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ABERDEEN STANDARD PRECIOUS METALS BASKET ETF TRUST Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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11/09/2018 | 08:44pm CET

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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and within the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements may relate to the Trust's financial condition, 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 Trust is a common law trust, formed under the laws of the state of New York on October 18, 2010. 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 Trust Agreement. 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 does not hold or trade in commodity futures contracts, nor is it a commodity pool, or subject to regulation as a commodity pool operator or a commodity trading adviser in connection with issuing Shares.

The Trust holds Bullion (consisting of gold, silver, platinum and palladium in specified proportions) and is expected to issue Baskets in exchange for deposits of Bullion, and to distribute Bullion in connection with redemptions of Baskets. Shares issued by the Trust represent units of undivided beneficial interest in and ownership of the Trust. 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 and only in aggregations of 50,000 Shares 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 day that the NYSE Arca is open for regular trading, as promptly as practicable after 4:00 p.m., New York time, on such day ("Evaluation Time"), the Trustee will evaluate the Bullion held by the Trust and determine both the ANAV and the NAV of the Trust.

At the Evaluation Time, the Trustee will value the Trust's Bullion on the basis of that day's London Metal Price for such metal or, if no London Metal Price is made for a metal on such day or has not been announced by the Evaluation Time, the next most recent London Metal Price announced 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 applicable London Metal Price 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 Metal Price 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.

Once the value of the Bullion has been determined, the Trustee will subtract all estimated accrued but unpaid fees (other than the fees accruing for such day on which the valuation takes place computed by reference to the value of the Trust or its assets), expenses 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 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 on which the valuation takes place. The Trustee shall subtract from the ANAV the amount of accrued fees so computed for such day and the resulting figure is the NAV of the Trust. The Trustee will also determine 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).



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               ABERDEEN STANDARD PRECIOUS METALS BASKET ETF TRUST

Recent Events

On September 20, 2018, the Sponsor entered into an Amendment to the Trust Agreement with the Trustee (the "DTA Amendment"), effective as of October 1, 2018. The DTA Amendment reflects the changed name of the Trust from ETFS Precious Metals Basket Trust to Aberdeen Standard Precious Metals Basket ETF Trust, the changed name of the Shares from ETFS Physical PM Basket Shares to Aberdeen Standard Physical Precious Metals Basket Shares ETF, and the changed name of the Sponsor from ETF Securities USA LLC to Aberdeen Standard Investments ETFs Sponsor LLC (collectively, the "Name Changes"). No other material changes to the Trust Agreement were made in connection with the Name Changes.

The Quarter Ended September 30, 2018

The NAV of the Trust is obtained by subtracting the Trust's liabilities on any day from the value of the Bullion owned and receivable 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 decreased from $343,626,313 at June 30, 2018 to $317,852,863 at September 30, 2018, a 7.50% decrease for the quarter. The decrease in the Trust's NAV resulted primarily from a decrease in the outstanding Shares, which fell from 5,600,000 Shares at June 30, 2018 to 5,450,000 shares at September 30, 2018, a result of 50,000 Shares (1 Baskets) being created and 200,000 Shares (4 Baskets) being redeemed during the quarter.

There was a decrease in the price per ounce of gold, silver, platinum and palladium in the proportions held by the Trust (the "Proportionate Price"), which fell 4.81% from $64.27 at June 30, 2018 to $61.18 at September 30, 2018.

The NAV per Share decreased 4.95% from $61.36 at June 30, 2018 to $58.32 at September 30, 2018. The Trust's NAV per Share fell slightly more than the Proportionate Price on a percentage basis due to the Sponsor's Fee, which was $499,629 for the quarter, or 0.60% of the Trust's ANAV on an annualized basis.

The NAV per Share of $61.93 at July 9, 2018 was the highest during the quarter, compared with a low of $57.16 at August 16, 2018.

The decrease in net assets from operations for the quarter ended September 30, 2018 was $17,166,664, resulting from a realized loss of $10,935 on the transfer of Bullion to pay expenses, a realized loss of $895,820 on Bullion distributed for the redemption of Shares, a change in unrealized loss on investment in Bullion of $15,760,280 and the Sponsor's Fee of $499,629. Other than the Sponsor's Fee, the Trust had no expenses during the quarter ended September 30, 2018.

The Nine Months Ended September 30, 2018

The Trust's NAV decreased from $361,931,979 at December 31, 2017 to $317,852,863 at September 30, 2018, a 12.18% decrease for the period. The decrease in the Trust's NAV resulted primarily from a decrease in the price per ounce of the Proportionate Price, which fell 9.35% from $67.49 at December 31, 2017 to $61.18 at September 30, 2018 and a decrease in outstanding Shares which fell from 5,600,000 Shares at December 31, 2017 to 5,450,000 Shares at September 30, 2018, as a result of 850,000 Shares (17 Baskets) being redeemed and 700,000 Shares (14 Baskets) being created during the period.

The NAV per Share decreased 9.76% from $64.63 at December 31, 2017 to $58.32 at September 30, 2018. The Trust's NAV per Share fell slightly more than the price per ounce of the Proportionate Price on a percentage basis due to the Sponsor's Fee, which was $1,619,440 for the nine months ended September 30, 2018, or 0.60% of the Trust's ANAV on an annualized basis.

The NAV per Share of $67.58 at January 25, 2018 was the highest during the period, compared with a low of $57.16 at August 16, 2018.

The decrease in net assets from operations for the nine months ended September 30, 2018 was $36,108,459, resulting from a change in unrealized loss on investment in Bullion of $34,906,158, a realized gain of $40,399 on the transfer of Bullion to pay expenses, a realized gain of $376,740 on Bullion distributed for the redemption of Shares, and the Sponsor's Fee of $1,619,440. Other than the Sponsor's Fee, the Trust had no expenses during the nine months ended September 30, 2018.


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               ABERDEEN STANDARD PRECIOUS METALS BASKET ETF TRUST


Liquidity & Capital Resources

The Trust is not aware of any trends, demands, commitments, events or uncertainties that are reasonably likely to result in material changes to its liquidity needs. In exchange for the Sponsor's Fee, the Sponsor has agreed to assume 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.

The Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust's Bullion, only in the specified proportion of gold, silver, platinum and palladium held by the Trust, as necessary to pay the Trust's expenses not otherwise assumed by the Sponsor. The Trustee will not sell Bullion to pay the Sponsor's Fee but will pay the Sponsor's Fee through in-kind transfers of Bullion to the Sponsor. At September 30, 2018, the Trust did not have any cash balances.

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

Critical Accounting Policies

The financial statements and accompanying notes are prepared in accordance with U.S. GAAP. The preparation of these financial statements relies on estimates and assumptions that impact the Trust's financial position and results of operations. These estimates and assumptions affect the Trust's application of accounting policies. In addition, please refer to Note 2 to the financial statements for further discussion of accounting policies.

© Edgar Online, source Glimpses

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