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FXCH > SEC Filings for FXCH > Form 10-Q on 12-Mar-2014All Recent SEC Filings

Show all filings for CURRENCYSHARES CHINESE RENMINBI TRUST

Form 10-Q for CURRENCYSHARES CHINESE RENMINBI TRUST


12-Mar-2014

Quarterly Report


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 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 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 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.

Trust Overview

The CurrencyShares® Chinese Renminbi Trust (the "Trust") is a grantor trust that was formed on August 16, 2011. The Trust issues shares (the "Shares") in blocks of 50,000 (a "Basket") in exchange for deposits of Chinese Renminbi and distributes Chinese Renminbi in connection with the redemption of Baskets. The Shares began trading on NYSE Arca under the ticker symbol "FXCH" on October 4, 2011.

The Trust is a passive investment vehicle. The Trust does not have any officers, directors or employees. The investment objective of the Trust is for the Shares to reflect the price of Chinese Renminbi plus accrued interest, less the expenses of the Trust's operations. The Trust does not engage in any activities designed to obtain profit from, or ameliorate losses caused by, changes in the price of Chinese Renminbi.

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 Chinese Renminbi in the Trust at the end of the preceding day accrued but unpaid interest, Chinese Renminbi receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor's fee, Chinese Renminbi payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in U.S. Dollars ("USD") based on the "Closing Spot Rate," which is the USD/ Chinese Renminbi exchange rate as determined by The WM Company, as of 4:00 PM (London time/London fixing) 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 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.currencyshares.com.


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 January 31, 2014 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 January 31, 2014.

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. 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. During the three months ended January 31, 2014, no additional Shares were created and no additional shares were redeemed. In addition, 37,395 Chinese Yuan were withdrawn to pay the portion of sponsor fee that exceeded the interest earned. As of January 31, 2014, the number of Chinese Yuan owned by the Trust was 49,666,731, resulting in a redeemable capital Share value of $8,223,810.

An increase in the Trust's redeemable capital share value from $8,162,610 at October 31, 2013 to $8,223,810 at January 31, 2014, was primarily the result of an increase in the Closing Spot Rate from 0.16427 at October 31, 2013 to 0.16562 at January 31, 2014.

Interest income increased from $1,024 for the three months ended January 31, 2013 to $2,094 for the three months ended January 31, 2014, attributable primarily to an increase in the weighted-average Chinese Yuan in the Trust.

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 $4,040 for the three months ended January 31, 2013 to $8,262 for the three months ended January 31, 2014. The only expense of the Trust during the three months ended January 31, 2014 was the Sponsor's fee.

The Trust's net loss for the three months ended January 31, 2014 was $6,168, due to the Sponsor's fee of 8,262 exceeding interest income of $2,094.

Cash dividends were not paid by the Trust during the three months ended January 31, 2013 and the three months ended January 31, 2014 as the Trust's income did not exceed the Trust's expenses during those periods.

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