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ABERDEEN STANDARD PALLADIUM ETF TRUST Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

03/01/2021 | 10:27am EDT
This information should be read in conjunction with the financial statements and
notes to the financial statements included with this report. The discussion and
analysis that follows may contain statements that relate to future events or
future performance. In some cases, such forward-looking statements can be
identified by terminology such as "may," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or the negative of
these terms or other comparable terminology. We remind readers that
forward-looking statements are merely predictions and therefore inherently
subject to uncertainties and other factors and involve known and unknown risks
that could cause the actual results, performance, levels of activity, or our
achievements, or industry results, to be materially different from any future
results, performance, levels of activity, or our achievements expressed or
implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Trust undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.


                                       29





Introduction.



The Aberdeen Standard Palladium ETF Trust (the "Trust") is a trust formed under
the laws of the State of New York. The Trust does not have any officers,
directors, or employees, and is administered by The Bank of New York Mellon (the
"Trustee") acting as trustee pursuant to the Depositary Trust Agreement (the
"Trust Agreement") between the Trustee and Aberdeen Standard Investments ETFs
Sponsor LLC, the sponsor of the Trust (the "Sponsor"). The Trust issues shares
("Shares") representing fractional undivided beneficial interests in its net
assets. The assets of the Trust consist of palladium bullion held by a custodian
as an agent of the Trust and responsible only to the Trustee.



The Trust is a passive investment vehicle and the objective of the Trust is for
the value of each Share to approximately reflect, at any given time, the price
of the palladium bullion owned by the Trust, less the Trust's liabilities
(anticipated to be principally for accrued operating expenses), divided by the
number of outstanding Shares. The Trust does not engage in any activities
designed to obtain a profit from, or ameliorate losses caused by, changes in the
price of palladium.


The Trust issues and redeems Shares only in exchange for palladium, only in
aggregations of 25,000 Shares effective April 1, 2019 (prior to April 1, 2019,
the number of Shares that constituted a Basket was 50,000 Shares) or integral
multiples thereof (each, a "Basket"), and only in transactions with registered
broker-dealers (or other securities market participants not required to register
as broker-dealers, such as a bank or other financial institution) that (1) are
participants in DTC and (2) have previously entered into an agreement with the
Trust governing the terms and conditions of such issuance (such dealers, the
"Authorized Participants").


As of the date of this annual report the Authorized Participants that have
signed an Authorized Participant Agreement with the Trust are Credit Suisse
Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC,
HSBC Securities (USA) Inc., J.P. Morgan Securities Inc., Merrill Lynch
Professional Clearing Corp., Mizuho Securities USA LLC, Morgan Stanley & Co.
Inc., Scotia Capital (USA) Inc., UBS Securities LLC and Virtu Financial BD, LLC.



Shares of the Trust trade on the NYSE Arca under the symbol "PALL."

Investing in the Shares does not insulate the investor from certain risks,
including price volatility. The following table illustrates the movement in the
NAV of the Shares against the corresponding palladium price (per 1/10 of an oz.
of palladium) since inception:



NAV per Share vs. Palladium Price from December 30, 2010 (the Date of Inception)
                              to December 31, 2020



                                [[Image Removed]]



The divergence of the NAV per Share from the palladium price over time reflects
the cumulative effect of the Trust expenses that arise if an investment had
been
held since inception.



Critical Accounting Policy


The financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements relies on estimates and assumption
that impact the Trust's financial position and results of operations. These
estimates and assumptions affect the Trust's application of accounting policies.
Below we describe the valuation of palladium bullion, a critical accounting
policy that we believe is important to understanding the results of operations
and financial position. In addition, please refer to Note 2 to the Financial
Statements for further discussion of our accounting policies.



                                       30





Valuation of Palladium


Palladium is held by JPMorgan Chase Bank, N.A. (the "Custodian") on behalf of
the Trust, at its London, England vaulting premises. Palladium may also be held
by UBS AG, or any other firm selected by the Custodian to hold the Trust's
palladium in the Trust's allocated account in the firm's Zurich vault premises
and whose appointment has been approved by the Sponsor, at its Zurich,
Switzerland vaulting premises. Palladium is recorded at fair value. The cost of
palladium is determined according to the average cost method and the fair value
is based on the LME PM Fix (the afternoon session of LME's twice daily
electronic price fixing process). Realized gains and losses on transfers of
palladium, or palladium distributed for the redemption of Shares, are calculated
on a trade date basis as the difference between the fair value and cost of
palladium transferred.



                                                December 31, 2020     December 31, 2019     December 31, 2018
(Amounts in 000's of US$)
Investment in palladium - cost                 $         224,166     $         170,040     $         112,344
Unrealized gain on investment in palladium               132,258               130,598                73,211
Investment in palladium - fair value           $         356,424     $     
   300,638     $         185,555




Inspection of Palladium



Under the Custody Agreements, the Trustee, the Sponsor and the Sponsor's
auditors and inspectors may, only up to twice a year, visit the premises of the
Custodian and the Zurich Sub-Custodian for the purpose of examining the
Trust's palladium and certain related records maintained by the
Custodian. Visits by auditors and inspectors to the Zurich Sub-Custodian's
facilities will be arranged through the Custodian. Other than with respect to
the Zurich Sub-Custodian, the Trustee and the Sponsor have no right to visit the
premises of any sub-custodian for the purposes of examining the
Trust's palladium or any records maintained by the sub-custodian, and no
sub-custodian is obligated to cooperate in any review the Trustee or the Sponsor
may wish to conduct of the facilities, procedures, records or creditworthiness
of such sub-custodian.



The Sponsor has exercised its right to visit the Custodian and the Zurich
Sub-Custodian, in order to examine the palladium and the records maintained by
them. Inspections were conducted by Inspectorate International Limited, a
leading commodity inspection and testing company retained by the Sponsor, as of
August 14, 2020. Due to unprecedented social lock-down policies implemented in
the UK and Switzerland to help prevent the spread of COVID-19, neither the
Sponsor, nor Inspectorate, were able to perform a physical inspection of the
Trust's palladium at December 31, 2020. In lieu of a physical inspection, the
Sponsor performed alternative procedures to verify the palladium held by the
Trust at December 31, 2020. These procedures included confirmation of the
palladium bar list and total ounces of palladium held by the Custodian at
December 31, 2020, and an independent recalculation of ounces of palladium for
each creation or redemption transaction from August 14, 2020, the date of the
last physical inspection, through December 31, 2020. The Sponsor and
Inspectorate also virtually inspected a selection of palladium bars held by the
Custodian on behalf of the Trust, verifying the weight of the bars and that the
serial numbers of the bars selected matched the records of the Trust.



Liquidity



The Trust is not aware of any trends, demands, conditions, 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 expense
of the Trust during the period covered by this report was the Sponsor's Fee. The
Trust's only source of liquidity is its transfers and sales of palladium.



The Trustee will, at the direction of the Sponsor or in its own discretion, sell
the Trust's palladium as necessary to pay the Trust's expenses not otherwise
assumed by the Sponsor. The Trustee will not sell palladium to pay the Sponsor's
Fee but will pay the Sponsor's Fee through in-kind transfers of palladium to the
Sponsor. At December 31, 2020 and 2019, the Trust did not have any cash
balances.



                                       31





Review of Financial Results



Financial Highlights



                                                   Year Ended            Year Ended            Year Ended
                                                December 31, 2020     December 31, 2019     December 31, 2018
(Amounts in 000's of US$)
Total gain/(loss) on palladium                 $          62,621     $          90,140     $          17,340
Net change in assets from operations           $          60,608     $          88,748     $          16,266
Net cash provided by operating activities      $               -     $     
         -     $               -



The year ended December 31, 2020




The net asset value ("NAV") of the Trust is obtained by subtracting the Trust's
expenses and liabilities on any day from the value of the palladium 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 increased from $300,485,250 at December 31, 2019 to $356,238,300
at December 31, 2020, an 18.55% increase for the year. The increase in the
Trust's NAV resulted primarily from an increase in the price per ounce of
palladium, which rose 22.94% from $1,905.00 at December 31, 2019 to $2,342.00 at
December 31, 2020.



There was a decrease in outstanding Shares, which fell from 1,675,000 Shares at
December 31, 2019 to 1,625,000 Shares at December 31, 2020, a result of 750,000
Shares (30 Baskets) being created and 800,000 Shares (32 Baskets) being redeemed
during the year.



The NAV per Share increased 22.20% from $179.39 at December 31, 2019 to $219.22
at December 31, 2020. The Trust's NAV per Share rose slightly less than the
price per ounce of palladium on a percentage basis due to the Sponsor's Fee,
which was $2,012,865 for the year, or 0.60% of the Trust's ANAV.



                                       32




The NAV per Share of $261.67 at February 19, 2020 was the highest during the year, compared with a low of $146.44 at March 16, 2020.

The increase in net assets from operations for the year ended December 31, 2020
was $60,607,957, resulting from a realized gain of $772,814 on the transfer of
palladium to pay expenses, a realized gain of $60,188,024 on palladium
distributed for the redemption of Shares, a change in unrealized gain on
investment in palladium of $1,659,984, offset by the Sponsor's Fee of
$2,012,865. Other than the Sponsor's Fee, the Trust had no expenses during
the
year ended December 31, 2020.


The year ended December 31, 2019




The Trust's NAV increased from $185,465,009 at December 31, 2018 to $300,485,250
at December 31, 2019, a 62.02% increase for the year. The increase in the
Trust's NAV resulted primarily from an increase in outstanding Shares, which
rose from 1,550,000 Shares at December 31, 2018 to 1,675,000 Shares at December
31, 2019, a result of 750,000 Shares (30 Baskets) being created and 625,000
Shares (25 Baskets) being redeemed during the year.



There was an increase in the price per ounce of palladium, which rose 50.83% from $1,263.00 at December 31, 2018 to $1,905.00 at December 31, 2019.




The NAV per Share increased 49.92% from $119.66 at December 31, 2018 to $179.39
at December 31, 2019. The Trust's NAV per Share rose slightly less than the
price per ounce of palladium on a percentage basis due to the Sponsor's Fee,
which was $1,392,218 for the year, or 0.60% of the Trust's ANAV.



The NAV per Share of $185.66 at December 13, 2019 was the highest during the year, compared with a low of $120.03 at January 2, 2019.

The increase in net assets from operations for the year ended December 31, 2019
was $88,747,092, resulting from a realized gain of $519,521 on the transfer of
palladium to pay expenses, a realized gain of $32,232,847 on palladium
distributed for the redemption of Shares, a change in unrealized gain on
investment in palladium of $57,386,942, offset by the Sponsor's Fee of
$1,392,218. Other than the Sponsor's Fee, the Trust had no expenses during
the
year ended December 31, 2019.


The year ended December 31, 2018




The Trust's NAV decreased from $241,554,950 at December 31, 2017 to $185,465,009
at December 31, 2018, a 23.22% decrease for the year. The decrease in the
Trust's NAV resulted primarily from a decrease in outstanding Shares, which fell
from 2,400,000 Shares at December 31, 2017 to 1,550,000 Shares at December 31,
2018, a result of 400,000 Shares (16 Baskets) being created and 1,250,000 Shares
(50 Baskets) being redeemed during the year. Effective April 1, 2019, the number
of shares in a block that constitutes a basket decreased from 50,000 Shares to
25,000 Shares (the "Basket Size Change"). The information presented attributable
to periods prior to the Basket Size Change has been adjusted to reflect the
effect of the Basket Size Change.



There was an increase in the price per ounce of palladium, which rose 19.60% from $1,056.00 at December 31, 2017 to $1,263.00 at December 31, 2018.




The NAV per Share increased 18.89% from $100.65 at December 31, 2017 to $119.66
at December 31, 2018. The Trust's NAV per Share rose slightly less than the
price per ounce of palladium on a percentage basis due to the Sponsor's Fee,
which was $1,073,755 for the year, or 0.60% of the Trust's ANAV.



The NAV per Share of $120.43 at December 20, 2018 was the highest during the year, compared with a low of $80.62 at August 15, 2018.

The increase in net assets from operations for the year ended December 31, 2018
was $16,266,087, resulting from a realized gain of $339,658 on the transfer of
palladium to pay expenses, a realized gain of $30,150,488 on palladium
distributed for the redemption of Shares, offset by a change in unrealized loss
on investment in palladium of $13,150,304 and the Sponsor's Fee of $1,073,755.
Other than the Sponsor's Fee, the Trust had no expenses during the year ended
December 31, 2018.


Off-Balance Sheet Arrangements

The Trust is not a party to any off-balance sheet arrangements.

© Edgar Online, source Glimpses

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