year ended October 31, 2013 attributable primarily to an increase in the weighted-average Chinese Yuan in the Trust. Interest income increased from $605 for the period ended October 31, 2011 to $6,067 for the year ended October 31, 2012. This increase in interest income occurred because the Trust was in operation and earning interest for only 27 days during the first year of operation (period ended October 31, 2011), compared to earning interest for a full year through the year ended October 31, 2012.

The Sponsor's fee accrues daily at an annual nominal rate of 0.40% of the Chinese Renminbi in the Trust. Due primarily to an increase in the weighted-average Chinese Yuan in the Trust, the Sponsor's fee increased from $23,695 for the year ended October 31, 2012 to $24,550 for the year ended October 31, 2013. The only expense of the Trust during the year ended October 31, 2013 was the Sponsor's fee. The Sponsor's fee increased from $2,385 for the period ended October 31, 2011 to $23,695 for the year ended October 31, 2012. This increase in Sponsor's fee occurred because the Trust was in operation and accruing the Sponsor's fee for only 27 days during the first year of operation (period ended October 31, 2011), compared to accruing the Sponsor's fee for a full year through the year ended October 31, 2012. The only expense of the Trust during the period ended October 31, 2012 was the Sponsor's fee.

The Trust's net loss for the year ended October 31, 2013 was $18,394, due to the Sponsor's fee of $24,550 exceeding interest income of $6,156. The Trust's net loss for the period ended October 31, 2012 was $17,628 due to the Sponsor's fee of $23,695 exceeding interest income of $6,067. The Trust's net loss for the period ended October 31, 2011 was $1,780, due to the Sponsor's fee of $2,385 exceeding interest income of $605.

Cash dividends were not paid by the Trust in the years ended October 31, 2013 or October 31, 2012, or the period ended October 31, 2011, as the Trust's income did not exceed the Trust's expenses during those periods.

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