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FXA > SEC Filings for FXA > Form 10-Q on 9-Jun-2014All Recent SEC Filings

Show all filings for CURRENCYSHARES AUSTRALIAN DOLLAR TRUST

Form 10-Q for CURRENCYSHARES AUSTRALIAN DOLLAR TRUST


9-Jun-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 Australian Dollar, as the value of the Shares relates directly to the value of the Australian Dollars 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® Australian Dollar Trust (the "Trust") is a grantor trust that was formed on June 8, 2006. The Trust issues shares (the "Shares") in blocks of 50,000 (a "Basket") in exchange for deposits of Australian Dollars and distributes Australian Dollars in connection with the redemption of Baskets. The Shares began trading on the New York Stock Exchange ("NYSE") under the ticker symbol "FXA" on June 26, 2006. The primary listing of the Shares was transferred to NYSE Arca on October 30, 2007.

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 the Australian Dollar plus accrued interest, if any, 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 the Australian Dollar. Investing in the Shares does not insulate the investor from certain risks, including price volatility.

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 Australian Dollars in the Trust at the end of the preceding day accrued but unpaid interest, if any, Australian Dollars receivable under pending purchase orders and the value of other Trust assets, and subtracts the accrued but unpaid Sponsor's fee, Australian Dollars payable under pending redemption orders and other Trust expenses and liabilities, if any. The NAV is expressed in USD based on the Australian Dollar/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 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 the Australian Dollar

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

[[Image Removed: LOGO]]


Table of Contents

NAV per Share; Valuation of the Australian Dollar

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 Arca and
(3) the Closing Spot Rate, expressed as a multiple of 100 Australian Dollars:

[[Image Removed: LOGO]]


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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 April 30, 2014 was an annual nominal rate of 2.17%. The following chart provides the daily rate paid by the Depository since April 30, 2009:

[[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 Australian Dollars 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). Distributions paid during the current reporting period follow (annualized yield reflects the estimated annual yield an investor would receive if a monthly distribution stayed the same for the entire year going forward, and is calculated by annualizing the monthly distribution and dividing by the Trust NAV for the dates listed below):

                                  FXA Distribution History
              Date         Value         NAV       Yield       Annualized Yield
              4/1/2014   $ 0.14470     $ 92.83       0.16 %         1.84%
              3/3/2014   $ 0.12041     $ 89.61       0.13 %         1.75%
              2/3/2014   $ 0.12845     $ 87.39       0.15 %         1.73%

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 the report.


Table of Contents

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 Australian Dollar in accordance with ASC 830, Foreign Currency Translation.

Results of Operations

As of October 31, 2013, the number of Australian Dollars owned by the Trust was 450,000,000, resulting in a redeemable capital share value of $426,725,846. During the three months ended April 30, 2014, an additional 350,000 Shares were created in exchange for 35,000,000 Australian Dollars and 1,600,000 Shares were redeemed in exchange for 160,000,000 Australian Dollars. As of April 30, 2014, the number of Australian Dollars owned by the Trust was 325,000,000, resulting in a redeemable capital Share value of $301,585,296.

A decrease in the Trust's redeemable capital Share value from $426,725,846 at October 31, 2013 to $301,585,296 at April 30, 2014 was primarily the result of a decrease in the number of Shares outstanding from 4,500,000 at October 31, 2013 to 3,250,000 at April 30, 2014 coupled with a decrease in the Closing Spot Rate from 0.9470 at October 31, 2013 to 0.9265 at April 30, 2014.

Interest income decreased from $3,658,002 for the three months ended April 30, 2013 to $1,706,535 for the three months ended April 30, 2014, and decreased from $7,688,775 for the six months ended April 30, 2013 to $3,713,639 for the six months ended April 30, 2014, attributable primarily to a decrease in the weighted-average Australian Dollars in the Trust and a decrease in the annual nominal interest rate paid by the Depository, as set forth in the chart above.

The Sponsor's fee accrues daily at an annual nominal rate of 0.40% of the Australian Dollars in the Trust. Due primarily to a decrease in the weighted-average Australian Dollars in the Trust, the Sponsor's fee decreased from $571,793 for the three months ended April 30, 2013 to $308,275 for the three months ended April 30, 2014, and decreased from $1,176,071 for the six months ended April 30, 2013 to $690,316 for the six months ended April 30, 2014. The only expense of the Trust during the three months and six months ended April 30, 2014 was the Sponsor's fee.

The Trust's net income for the three months ended April 30, 2014 was $1,398,260 due to interest income of $1,706,535 exceeding the Sponsor's fee of $308,275. The Trust's net income for the six months ended April 30, 2014 was $3,023,323 due to interest income of $3,713,639 exceeding the Sponsor's fee of $690,316.

Cash dividends per Share decreased from $0.56 for the three months ended April 30, 2013 to $0.41 per Share for the three months ended April 30, 2014, and cash dividends per Share decreased from $1.17 for the six months ended April 30, 2013 to $0.80 per Share for the six months ended April 30, 2014. The decrease in cash dividends per Share was primarily the result of a decrease in the annual nominal interest rate paid by the Depository.

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