Company Overview

Invesco DB Base Metals Fund is a commodity pool that trades futures contracts in aluminum, copper, and zinc with the goal of tracking the DBIQ Optimum Yield Industrial Metals Index. The Fund was formed in 2006 and is managed by Invesco Capital Management LLC.

The Fund has returned -1.86% over the past three months based on its net asset value (NAV). This was driven by falling aluminum and zinc futures prices, partially offset by rising copper futures. The Fund’s market price per share has decreased from $18.31 to $17.95 over the quarter.

Revenue and Profit Analysis

The Fund had a net loss of $2.2 million over the past three months. This loss was caused by:

• $1.6 million in interest/dividend income
• $(0.1) million in net realized trading losses
• $(3.5) million in unrealized losses on futures positions
• $0.2 million in operating expenses

The unrealized trading losses show that the Fund’s open futures positions have declined in value over the quarter. However, the Fund aims to track its benchmark index over time, not outperform.

Fund Operations

The Fund operates by trading futures contracts on aluminum, copper, and zinc. The total value of the futures contracts is intended to match the Fund’s net asset value.

The Fund holds U.S. Treasuries and cash to meet margin requirements and for cash management. The interest and dividends from these holdings help to offset the Fund’s expenses.

The Fund has limited liquidity risks due to the ability of authorized participants to create or redeem shares daily. However, its futures positions may face periods of low liquidity depending on market conditions.

The Fund has financial obligations to the Managing Owner (management fee) and Commodity Broker (commission) based on its net assets and futures trading volume.

Cash Flows

The Fund’s main cash inflow is the issuance of shares to authorized participants, raised to invest in Treasuries, cash equivalents, and to meet futures margin requirements.

Its main cash outflow is the redemption of shares by authorized participants. During the quarter, shares purchased were $3.5 million while shares redeemed were $4.4 million.

Outlook

The Fund aims to closely track its benchmark index, not outperform. Performance is primarily driven by the prices of its aluminum, copper and zinc futures positions.

Industrial metal commodity prices have faced significant volatility recently due to factors like supply shortfalls, energy prices, economic conditions, and geopolitics. The Fund may continue to experience periods of elevated volatility in its returns related to these factors.