abrdn Precious Metals Basket ETF Trust - Quarter Report: 2011 March (Form 10-Q)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Quarterly Period Ended March 31, 2011 |
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or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Transition Period from ____________ to __________ |
Commission File Number: 001-34917
ETFS PRECIOUS METALS BASKET
TRUST
(Exact name of registrant as specified in its charter)
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New York |
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27-2780046 |
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(State or other jurisdiction of incorporation or |
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(I.R.S. Employer Identification No.) |
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c/o ETF Securities USA LLC |
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48 Wall Street, 11th Floor |
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New York, NY |
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10005 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area
code:
(212) 918-4954
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
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Large accelerated filer |
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Accelerated filer o |
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Non accelerated filer |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
2,500,000 Shares outstanding as of May 12, 2011
ETFS PRECIOUS METALS BASKET TRUST
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2011
INDEX
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1 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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11 |
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13 |
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13 |
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13 |
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15 |
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16 |
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ETFS PRECIOUS METALS BASKET TRUST
Item 1. Financial Statements (Unaudited)
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Condensed Statements of Financial Condition (Unaudited) |
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At March 31, 2011 and December 31, 2010 |
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March 31, |
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December 31, |
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ASSETS |
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Investment in Bullion, at cost (1) |
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Gold |
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$ |
97,057,840 |
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$ |
76,213,472 |
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Silver |
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72,470,665 |
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54,148,351 |
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Platinum |
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16,289,729 |
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12,716,653 |
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Palladium |
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10,007,743 |
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7,566,140 |
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195,825,977 |
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150,644,616 |
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Bullion receivable |
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4,813,115 |
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4,378,396 |
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Total assets |
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$ |
200,639,092 |
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$ |
155,023,012 |
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LIABILITIES |
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Fees payable to Sponsor |
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$ |
113,348 |
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$ |
78,202 |
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Total liabilities |
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$ |
113,348 |
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$ |
78,202 |
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Redeemable Shares: |
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Shares at redemption value to investors (2) |
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231,021,925 |
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166,379,066 |
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Shareholders’ deficit |
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$ |
(30,496,181 |
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$ |
(11,434,256 |
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Total liabilities, redeemable Shares & shareholders’ deficit |
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$ |
200,639,092 |
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$ |
155,023,012 |
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(1) |
The market value of investment in Bullion at March 31, 2011 is $226,322,158 and at December 31, 2010, is $162,078,872. Refer to note 2.1 for a breakdown of market value per metal. |
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(2) |
Authorized share capital is unlimited and no par value per share. Shares issued and outstanding at March 31, 2011 were 2,400,000 and at December 31, 2010 were 1,900,000. |
See Notes to the Unaudited Condensed Financial Statements.
1
ETFS PRECIOUS METALS BASKET TRUST
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Condensed Statement of Operations (Unaudited) |
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For the three months ended March 31, 2011 |
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Three Months |
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REVENUES |
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Value of Bullion transferred to pay expenses |
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$ |
245,201 |
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Cost of Bullion transferred to pay expenses |
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(233,362 |
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Gain on Bullion transferred to pay expenses |
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$ |
11,839 |
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Gain on Bullion distributed for the redemption of Shares |
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$ |
438,080 |
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Total gain on Bullion |
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$ |
449,919 |
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EXPENSES |
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Sponsor’s Fee (Note 2.7) |
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$ |
280,348 |
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Total expenses |
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$ |
280,348 |
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Net gain from operations |
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$ |
169,571 |
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Net income per Share |
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$ |
0.08 |
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Weighted average number of Shares |
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2,115,556 |
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See Notes to the Unaudited Condensed Financial Statements
2
ETFS PRECIOUS METALS BASKET TRUST
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Condensed Statement of Cash Flows (Unaudited) |
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For the three months ended March 31, 2011 |
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Three Months |
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INCREASE / (DECREASE) IN CASH FROM OPERATIONS: |
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Cash proceeds received from transfer of Bullion |
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$ |
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Cash expenses paid |
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— |
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Increase in cash resulting from operations |
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$ |
— |
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Cash and cash equivalents at beginning of period |
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— |
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Cash and cash equivalents at end of period |
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$ |
— |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: |
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Value of Bullion received for creation of Shares |
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$ |
53,630,974 |
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Value of Bullion distributed for redemption of Shares - at average cost |
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$ |
8,216,251 |
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RECONCILIATION OF NET GAIN TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |
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Net gain from operations |
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$ |
169,571 |
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Adjustments to reconcile net gain to net cash provided by operating activities: |
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(Increase) in Bullion assets |
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(45,181,361 |
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(Increase) in Bullion receivable |
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(434,719 |
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Increase in unrealized gain on Bullion receivable |
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113,202 |
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Increase in amounts payable to Sponsor |
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35,146 |
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Increase / (decrease) in redeemable Shares: |
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Creations |
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53,952,490 |
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Redemptions |
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(8,654,329 |
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Net cash provided by operating activities |
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$ |
— |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: |
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Value of Bullion transferred to pay expenses |
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$ |
245,201 |
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See Notes to the Unaudited Condensed Financial Statements
3
ETFS PRECIOUS METALS BASKET TRUST
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Condensed Statement of Changes in Shareholders’ Deficit (Unaudited) |
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For the three months ended March 31, 2011 |
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Three Months |
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Shareholders’ deficit - opening balance |
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$ |
(11,434,256 |
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Net gain for the period |
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169,571 |
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Adjustment of redeemable Shares to redemption value |
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(19,344,698 |
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Adjustment of Bullion receivable to market value |
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113,202 |
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Shareholders’ deficit - closing balance |
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$ |
(30,496,181 |
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See Notes to the Unaudited Condensed Financial Statements
4
ETFS PRECIOUS METALS BASKET TRUST
Notes to the Unaudited Condensed Financial Statements
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1. Organization |
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The ETFS Precious Metals Basket Trust (the “Trust”) is an investment trust formed on October 18, 2010, under New York law pursuant to a depositary trust agreement (the “Trust Agreement”) executed by ETF Securities USA LLC (the “Sponsor”) and the Bank of New York Mellon (the “Trustee”) at the time of the Trust’s organization. The Trust holds gold, silver, platinum and palladium in set ratios (together, “Bullion”) and issues Shares (“Shares”) (in minimum blocks of 50,000 Shares, referred to as “Baskets”) in exchange for deposits of Bullion and distributes Bullion in connection with the redemption of Baskets. Shares represent units of fractional undivided beneficial interest in and ownership of the Trust which are issued by the Trust. The Sponsor is a Delaware limited liability company and a wholly-owned subsidiary of ETF Securities Limited, a Jersey, Channel Islands’ based company. The Trust is governed by the Trust Agreement. |
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The investment objective of the Trust is for the Shares to reflect the performance of the price of gold, silver, platinum and palladium, less the Trust’s expenses and liabilities. The Trust is designed to provide an individual owner of beneficial interests in the Shares (a “Shareholder”) an opportunity to participate in the gold, silver, platinum and palladium market through an investment in securities. The fiscal year end for the Trust is December 31. |
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The accompanying unaudited financial statements were prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and with the instructions for the Form 10-Q. In the opinion of management of the Sponsor, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the three months ended March 31, 2011 have been made. |
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Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the operating results for the full year. |
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2. Significant Accounting Policies |
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The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires those responsible for preparing financial statements to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Trust. |
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2.1. Valuation of Bullion |
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Bullion is held by JPMorgan Chase Bank, N.A. (the “Custodian”), on behalf of the Trust, at its London, England vaulting premises on a segregated basis. The allocated Platinum and Palladium is held by UBS AG (the “Zurich Sub-Custodian”) at its Zurich, Switzerland vaulting Premises on a segregated basis. The Trust’s Bullion is valued, per individual metal type, for financial statement purposes, at the lower of cost or market. The cost of Bullion is determined according to the average cost method and the market value is based on the London Fix for each metal held by the Trust used to determine the NAV of the Trust. Realized gains and losses on sales of Bullion, or Bullion distributed for the redemption of Shares, are calculated on a trade date basis using average cost. |
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Once the value of Bullion has been determined, the NAV is computed by the Trustee by deducting all accrued fees, expenses and other liabilities of the Trust, including the remuneration to the Sponsor (“Sponsor’s Fee”), from the fair value of the Bullion and all other assets held by the Trust. |
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ETFS PRECIOUS METALS BASKET TRUST
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2. Significant Accounting Policies (Continued) |
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2.1. Valuation of Bullion (Continued) |
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The table below summarizes the unrealized gains or losses on the Trust’s Bullion holdings as of March 31, 2011 and for the period from October 18, 2010 (the “Date of Inception”) through December 31, 2010: |
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March 31, 2011 |
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Gold |
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Silver |
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Platinum |
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Palladium |
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Total |
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Investment in Bullion-average cost |
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$ |
97,057,840 |
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$ |
72,470,665 |
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$ |
16,289,729 |
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$ |
10,007,743 |
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$ |
195,825,977 |
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Unrealized gain on investment in Bullion |
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4,173,272 |
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25,212,645 |
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340,604 |
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769,660 |
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30,496,181 |
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Investment in Bullion-market value |
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$ |
101,231,112 |
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$ |
97,683,310 |
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$ |
16,630,333 |
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$ |
10,777,403 |
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$ |
226,322,158 |
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December 31, 2010 |
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Gold |
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Silver |
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Platinum |
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Palladium |
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Total |
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Investment in Bullion-average cost |
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$ |
76,213,472 |
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$ |
54,148,351 |
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$ |
12,716,653 |
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$ |
7,566,140 |
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$ |
150,644,616 |
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Unrealized gain on investment in Bullion |
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2,001,570 |
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8,140,827 |
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83,937 |
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1,207,922 |
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11,434,256 |
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Investment in Bullion-market value |
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$ |
78,215,042 |
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$ |
62,289,178 |
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$ |
12,800,590 |
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$ |
8,774,062 |
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$ |
162,078,872 |
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The Trust recognizes the diminution in value of the investment in Bullion which arises from market declines on an interim basis. Increases in the value of the investment in Bullion through market price recoveries in later interim periods of the same fiscal year are recognized in the later interim period. Increases in value recognized on an interim basis may not exceed the previously recognized diminution in value. |
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The per Share amount of Bullion exchanged for a purchase or redemption is calculated daily by the Trustee, using the London Fix for each metal held by the Trust to calculate the Bullion amount in respect of any liabilities for which covering Bullion sales have not yet been made, and represents the per-Share amount of Bullion held by the Trust, after giving effect to its liabilities, to cover expenses and liabilities and any losses that may have occurred. |
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2.2. Bullion Receivable and Payable |
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Bullion receivable or payable represents the quantity of Bullion covered by contractually binding orders for the creation or redemption of Shares respectively, where the Bullion has not yet been transferred to or from the Trust’s account. Generally, ownership of the Bullion is transferred within three days of the trade date. As of March 31, 2011 there was $4,813,115 of Bullion receivable and $0 of Bullion payable and as of December 31, 2010 there was $4,378,396 of Bullion receivable and $0 of Bullion payable. |
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2.3. Creations and Redemptions of Shares |
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The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets (a Basket equals a block of 50,000 Shares). The Trust issues Shares in Baskets to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. An Authorized Participant is a person who (1) is registered as a broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) is a participant in The Depositary Trust Company, (3) has entered into an Authorized Participant Agreement with the Trustee, and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian. An Authorized Participant Agreement is an agreement entered into by each Authorized Participant, the Sponsor and the Trustee which provides the procedures for the creation and redemption of Baskets and for the delivery of the Bullion required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated Bullion account, either loco London or loco Zurich, established with the Custodian or a Bullion clearing bank by an Authorized Participant. |
6
ETFS PRECIOUS METALS BASKET TRUST
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2. Significant Accounting Policies (Continued) |
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2.3. Creations and Redemptions of Shares (Continued) |
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The creation and redemption of Baskets is only made in exchange for the delivery to the Trust or the distribution by the Trust of the amount of Bullion and any cash represented by the Baskets being created or redeemed, the amount of which is based on the combined NAV of the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received. |
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Authorized Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. The typical settlement period for Shares is three business days. In the event of a trade date at period end, where a settlement is pending, a respective account receivable and/or payable will be recorded. When Bullion is exchanged in settlement of redemption, it is considered a sale of Bullion for financial statement purposes. |
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The Shares of the Trust are classified as “Redeemable Capital Shares” for financial statement purposes, since they are subject to redemption at the option of Authorized Participants. Outstanding Shares are reflected at redemption value, which represents the maximum obligation (based on NAV per Share), with the difference from historical cost recorded as an offsetting amount to retained earnings. Changes in the Shares for March 31, 2011 and for the period from October 18, 2010 (the “Date of Inception” through December 31, 2010 are as follows: |
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Three Months |
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For the period |
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Number of Redeemable Shares: |
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Opening balance |
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1,900,000 |
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— |
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Creations |
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600,000 |
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1,900,000 |
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Redemptions |
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(100,000 |
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— |
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Closing balance |
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2,400,000 |
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1,900,000 |
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Three Months |
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For the period |
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|
|
|
|
|
|
|
||
|
Redeemable Shares: |
|
|
|
|
|
|
|
|
Opening balance |
|
$ |
166,379,066 |
|
$ |
— |
|
|
Creations |
|
|
53,952,490 |
|
|
155,072,282 |
|
|
Redemptions |
|
|
(8,654,329 |
) |
|
— |
|
|
Adjustment to redemption value |
|
|
19,344,698 |
|
|
11,306,784 |
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
$ |
231,021,925 |
|
$ |
166,379,066 |
|
|
|
|
|
|
|
|
|
|
|
Redemption value per Share at period end |
|
$ |
96.26 |
|
$ |
87.57 |
|
|
|
|
|
|
*Date of inception. |
|
|
|
|
2.4. Revenue Recognition Policy |
|
|
|
|
|
|
The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of Bullion to the Sponsor. With respect to expenses not otherwise assumed by the Sponsor, the Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s Bullion as necessary to pay these expenses. When selling Bullion to pay expenses, the Trustee will endeavor to sell the smallest amounts of Bullion needed to pay these expenses in order to minimize the Trust’s holdings of assets other than Bullion. |
|
|
|
7
ETFS PRECIOUS METALS BASKET TRUST
|
|
|
2. Significant Accounting Policies (Continued) |
|
|
|
2.4. Revenue Recognition Policy (Continued) |
|
|
|
|
|
Unless otherwise directed by the Sponsor, when selling Bullion the Trustee will endeavor to sell at the price established by the London Fix for each metal held by the Trust. The Trustee will place orders with dealers (which may include the Custodian) through which the Trustee expects to receive the most favorable price and execution of orders. The Custodian may be the purchaser of such Bullion only if the sale transaction is made at the London Fix for each metal held by the Trust used by the Trustee to value the Trust’s Bullion. A gain or loss is recognized based on the difference between the selling price and the average cost of the Bullion sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale. |
|
|
|
|
2.5. Income Taxes |
|
|
|
|
|
|
The Trust is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Trust itself will not be subject to U.S. federal income tax. Instead, the Trust’s income and expenses will “flow through” to the Shareholders, and the Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis. |
|
|
|
|
|
The Trust has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. The Sponsor has evaluated the application of ASC 740 to the Trust, to determine whether or not there are uncertain tax positions that require financial statement recognition. Based on this evaluation, the Trust has determined no reserves for uncertain tax positions are required to be recorded as a result of the application of ASC 740. As a result, no income tax liability or expense has been recorded in the accompanying financial statements. |
|
|
|
|
2.6. Investment in Bullion |
|
|
|
|
|
|
The following represents the changes in ounces of Bullion and the respective values for the three months ended March 31, 2011 and for the period from October 18, 2010 (the “Date of Inception”) through December 31, 2010: |
8
ETFS PRECIOUS METALS BASKET TRUST
2. Significant Accounting Policies (Continued) |
|
|
|
2.6. Investment in Bullion (Continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2011 |
|
|
|
|
||||||||||
|
|
|
Gold |
|
Silver |
|
Platinum |
|
Palladium |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Ounces of Bullion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
55,461.9 |
|
|
2,033,601.3 |
|
|
7,395.0 |
|
|
11,092.3 |
|
|
2,107,550.5 |
|
|
Creations (excluding Bullion receivable at March 31, 2011 - 1,496.1, 54,856.0, 199.5 and 299.2, respectively) |
|
|
17,965.9 |
|
|
658,752.4 |
|
|
2,395.4 |
|
|
3,593.3 |
|
|
682,707.0 |
|
|
Redemptions |
|
|
(2,994.3 |
) |
|
(109,789.8 |
) |
|
(399.2 |
) |
|
(598.9 |
) |
|
(113,782.2 |
) |
|
Transfers of Bullion |
|
|
(85.3 |
) |
|
(3,126.8 |
) |
|
(11.4 |
) |
|
(17.0 |
) |
|
(3,240.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
70,348.2 |
|
|
2,579,437.1 |
|
|
9,379.8 |
|
|
14,069.7 |
|
|
2,673,234.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Bullion (lower of cost or market): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
$ |
76,213,472 |
|
$ |
54,148,351 |
|
$ |
12,716,653 |
|
$ |
7,566,140 |
|
$ |
150,644,616 |
|
|
Creations (excluding Bullion receivable at March 31, 2011 - $2,152,849, 2,077,397, 353,670 and 229,199, respectively) |
|
|
25,081,589 |
|
|
21,395,250 |
|
|
4,282,273 |
|
|
2,871,862 |
|
|
53,630,974 |
|
|
Redemptions |
|
|
(4,119,910 |
) |
|
(2,988,335 |
) |
|
(689,586 |
) |
|
(418,420 |
) |
|
(8,216,251 |
) |
|
Transfers of Bullion |
|
|
(117,311 |
) |
|
(84,601 |
) |
|
(19,611 |
) |
|
(11,839 |
) |
|
(233,362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
$ |
97,057,840 |
|
$ |
72,470,665 |
|
$ |
16,289,729 |
|
$ |
10,007,743 |
|
$ |
195,825,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period October 18, 2010* to December 31, 2010 |
|
|
|
|
||||||||||
|
|
|
Gold |
|
Silver |
|
Platinum |
|
Palladium |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Ounces of Bullion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Creations (excluding bullion receivable at December 31, 2010 - 1,498.2, 54,935.7, 199.8 and 299.6, respectively) |
|
|
55,480.2 |
|
|
2,034,273.9 |
|
|
7,397.4 |
|
|
11,096.0 |
|
|
2,108,247.5 |
|
|
Redemptions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Transfers of bullion |
|
|
(18.3 |
) |
|
(672.6 |
) |
|
(2.4 |
) |
|
(3.7 |
) |
|
(697.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
55,461.9 |
|
|
2,033,601.3 |
|
|
7,395.0 |
|
|
11,092.3 |
|
|
2,107,550.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Bullion (lower of cost or market): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Creations (excluding bullion receivable at December 31, 2010 - $2,112,900, 1,682,679, 345,795 and 237,022, respectively) |
|
|
76,238,609 |
|
|
54,165,816 |
|
|
12,720,869 |
|
|
7,568,584 |
|
|
150,693,878 |
|
|
Redemptions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Transfers of bullion |
|
|
(25,137 |
) |
|
(17,465 |
) |
|
(4,216 |
) |
|
(2,444 |
) |
|
(49,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
$ |
76,213,472 |
|
$ |
54,148,351 |
|
$ |
12,716,653 |
|
$ |
7,566,140 |
|
$ |
150,644,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Date of inception |
|
|
|
|
|
|
|
|||||||||
9
ETFS PRECIOUS METALS BASKET TRUST
|
|
|
2. Significant Accounting Policies (Continued) |
|
|
|
2.7. Expenses |
|
|
|
|
|
The Trust will transfer Bullion to the Sponsor to pay the Sponsor’s Fee that will accrue daily at an annualized rate equal to 0.60% of the adjusted daily net asset value (the “ANAV) of the Trust, paid monthly in arrears. |
|
|
|
|
|
The Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and out of pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and certain legal expenses. |
|
|
|
|
|
For the three months ended March 31, 2011 the Sponsor’s Fee was $280,348. At March 31, 2011, and at December 31, 2010, the fees payable to the Sponsor were $113,348 and $78,202 respectively. |
|
|
| 3. Related Parties | |
|
|
The Sponsor and the Trustee
are considered to be related parties to the Trust. The Trustee’s
fee is paid by the Sponsor and is not a separate expense of the Trust.
The Custodian and its affiliates may from time to time act as Authorized
Participants or purchase or sell Bullion or Shares for their own account,
as agent for their customers and for accounts over which they exercise
investment discretion. |
|
|
|
| 4. Concentration of Risk | |
|
|
The Trust’s sole business activity is the
investment in Bullion, and substantially all the Trust’s assets are
holdings of Bullion which creates a concentration risk associated with
fluctuations in the price of Bullion. Several factors could affect the
price of Bullion, including: (i) global Bullion supply and demand, which
is influenced by factors such as forward selling by Bullion producers,
purchases made by Bullion producers to unwind Bullion hedge positions,
central bank purchases and sales, and production and cost levels in major
Bullion-producing countries; (ii) investors’ expectations with respect
to the rate of inflation; (iii) currency exchange rates; (iv) interest
rates; (v) investment and trading activities of hedge funds and commodity
funds; and (vi) global or regional political, economic or financial events
and situations. In addition, there is no assurance that Bullion will maintain
its long-term value in terms of purchasing power in the future. In the
event that the price of Bullion declines, the Sponsor expects the value
of an investment in the Shares to decline proportionately. Each of these
events could have a material effect on the Trust’s financial position
and results of operations. |
|
|
|
| 5. Indemnification | |
|
|
Under the Trust’s organizational documents,
each of the Trustee (and its directors, employees and agents) and the
Sponsor (and its members, managers, directors, officers, employees and
affiliates) is indemnified by the Trust against any liability, cost or
expense it incurs without gross negligence, bad faith or willful misconduct
on its part and without reckless disregard on its part of its obligations
and duties under the Trust’s organizational documents. The Trust’s
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Trust that have not yet occurred. |
|
|
|
| 6. Subsequent Events | |
|
|
In accordance with the provisions set forth in
FASB ASC 855-10, Subsequent Events, the Trust’s management
has evaluated the possibility of subsequent events existing in the Trust’s
financial statements through the filing date. |
|
10
ETFS PRECIOUS METALS BASKET TRUST
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
|
|
This information should be read in conjunction with the financial statements and notes to the financial statements included in Item 1 of Part 1 of this Form 10-Q. The discussion and analysis that follows may contain forward-looking statements with respect to the Trust’s financial conditions, operations, future performance and business. These statements can be identified by the use of the words “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or similar words and phrases. These statements are based upon certain assumptions and analyses the Sponsor has made based on its perception of historical trends, current conditions and expected future developments. Neither the Trust nor the Sponsor is under a duty to update any of the forward looking statements, to conform such statements to actual results or to reflect a change in management’s expectations or predictions. |
|
|
|
|
|
Introduction |
|
|
|
|
|
The ETFS Precious Metals Basket Trust (The “Trust”) is a common law trust, formed under the laws of the state of New York on the Date of Inception. The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors, or employees and is administered by the Trustee pursuant to the Depositary Trust Agreement (the “Trust Agreement”) between the Trustee and ETF Securities USA LLC, the Sponsor of the Trust (the “Sponsor”). The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not required to register under such act. It will not hold or trade in commodity futures contracts, nor is it a commodity pool, subject to regulation as a commodity pool operator or a commodity trading adviser in connection with issuing Shares. |
|
|
|
|
|
The Trust holds gold, silver, platinum and palladium bullion (collectively, “Bullion”) transferred to the Trust in exchange for shares issued by the Trust (“Shares”). Each Share represents a fractional undivided beneficial interest in and ownership of the Trust. The assets of the Trust are anticipated to consist solely of Bullion. Shares are issued in Baskets in exchange for deposits of Bullion, and to distribute Bullion in connection with redemptions of Baskets. A Basket consists of 50,000 Shares. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold, silver, platinum and palladium in the proportions held by the Trust, less the Trust’s expenses. The Trust holds Bullion in a ratio such that for every 0.03 ounces of gold, it holds 1.1 ounces of silver, 0.004 ounces of platinum and 0.006 ounces of palladium. The Sponsor believes that, for many investors, the Shares will represent a cost effective investment relative to traditional means of investing in Bullion. |
|
|
|
|
|
The Trust issues and redeems Shares only with Authorized Participants in exchange for Bullion, only in aggregations of 50,000 or integral multiples thereof. A list of current Authorized Participants is available from the Sponsor or the Trustee. |
|
|
|
|
|
Shares of the Trust trade on the New York Stock Exchange (the “NYSE”) Arca under the symbol “GLTR.” |
|
|
|
|
|
Valuation of Bullion and Computation of Net Asset Value |
|
|
|
|
|
On each business day, as promptly as practicable after 4:00 p.m., New York time, on such day (the “Evaluation Time”), the Trustee evaluates the Bullion held by the Trust and determines the NAV of the Trust. |
|
|
|
|
|
At the Evaluation Time, the Trustee values the Trust’s Bullion on the basis of that day’s “London Fix” for such metal (the applicable fix for each metal of the price of an ounce of such metal and is performed in London, England by fixing members of the London Bullion Market Association (“LBMA”) or London Platinum and Palladium (“LPPM”), as applicable), or if no London Fix is made for a metal on such day or has not been announced by the Evaluation Time, the next most recent London Fix for such metal determined prior to the Evaluation Time will be used, unless the Sponsor determines that such price is inappropriate as a basis for Evaluation. In the event the Sponsor determines that the London Fix or such other publicly available price as the Sponsor may deem fairly represents the commercial value of the Trust’s Bullion is not an appropriate basis for evaluation of the Trust’s Bullion, it shall identify an alternative basis for such evaluation to be employed by the Trustee. Neither the Trustee nor the Sponsor shall be liable to any person for the determination that the London Fix or such other publicly available price is not appropriate as a basis for evaluation of the Trust’s Bullion or for any determination as to the alternative basis for such evaluation provided that such determination is made in good faith. |
11
ETFS PRECIOUS METALS BASKET TRUST
|
|
|
|
|
Gold held by the Trust will be valued on the basis of the price of an ounce of gold as set by the afternoon session of the twice daily fix of the price of an ounce of gold which starts at 3:00 PM London, England time and is performed in London by the five members of the London gold fix. Silver held by the Trust will be valued on the basis of the price of an ounce of silver as set at approximately 12:00 noon London time and performed in London by three market making members of the LBMA. Platinum held by the Trust will be valued on the basis of the price of an ounce of platinum as set by the afternoon session of the twice daily fix of the price of an ounce of platinum which starts at 2:00 PM London, England time and is performed in London by the four fixing members of the LPPM. Palladium held by the Trust will be valued on the basis of the price of an ounce of palladium as set by the afternoon session of the twice daily fix of the price of an ounce of palladium which starts at 2:00 PM London, England time and is performed in London by the four fixing members of the LPPM. |
|
|
|
|
|
Once the value of Bullion has been determined, the Trustee subtracts all estimated accrued but unpaid fees (other than the fees accruing for such day on which the valuation takes place that are computed by reference to the value of the Trust or its assets), and other liabilities of the Trust from the total value of the Bullion and all other assets of the Trust (other than any amounts credited to the Trust’s reserve account, if established). The resulting figure is the adjusted net asset value (the “ANAV”) of the Trust. The ANAV of the Trust is used to compute the Sponsor’s Fee. |
|
|
|
|
|
All fees accruing for the day on which the valuation takes place that are computed by reference to the value of the Trust or its assets shall be calculated using the ANAV calculated for such day. The Trustee shall subtract from the ANAV the amount of accrued fees so computed for such day and the resulting figure is net asset value (“NAV”) of the Trust. The Trustee also determines the NAV per Share by dividing the NAV of the Trust by the number of the Shares outstanding as of the close of trading on the NYSE Arca (which includes the net number of any Shares created or redeemed on such evaluation day). |
|
|
|
|
|
The Trustee’s estimation of accrued but unpaid fees, expenses and liabilities is conclusive upon all persons interested in the Trust and no revision or correction in any computation made under the Trust Agreement will be required by reason of any difference in amounts estimated from those actually paid. |
|
|
|
|
|
The Quarter Ended March 31, 2011 |
|
|
|
|
|
The NAV of the Trust is obtained by subtracting the Trust’s expenses and liabilities on any day from the value of the Bullion owned by the Trust on that day; the NAV per Share is obtained by dividing the NAV of the Trust on a given day by the number of Shares outstanding on that day. |
|
|
|
|
|
The Trust’s NAV grew from $166,379,066 at December 31, 2010 to $231,021,925 at March 31, 2011, a 38.85% increase for the quarter. The increase in the Trust’s NAV resulted primarily from an increase in the price per ounce of gold, silver, platinum and palladium (the “Proportionate Price”) which rose 10.09% and an increase in outstanding Shares, which rose from 1,900,000 Shares at December 31, 2010 to 2,400,000 Shares at 31 March, 2011, a result of 600,000 Shares (12 Baskets) being created and 100,000 Shares (2 Baskets) being redeemed during the quarter. |
|
|
|
|
|
NAV per Share increased 9.92% from $87.57 at December 31, 2010 to $96.26 at March 31, 2011. The Trust’s NAV per Share rose slightly less than the Proportionate Price on a percentage basis due to Sponsor’s Fees, which were $280,348 for the period, or 0.60% of the Trust’s assets on an annualized basis. |
|
|
|
|
|
The NAV per share of $96.32 at March 24, 2011 was the highest during the quarter, compared with a low of $80.76 at January 28, 2011. |
|
|
|
|
|
Net gain from operations for the quarter ended March 31, 2011 was $169,571, resulting from a net gain of $11,839 on the transfer of Bullion to pay expenses and a net gain of $438,080 on Bullion distributed for the redemption of Shares, offset by Sponsor’s Fees of $280,348. Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended March 31, 2011. |
12
ETFS PRECIOUS METALS BASKET TRUST
13
ETFS PRECIOUS METALS BASKET TRUST
None.
|
|
|
|
|
There have been no material changes to the risk factors previously disclosed in the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
Item 2(a). |
None. |
|
|
|
|
|
|
|
|
Item 2(b). |
Not applicable. |
|
|
|
|
|
|
|
|
Item 2(c). |
For the three months ended March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
12 Baskets were created. |
|
|
|
|
|
|
|
|
|
2 Baskets were redeemed. |
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
Average Ounces of Bullion Per Share |
|
||||||||
|
Period |
|
Total Baskets |
|
Total Shares |
|
Gold |
|
Silver |
|
Platinum |
|
Palladium |
|
||
|
|
|
|
|
|
|
|||||||||
|
|||||||||||||||
|
January 2011 |
|
|
1 |
|
|
50,000 |
0.030 |
|
1.098 |
|
0.004 |
|
0.006 |
|
|
|
February 2011 |
|
|
1 |
|
|
50,000 |
0.030 |
|
1.097 |
|
0.004 |
|
0.006 |
|
|
|
March 2011 |
|
|
— |
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2 |
|
|
100,000 |
|
|
|
|
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
None.
None.
14
ETFS PRECIOUS METALS BASKET TRUST
(a) Exhibits
|
|
31.1 |
Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2 |
Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1 |
Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
15
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned in the capacities thereunto duly authorized.
|
|
|
|
|
|
ETF SECURITIES USA LLC |
|
|
|
Sponsor of the ETFS Precious Metals Basket Trust |
|
|
|
(Registrant) |
|
|
|
|
|
|
Date: May 13, 2011 |
/s/ Graham Tuckwell |
|
|
|
|
|
|
|
Graham Tuckwell |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
Date: May 13, 2011 |
/s/ Thomas Quigley |
|
|
|
|
|
|
|
Thomas Quigley |
|
|
|
Chief Financial Officer and Treasurer |
|
|
|
(Principal Financial Officer and Principal |
|
|
|
Accounting Officer) |
|
* The Registrant is a trust and the persons are signing in their capacities as officers of ETF Securities USA LLC, the Sponsor of the Registrant.
16
Exhibit Index
|
|
|
|
31.1 |
Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
31.2 |
Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
32.1 |
Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
32.2 |
Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |