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EXCEL - IDEA: XBRL DOCUMENT - ETFS White Metals Basket TrustFinancial_Report.xls
EX-31.1 - EX-31.1 - ETFS White Metals Basket Trustwite-20140930ex3119f9d63.htm
EX-32.2 - EX-32.2 - ETFS White Metals Basket Trustwite-20140930ex32239bb9c.htm
EX-32.1 - EX-32.1 - ETFS White Metals Basket Trustwite-20140930ex3210db1d0.htm
EX-31.2 - EX-31.2 - ETFS White Metals Basket Trustwite-20140930ex3125e527f.htm

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2014 

Or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____________ to _____________

Commission File Number: 001-34916

 

 

 

ETFS WHITE METALS BASKET TRUST

(Exact name of registrant as specified in its charter)

 

 

 

New York

27-2780294

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

organization)

 

 

 

c/o ETF Securities USA LLC

 

48 Wall Street, 11th Floor

 

New York, NY

10005

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code:

(212) 918-4954

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes No

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 the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer

Accelerated filer

Non accelerated filer

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

As of November 6, 2014, ETFS White Metals Basket Trust has 650,000 ETFS Physical WM Basket Shares outstanding.


 

 

 

 

 

ETFS WHITE METALS BASKET TRUST

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2014

INDEX

 

 

 

 


 

 

ETFS WHITE METALS BASKET TRUST

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited) 

Condensed Statements of Assets and Liabilities (Unaudited)
At September 30, 2014 and December 31, 2013 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2014 (1)

 

December 31, 2013 (4)

(Amounts in 000's of US$, except for Share and per Share data)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Investment in Bullion (2)

 

 

 

 

 

 

Silver (cost: September 30, 2014: $12,393; December 31, 2013: $13,406)

 

$

10,874 

 

$

13,406 

Platinum (cost: September 30, 2014: $8,630; December 31, 2013: $9,336)

 

 

8,261 

 

 

9,336 

Palladium (cost: September 30, 2014: $3,258; December 31, 2013: $3,524)

 

 

3,940 

 

 

3,524 

Total investment in Bullion

 

 

23,075 

 

 

26,266 

 

 

 

 

 

 

 

Total assets

 

 

23,075 

 

 

26,266 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Fees payable to Sponsor

 

 

11 

 

 

14 

Total Liabilities

 

 

11 

 

 

14 

 

 

 

 

 

 

 

NET ASSETS

 

$

23,064 

 

$

26,252 

 

 

 

 

 

 

 

ANALYSIS OF NET ASSETS

 

 

 

 

 

 

Redeemable Shares at redemption value to investors (3)

 

 

23,064 

 

 

26,639 

Shareholders' deficit

 

 

 

 

(387)

Total net assets (3)

 

$

23,064 

 

$

26,252 

 

 

 

 

(1)

Effective January 1, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting.  Refer to Note 2.1 for additional information.

(2)

At September 30, 2014, Bullion is recorded at fair value.  At December 31, 2013, Bullion was recorded at the lower of cost or market value. Refer to Note 2.1 for additional information.

(3)

Net assets at December 31, 2013 represents total liabilities, redeemable Shares and Shareholders’ deficit. Authorized share capital is unlimited with no par value per Share. Shares issued and outstanding at September 30, 2014 were 650,000 and at December 31, 2013 were 700,000. Net asset value per Share at September 30, 2014 and December 31, 2013 was $35.48 and $38.06, respectively.

(4)

Derived from audited Statement of Financial Condition as of December 31, 2013.  The amounts are those previously reported under non investment company accounting.  Refer to Note 2.1 for additional information.

 

 

 

See Notes to the Unaudited Condensed Financial Statements

 

 

1


 

 

ETFS WHITE METALS BASKET TRUST

Schedule of Investments (Unaudited)
At September 30, 2014 and December 31, 2013 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2014

Description

 

oz

 

Cost

 

Fair Value

 

% of Net Assets (1)

Investment in Bullion (in 000's of US$, except for oz and precentage data)

Silver

 

635,513.5 

 

$

12,393 

 

$

10,874 

 

47.15% 

Platinum

 

6,355.2 

 

 

8,630 

 

 

8,261 

 

35.82% 

Palladium

 

5,084.1 

 

 

3,258 

 

 

3,940 

 

17.08% 

Total investment in Bullion

 

 

 

$

24,281 

 

$

23,075 

 

100.05% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

Description

 

oz

 

Cost

 

Fair Value

 

% of Net Assets (2)

Investment in Bullion (in 000's of US$, except for oz and percentage data)

Silver

 

687,498.1 

 

$

13,406 

 

$

13,406 

 

51.07% 

Platinum

 

6,875.1 

 

 

9,336 

 

 

9,336 

 

35.56% 

Palladium

 

5,500.0 

 

 

3,524 

 

 

3,911 

 

13.42% 

Total investment in Bullion

 

 

 

$

26,266 

 

$

26,653 

 

100.05% 

 

 

 

 

 

(1)

Calculated as investment in Bullion at fair value divided by net assets, as at September 30, 2014, investment in Bullion is recorded at fair value.  Refer to Note 2.1 for additional information.

(2)

Calculated as investment in Bullion at cost divided by net assets, as at December 31, 2013, investment in Bullion was recorded at the lower of cost or market value.  Refer to Note 2.1 for additional information.

 

 

See Notes to the Unaudited Condensed Financial Statements

 

 

2


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statements of Operations (Unaudited)
For the three months ended September 30, 2014 and 2013 and the nine months ended September 30, 2014 and 2013 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

September 30, 2014 (1)

 

September 30, 2013 (2)

 

September 30, 2014 (1)

 

September 30, 2013 (2)

(Amounts in 000's of US$, except for Share and per Share data)

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Sponsor's Fee

 

$

38 

 

$

44 

 

$

122 

 

$

156 

Total expenses

 

 

38 

 

 

44 

 

 

122 

 

 

156 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment loss

 

 

(38)

 

 

(44)

 

 

(122)

 

 

(156)

 

 

 

 

 

 

 

 

 

 

 

 

 

REALIZED AND UNREALIZED GAINS / (LOSSES)

 

 

 

 

 

 

 

 

 

 

 

 

Realized gain / (loss) on Bullion transferred to pay expenses

 

 

 

 

(7)

 

 

 

 

(2)

Realized gain / (loss) on Bullion distributed for the redemption of Shares

 

 

194 

 

 

2,531 

 

 

194 

 

 

(495)

Change in unrealized loss on investment in Bullion

 

 

(4,097)

 

 

 

 

(1,593)

 

 

(4,634)

Total (loss) / gain on Bullion

 

 

(3,900)

 

 

2,524 

 

 

(1,391)

 

 

(5,131)

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets from operations

 

$

(3,938)

 

$

2,480 

 

$

(1,513)

 

$

(5,287)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) / increase in net assets per Share

 

$

(6.06)

 

$

3.54 

 

$

(2.22)

 

$

(6.91)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Shares

 

 

650,000 

 

 

700,000 

 

 

682,234 

 

 

764,835 

 

 

 

(1)

Effective January 1, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting.  Refer to Note 2.1 for additional information.

(2)

Amounts are those previously reported under non investment company accounting.  Refer to Note 2.1 for additional information.

 

 

 

See Notes to the Unaudited Condensed Financial Statements

3


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statements of Cash Flows (Unaudited)
For the three and nine months ended September 30, 2013 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Nine Months

 

 

Ended

 

Ended

 

 

September 30, 2013 (1)

 

September 30, 2013 (1)

(Amounts in 000's of US$)

 

 

 

 

 

 

INCREASE IN CASH FROM OPERATIONS:

 

 

 

 

 

 

Cash proceeds received from transfer of Bullion

 

$

 

$

Cash expenses paid

 

 

 

 

Increase in cash resulting from operations

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

 

 

Cash and cash equivalents at end of period

 

$

 

$

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

Value of Bullion received for creation of Shares

 

$

 

$

5,041 

 

 

 

 

 

 

 

Value of Bullion distributed for redemption of Shares - at cost

 

$

 

$

7,029 

 

 

 

 

 

 

 

RECONCILIATION OF CHANGE IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

Change in net assets from operations

 

$

2,480 

 

$

(5,287)

Adjustments to reconcile change in net assets from operations to net cash provided by operating activities:

 

 

 

 

 

 

(Increase) / decrease in investment in Bullion

 

 

(2,481)

 

 

6,785 

Increase / (decrease) in fees payable to Sponsor

 

 

 

 

(5)

Increase / (decrease) in redeemable Shares:

 

 

 

 

 

 

Creations

 

 

 

 

5,041 

Redemptions

 

 

 

 

(6,534)

Net cash provided by operating activities

 

$

 

$

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

Value of Bullion transferred to pay expenses

 

$

43 

 

$

161 

 

 

 

(1)

In accordance with Topic 946, Investment Companies, the Trust meets the exemption criteria to exclude a statement of cash flows.  Thus one has not been presented for the three and nine months ended September 30, 2014.  Refer to Note 2.1 for additional information.

 

 

See Notes to the Unaudited Condensed Financial Statements

4


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statement of Changes in Net Assets (Unaudited)
For the nine months ended September 30, 2014 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014 (1)

(Amounts in 000's of US$, except for Share data)

 

Shares

 

Amount

Opening balance at December 31, 2013

 

700,000 

 

$

26,252 

Effect of adoption of new accounting principle (see Note 2.1)

 

 

 

 

387 

Net investment loss

 

 

 

 

(122)

Realized gain on investment in Bullion

 

 

 

 

202 

Change in unrealized loss on investment in Bullion

 

 

 

 

(1,593)

Creations

 

 

 

Redemptions

 

(50,000)

 

 

(2,062)

Closing balance at September 30, 2014

 

650,000 

 

$

23,064 

 

 

 

(1)

Effective January 1, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting.  Refer to Note 2.1 for additional information.

 

 

 

See Notes to the Unaudited Condensed Financial Statements

 

 

5


 

 

ETFS WHITE METALS BASKET TRUST

Financial Highlights (Unaudited)
For the three and nine months ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Nine Months

 

 

Ended

 

Ended

 

 

September 30, 2014 (1)

 

September 30, 2014 (1)

Per Share Performance (for a Share outstanding throughout the entire period)

 

 

 

 

 

 

 

Net asset value per Share at beginning of period

 

$

41.52 

 

$

38.06 

Income from investment operations:

 

 

 

 

 

 

Net investment loss

 

 

(0.06)

 

 

(0.18)

Total realized gain and change in unrealized loss on investment in Bullion

 

 

(5.98)

 

 

(2.40)

Change in net assets from operations

 

 

(6.04)

 

 

(2.58)

 

 

 

 

 

 

 

Net asset value per Share at end of period

 

$

35.48 

 

$

35.48 

 

 

 

 

 

 

 

Weighted average number of Shares

 

 

650,000 

 

 

682,234 

 

 

 

 

 

 

 

Expense Ratio

 

 

 

 

 

 

Annualized Sponsor's Fee per Share

 

 

0.60% 

 

 

0.60% 

 

 

 

 

 

 

 

Net Investment Loss Ratio

 

 

 

 

 

 

Annualized net investment loss ratio

 

 

(0.60)%

 

 

(0.60)%

 

 

 

 

 

 

 

Non-Annualized Total Return

 

 

(14.55)%

 

 

(6.78)%

 

 

 

(1)

Effective January 1, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting.  Refer to Note 2.1 for additional information.

 

 

See Notes to the Unaudited Condensed Financial Statements

 

 

 

6


 

ETFS WHITE METALS BASKET TRUST

Notes to the Unaudited Condensed Financial Statements

 

1. Organization

The ETFS White Metals Basket Trust (the “Trust”) is an investment trust formed on November 29, 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 silver, platinum and palladium in set ratios (together, “Bullion”) and issues ETFS Physical WM Basket Shares (“Shares”) (in minimum blocks of 50,000 Shares, also 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.

The investment objective of the Trust is for the Shares to reflect the performance of the price of 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 silver, platinum and palladium markets through an investment in securities. The fiscal year end for the Trust is December 31.

The accompanying unaudited condensed 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 consist of normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the three and nine months ended September 30, 2014 and for all periods presented have been made.

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, 2013. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the operating results for the full year.

 

 

 

7


 

ETFS WHITE METALS BASKET TRUST

 

2. Significant Accounting Policies

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.

 

2.1. Basis of Accounting

Since the Trust’s inception, the Sponsor determined that the Trust was not an investment company within the scope of Financial Accounting Standards Board (“FASB”) Codification of Accounting Standards, Topic 946, Financial Services—Investment Companies (“Topic 946”).  Consequently, the Trust did not prepare its financial statements applying standards applicable to investment companies in accordance with Topic 946, including recording its investment in Bullion at “fair value” as defined in Topic 946.  Instead, the Trust recorded its investment in Bullion at the lower of cost or fair value in accordance with ASC 330, Inventory and ASC 270, Interim Reporting.  

Following the release of FASB Accounting Standards Update ASU 2013-08, Financial Services—Investments Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements, the Sponsor has re-evaluated whether the Trust falls within scope and has concluded that for reporting purposes, the Trust is classified as an investment company effective January 1, 2014.  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.

As a result of the change in the evaluation of investment company status, the Trust must, from January 1, 2014, present its Bullion assets at “fair value” as defined in Topic 946.

The adoption of Topic 946 accounting changed the presentation of the Trust’s financial statements prospectively from January 1, 2014 (the date of the adoption), the most significant aspects of which are as follows:

1.

Presentation of prior year information has been conformed to the current year accounting standards in the Condensed Statement of Assets and Liabilities and Condensed Statement of Operations.  A Condensed Statement of Changes in Net Assets is required and has been presented for the nine month period ended September 30, 2014.

2.

A Schedule of Investments is required as of September 30, 2014.  The Schedule has also been included as of December 31, 2013, for comparative presentation.

3.

Financial Highlights are required for the three and nine month periods ended September 30, 2014.

4.

As the Trust meets the exemption criteria under Topic 946, a cash flow statement is not required for the three and nine month periods ended September 30, 2014.  Since the adoption of the new accounting principle is prospective, the prior year statement of cash flows is still presented.

5.

Required disclosures under Topic 820, Fair Value Measurements, have been included in the footnotes to the financial statements as of eptember 30, 2014.  December 31, 2013 disclosures have also been included for comparative purposes.

The quantitative effect of the adoption of investment company accounting is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value at

 

 

 

Gain / (loss)

 

 

December 31, 2013

 

Value at

 

as a result of

 

 

at lower of cost

 

January 1, 2014

 

change in

(Amounts in 000's of US$)

 

or market value

 

at fair value

 

accounting principle

Bullion

 

 

 

 

 

 

 

 

 

Silver

 

$

13,406 

 

$

13,406 

 

$

Platinum

 

$

9,336 

 

$

9,336 

 

$

Palladium

 

$

3,524 

 

$

3,911 

 

$

387 

 

 

$

26,266 

 

$

26,653 

 

$

387 

 

 

8


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.2. Valuation of Bullion

The Trust follows the provisions of ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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 may also be held by UBS .A.G (the “Zurich Sub-Custodian”) at its Zurich, Switzerland vaulting premises on a segregated basis. The Trust’s Bullion is recorded, per individual metal type, at fair value. The cost of Bullion is determined according to the average cost method and the fair value is based on the relevant “London Metal Price for each metal held by the Trust. This is the applicable “London Fix” for platinum and palladium of an ounce of such metal performed in London, England by fixing members of the London Platinum and Palladium Market (“LPPM”). Effective from August 15, 2014, CME Group, Inc. has been conducting an electronic, over-the-counter silver bullion auction in London, England to establish a fixing price for an ounce of silver once each trading day, which is disseminated by Thomson Reuters (the “London Silver Price”).  As of the date of filing, the London Silver Price is established by the five LBMA-authorized bullion banks and market makers participating in the auction.  The “London Metal Price” for silver held by the Trust is the London Silver Price. 

Prior to August 15, 2014, the Trust utilized the “London Fix” for silver as its benchmark for silver valuation purposes. The London Fix for silver, which London Silver Market Fixing Ltd. discontinued on August 14, 2014, was the price of an ounce of silver as set by three market members of the London Bullion Market Association at approximately 12:00 noon, London time, on each London business day and was widely accepted among silver market participants.

Realized gains and losses on transfers of Bullion, or Bullion distributed for the redemption of Shares, are calculated on a trade date basis using cost.

Once the value of Bullion has been determined, the net asset value (the “NAV”) is computed by the Trustee by deducting all accrued fees, expenses and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the Bullion and all other assets held by the Trust.

The table below summarizes the unrealized gains or losses on the Trust’s Bullion holdings as of September 30, 2014 and December 31, 2013:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2014

(Amounts in 000's of US$)

 

 

Silver

 

 

Platinum

 

 

Palladium

 

Total

Investment in Bullion - cost

 

$

12,393 

 

$

8,630 

 

$

3,258 

 

$

24,281 

Unrealized (loss) / gain on investment in Bullion

 

 

(1,519)

 

 

(369)

 

 

682 

 

 

(1,206)

Investment in Bullion - fair value

 

$

10,874 

 

$

8,261 

 

$

3,940 

 

$

23,075 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

(Amounts in 000's of US$)

 

 

Silver

 

 

Platinum

 

 

Palladium

 

Total

Investment in Bullion - cost

 

$

13,406 

 

$

9,336 

 

$

3,524 

 

$

26,266 

Unrealized gain on investment in Bullion

 

 

 

 

 

 

387 

 

 

387 

Investment in Bullion - fair value

 

$

13,406 

 

$

9,336 

 

$

3,911 

 

$

26,653 

 

Effective January 1, 2014, the Trust records its investment in Bullion at fair value and recognizes changes in fair value of the investment in Bullion as changes in unrealized gains or losses on investment in Bullion through the Statement of Operations.

Prior to 2014, the Trust recognized the movements in value of the investment in Bullion arising 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 were recognized in the later interim period. Increases in value recognized on an interim basis were not permitted to exceed the previously recognized diminution in value. Unrealized losses at December 31, 2013 were crystallized as realized losses, and the average cost of silver and platinum was written down to market value.

9


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.2. Valuation of Bullion (continued)

The per Share amount of Bullion exchanged for a purchase or redemption is calculated daily by the Trustee, using the London Metal Price 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.

Fair Value Hierarchy

Inputs

Generally accepted accounting principles establish a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:

·

Level 1.

Unadjusted quoted prices in active markets for identical assets or liabilities that the company has the ability to access.

·

Level 2.

Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments and similar data.

·

Level 3.

Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the company’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The investment in Bullion is classified as a level 2 asset, as the Trust’s investment in Bullion is calculated using third party pricing sources supported by observable, verifiable inputs.

The categorization of the Trust’s assets is as shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in 000's of US$)

 

September 30, 2014

 

December 31, 2013

Level 2

 

 

 

 

 

 

Investment in Bullion

 

$

23,075 

 

$

26,653 

 

 

 

 

 

 

 

There were no re-allocations or transfers between levels during the period.

 

2.3. Bullion Receivable and Payable

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 business days of the trade date.

There was no Bullion receivable or payable at September 30, 2014 and December 31, 2013: 

 

10


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.4. Creations and Redemptions of Shares

The Trust’s contractual obligation is to create or redeem Baskets with Authorized Participants at set prices on each trading day.  These prices are based on an agreed formula published in the prospectus, which is equal to the NAV of the Trust.  The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets. 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 a registered 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 Depository Trust Company, (3) has entered into an Authorized Participant Agreement with the Trustee and the Sponsor, and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian or other Bullion clearing bank. 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.

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 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.

The amount of Bullion represented by the Baskets created or redeemed can only be settled to the nearest 1/1000th of an ounce per individual metal type. As a result, the value attributed to the creation or redemption of Shares may differ from the value of Bullion to be delivered or distributed by the Trust. In order to ensure that the correct amount of Bullion is available at all times to back the Shares, the Sponsor accepts an adjustment to its management fees in the event of any shortfall or excess. For each transaction, this amount is not more than 1/1000th of an ounce per individual metal type.

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 a redemption, it is considered a sale of Bullion for financial statement purposes.

The Shares of the Trust are classified as “Redeemable 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. When Bullion is exchanged in settlement of a redemption, a realized gain or loss in the amount of the difference between the fair value on the trade date and the historical cost is recorded through the Condensed Statement of Operations.

Changes in the Shares for the year ended December 31, 2013 are set out below:

 

 

 

 

 

 

 

 

 

Year

 

Ended

(Amounts in 000's of US$, except for Share and per Share data)

December 31, 2013

Number of Redeemable Shares

 

 

Opening balance

 

750,000 

Creations

 

100,000 

Redemptions

 

(150,000)

Closing balance

 

700,000 

 

 

 

Redeemable Shares

 

 

Opening balance

$

37,605 

Creations

 

5,041 

Redemptions

 

(6,534)

Adjustments to redemption value

 

(9,473)

Closing balance

$

26,639 

 

 

 

Redemption value per Share at period end

$

38.06 

11


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.5. 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.  Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended September 30, 2014.

Unless otherwise directed by the Sponsor, when selling Bullion the Trustee will endeavor to sell at the price established by the London Metal Price 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 Metal Price 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 cost of the Bullion sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale.

 

2.6. 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 Sponsor has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions are required as of September 30, 2014 and December 31, 2013.

 

12


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.7. Investment in Bullion

Changes in ounces of Bullion and the respective values for the nine months ended September 30, 2014 and for the year ended December 31, 2013 are set out below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in 000's of US$, except for ounces data)

 

Nine Months Ended September 30, 2014

Ounces of Bullion

 

Silver

 

Platinum

 

Palladium

 

Total

Opening balance

 

 

687,498.1 

 

 

6,875.1 

 

 

5,500.0 

 

 

699,873.2 

Redemptions

 

 

(48,938.9)

 

 

(489.4)

 

 

(391.5)

 

 

(49,819.8)

Transfers of Bullion to pay expenses

 

 

(3,045.7)

 

 

(30.5)

 

 

(24.4)

 

 

(3,100.6)

Closing balance

 

 

635,513.5 

 

 

6,355.2 

 

 

5,084.1 

 

 

646,952.8 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion

 

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

$

13,406 

 

$

9,336 

 

$

3,911 

 

$

26,653 

Redemptions

 

 

(1,019)

 

 

(717)

 

 

(326)

 

 

(2,062)

Realized gain on Bullion distributed for the redemption of Shares

 

 

65 

 

 

53 

 

 

76 

 

 

194 

Transfers of Bullion to pay expenses

 

 

(61)

 

 

(44)

 

 

(20)

 

 

(125)

Realized gain on Bullion transferred to pay expenses

 

 

 

 

 

 

 

 

Unrealized (loss) / gain on investment in Bullion

 

 

(1,519)

 

 

(369)

 

 

295 

 

 

(1,593)

Closing balance

 

$

10,874 

 

$

8,261 

 

$

3,940 

 

$

23,075 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in 000's of US$, except for ounces data)

 

Year Ended December 31, 2013

Ounces of Bullion

 

Silver

 

Platinum

 

Palladium

 

Total

Opening balance

 

 

741,050.4 

 

 

7,410.5 

 

 

5,928.4 

 

 

754,389.3 

Creations

 

 

98,745.0 

 

 

987.5 

 

 

790.0 

 

 

100,522.5 

Redemptions

 

 

(147,834.5)

 

 

(1,478.3)

 

 

(1,182.7)

 

 

(150,495.5)

Transfers of Bullion to pay expenses

 

 

(4,462.8)

 

 

(44.6)

 

 

(35.7)

 

 

(4,543.1)

Closing balance

 

 

687,498.1 

 

 

6,875.1 

 

 

5,500.0 

 

 

699,873.2 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion

 

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

$

20,883 

 

$

10,234 

 

$

3,770 

 

$

34,887 

Creations

 

 

2,976 

 

 

1,531 

 

 

534 

 

 

5,041 

Redemptions

 

 

(3,533)

 

 

(2,190)

 

 

(810)

 

 

(6,533)

Realized (loss)/gain on Bullion distributed for the redemption of Shares

 

 

(667)

 

 

119 

 

 

53 

 

 

(495)

Transfers of Bullion to pay expenses

 

 

(112)

 

 

(67)

 

 

(26)

 

 

(205)

Realized gain on Bullion transferred to pay expenses

 

 

(15)

 

 

 

 

 

 

(7)

Realized loss on investment in Bullion

 

 

(6,126)

 

 

(296)

 

 

 

 

(6,422)

Closing balance

 

$

13,406 

 

$

9,336 

 

$

3,524 

 

$

26,266 

 

13


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.8. 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 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 September 30, 2014 and 2013 the Sponsor’s Fee was $38,278 and $44,418, respectively. For the nine months ended September 30, 2014 and 2013 the Sponsor’s Fee was $121,892 and $156,274, respectively. At September 30, 2014 and at December 31, 2013, the fees payable to the Sponsor were $11,412 and $13,619, respectively.

 

2.9. 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.

On October 16, 2014, the London Platinum and Palladium Fixing Company Limited (“LPPFCL”) announced it will discontinue the “London Fix” pricing benchmarks for platinum and palladium after November 30, 2014.  The London Fix has been the benchmark price for valuation of platinum and palladium bullion held by the Trust. The LPPFCL has accepted a proposal by the London Metal Exchange (“LME”) to administer replacement platinum and palladium price benchmark mechanisms. Commencing December 1, 2014, the LME will operate platinum and palladium bullion price fixing systems that will replicate electronically the current manual London Fix processes employed by the LPPFCL as well as provide electronic market clearing processes for platinum and palladium bullion transactions at the fixed prices established by the LME pricing mechanism. The LME’s electronic price fixing processes, like the current London Fix processes, will establish and publish fixed prices for troy ounces of platinum and palladium twice each London trading day at 9:45 am London time (“LME AM Fix”) and 2:00 pm London time (“LME PM Fix”). In addition to utilizing the same London Fix standards and methods, the LME will also supervise the platinum and palladium electronic price fixing processes through its market operations, compliance, internal audit and third-party complaint handling capabilities in order to support the integrity of the LME AM and PM Fixes. 

Commencing December 1, 2014, on each trading day the Sponsor will use the LME PM Fix for valuing platinum and palladium bullion received upon purchase of the Trust’s shares, delivered upon redemption of the Trust’s shares and otherwise held by the Trust. The Sponsor also expects to determine that the LME PM Fix will fairly represent the commercial value of platinum and palladium bullion held by the Trust and, effective 60 days after the delivery of notice of such determination to The Depository Trust Company, the registered owner of the shares of the Trust, the “Benchmark Price” (as defined in the Trust’s Trust Agreement) as of any day will be the LME PM Fix for such day.

During this period, no other material subsequent events requiring adjustment to or disclosure in the financial statements were identified.

 

 

 

3. Related Parties

The Sponsor and the Trustee are considered to be related parties to the Trust. The Trustee’s and Custodian’s fees are paid by the Sponsor and are not separate expenses of the Trust. The Trustee and the Custodian and their affiliates may from time to time act as Authorized Participants and purchase or sell Shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion. In addition the Trustee and the Custodian and their affiliates may from time to time purchase or sell Bullion directly, for their own account, as agent for their customers and for accounts over which they exercise investment discretion.

 

14


 

ETFS WHITE METALS BASKET TRUST

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 general changes in economic conditions, such as a recession or other economic downturn, recycling, autocatalyst demand, industrial demand, jewelry demand and investment demand, 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, the Trustee (and its directors, employees and agents) and the Sponsor (and its members, managers, directors, officers, employees and affiliates) are 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.

 

 

 

15


 

 

ETFS WHITE 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 unaudited condensed financial statements and notes to the unaudited condensed 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 Trust is a common law trust, formed under the laws of the state of New York on November 29, 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 will 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 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 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 1.0 ounces of silver, it holds 0.01 ounces of platinum and 0.008 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 “WITE”. 

 

Valuation of Bullion and Computation of Net Asset Value

On each business 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 (the “Evaluation Time”), the Trustee values the Bullion held by the Trust and determines both the adjusted net asset value (the “ANAV”) and the net asset value (the “NAV”) of the Trust.

At the Evaluation Time, the Trustee values the Trust’s Bullion on the basis of that day’s “London Metal Price” for such metal (the London Fix for platinum and palladium or the London Silver Price for silver of the price of an ounce of such metal, performed in London, England by fixing members of the London Bullion Market Association (“LBMA”) or London Platinum and Palladium Market (“LPPM”), as applicable), 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 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 case this determination is made, the Sponsor will identify an alternative basis for such evaluation to be used by the Trustee.

Silver held by the Trust will typically be valued on the basis of the daily price of an ounce of silver as set at approximately 12:00 noon London, England time by LBMA-authorized participating bullion banks and market makers in an electronic, over-the-counter auction conducted by CME Group, Inc. and performed in London, England and disseminated by Thomson Reuters (“London Silver Price”). Platinum held by the Trust will typically 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 typically 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 held by the Trust has been determined, the Trustee subtracts all estimated accrued but unpaid fees and other liabilities of the Trust from the total value of the Bullion and all other assets of the Trust. The resulting figure is the ANAV of the Trust. The ANAV is used to compute the Sponsor’s Fee. The Trustee then subtracts from the ANAV the amount of Sponsor’s Fees computed for such day to determine the NAV of the Trust. The Trustee also determines the NAV per Share by dividing the NAV of the Trust by the number of Shares outstanding as of the close of trading on the NYSE Arca.

16


 

 

ETFS WHITE METALS BASKET TRUST

The Quarter Ended September 30, 2014

Effective January 1, 2014, the Trust is deemed to be an investment company under generally accepted accounting principles.  Accordingly, the Trust adopted the specialized accounting for an investment company as prescribed in Topic 946, Investment Companies.  Refer to Note 2.1 of the unaudited condensed financial statements for additional information.

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 $26,987,331 at June 30, 2014 to $23,064,086 at September 30, 2014,  a 14.54% decrease for the quarter. The decrease in the Trust’s NAV resulted primarily from a decrease in the price per ounce of silver, platinum and palladium in the proportions held by the Trust (the “Proportionate Price”), which fell 14.41% during the quarter.

No Shares were created or redeemed duing the quarter, therefore Shares outstanding at September 30, 2014 and June 30, 2014 were 650,000.

NAV per Share decreased 14.55% from $41.52 at June 30, 2014 to $35.48 at September 30, 2014. The Trust’s NAV per Share fell slightly more than the Proportionate Price on a percentage basis due to Sponsor’s Fees, which were $38,278 for the quarter, or 0.60% of the Trust’s assets on an annualized basis.

The NAV per Share of $42.61 at July 10, 2014 was the highest during the quarter, compared with a low of $35.48 at September 30, 2014.

Decrease in net assets from operations for the quarter ended September 30, 2014 was $3,935,577, resulting from  a realized gain of $3,450 on the transfer of Bullion to pay expenses and a realized gain of $194,035 on Bullion distributed fir the redemption of Shares, offset by a change in unrealized loss on investment in Bullion of $4,094,784 and Sponsor’s Fees of $38,278. Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended September 30, 2014.  

Prior to the adoption of investment company accounting, the Trust recorded its investment in Bullion at the lower of cost or market value. Under the previous presentation and accounting policies, net gain from operations for the quarter ended September 30, 2013 was $2,479,686, resulting from an unrealized gain of $2,530,868 on investment in Bullion, offset by a net loss of $6,764 on the transfer of Bullion to pay expenses and Sponsor’s Fees of $44,418. Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended September 30, 2013. 

There was a change in unrealized loss on investment in Bullion in the quarter ended September 30, 2014 compared to an unrealized gain on investment in Bullion in the quarter ended September 30, 2013.  This change has occurred as a result of the adoption of investment company accounting and movements in the Proportionate Price during the respective quarters.  

Sponsor’s Fees are calculated as a percentage of assets.  The Sponsor’s Fee in the quarter ended September 30, 2014 was lower than the fee for the quarter ended September 30, 2013 as the average assets were lower in the quarter ended September 30, 2014 compared to the quarter ended September 30, 2013.

17


 

 

The Nine Months Ended September 30, 2014

The Trust’s NAV decreased  from $26,639,308 at December 31, 2013 to $23,064,086 at September 30, 2014, a 13.42% decrease for the period. The decrease in the Trust’s NAV resulted primarily from an decrease in the Proportionate Price which fell 6.34% during the period and a decrease in outstanding Shares which fell from 700,000 Shares at December 31, 2013 to 650,000 Shares at September 30, 2014, a result of 50,000 Shares (1 Basket) being redeemed during the period.  No Shares were created during the period.

NAV per Share decreased 6.78% from $38.06 at December 31, 2013 to $35.48 at September 30, 2014. The Trust’s NAV per Share fell slightly more than the Proportionate Price on a percentage basis due to Sponsor’s Fees, which were $121,892 for the period, or 0.60% of the Trust’s assets on an annualized basis.

The NAV per Share of $42.61 at July 10, 2014 was the highest during the period, compared with a low of $35.48 at September 30, 2014.

Change in net assets arising from the change in accounting principle (refer to Note 2.1 to the unaudited condensed financial statements) as of January 1, 2014 was $386,941.  Decrease in net assets from operations for the period ended June 30, 2014 was $1,511,392, resulting from a realized gain of $7,816 on Bullion transferred to pay expenses and a realized gain of $194,035 on Bullion distributed for the redemption of Shares, offset by a change in unrealized loss on investment in Bullion of $1,591,351 and Sponsor’s Fees of $121,892. Other than the Sponsor’s Fee, the Trust had no expenses during the period ended September 30, 2014.  

Prior to the adoption of investment company accounting, the Trust recorded its investment in Bullion at the lower of cost or market value. Under the previous presentation and accounting policies, net loss from operations for the period ended September 30, 2013 was $5,287,026, resulting from a net loss of $1,646 on the transfer of Bullion to pay expenses, a loss of $494,907 on Bullion distributed for the redemption of Shares, an unrealized loss of $4,634,199 on investment in Bullion and Sponsor’s Fees of $156,274. Other than the Sponsor’s Fee, the Trust had no expenses during the period ended September 30, 2013.

The change in unrealized gain on investment in Bullion in the period ended September 30, 2014 was less than the unrealized loss on investment in Bullion in the period ended September 30, 2013.  This change has occurred as a result of the adoption of investment company accounting and movements in the Proportionate Price during the respective periods.  

Sponsor’s Fees are calculated as a percentage of assets.  The Sponsor’s Fee in the period ended September 30, 2014 was lower than the fee for the period ended September 30, 2013 as the average assets were lower in the period ended September 30, 2014 compared to the period ended September 30, 2013.

 

18


 

 

ETFS WHITE METALS BASKET 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 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, 2014 the Trust did not have any cash balances.

 

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

 

Critical Accounting Policies

The unaudited condensed financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed 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 unaudited condensed financial statements for further discussion of accounting policies.

Effective January 1, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting. Other than a change in the presentation of the Trust’s financial statements, the most significant change is that the Trust must, from January 1, 2014, record its investment in Bullion at fair value.  Prior to January 1, 2014 the investment in Bullion was recorded at the lower of cost and market value.  As a result of this change, the Trust expects that there will be fluctuations in the value of investments based on changes in the Proportionate Price of Bullion.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

 

Item 4. Controls and Procedures

The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer of the Sponsor, and to the audit committee, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer of the Sponsor, the Sponsor conducted an evaluation of the Trust’s disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer of the Sponsor concluded that, as of September 30, 2014, the Trust’s disclosure controls and procedures were effective.

There have been no changes in the Trust’s or Sponsor’s internal control over financial reporting that occurred during the Trust’s fiscal quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Trust’s or Sponsor’s internal control over financial reporting.

 

Item 4T. Controls and Procedures

Not applicable.

 

19


 

 

ETFS WHITE METALS BASKET TRUST

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

 

Item 1A. Risk Factors

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, 2013.  

 

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 September 30, 2014:  

0 Baskets were created. 

0 Basket  were redeemed. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Baskets

 

Total Shares

 

 

Period

 

Redeemed

 

Redeemed

 

Silver

 

Platinum

 

Palladium

July 2014

 

 

 

 

 

August 2014

 

 

 

 

 

September 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

None.

 

Item 5. Other Information

As a result of the temporary incapacity of the Sponsor’s Chief Financial Officer and Treasurer, Christopher Foulds, due to illness, Joseph Roxburgh was appointed on November 4, 2014 to serve as the Sponsor’s principal financial and accounting officer in the role of Chief Financial Officer and Treasurer until Mr. Foulds can resume his duties. Since 2012, Mr. Roxburgh has served as the Chief Financial Officer of ETF Securities Limited, the Sponsor’s parent company that is based in Jersey, Channel Islands.  Prior to acting as Chief Financial Officer of ETF Securities Limited, from 2006 to 2012, Mr. Roxburgh was Group Finance Director for a Jersey-based individual managing a global portfolio of commercial and financial investments. From 2004 to 2006, he was Group Finance Director and Company Secretary for Brand Advantage Group and held various roles at KPMG between 1993 and 2004. Mr. Roxburgh is a Chartered Accountant (FCA) and a member of the Association of Corporate Treasurers (AMCT). He holds an Executive MBA from University of Bristol / Ecole Nationale des Ponts et Chausses and a BSc in Physics from the University of Manchester. 

 

20


 

 

Item 6. Exhibits

(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.

 

 

101.INS

XBRL Instance Document*

 

 

101.SCH

XBRL Taxonomy Extension Schema Document*

 

 

101.CAL

XBRL Taxonomy Extension Calculation Document*

 

 

101.DEF

XBRL Taxonomy Extension Definitions Document*

 

 

101.LAB

XBRL Taxonomy Extension Labels Document*

 

 

101.PRE

XBRL Taxonomy Extension Presentation Document*

*In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

 

 

21


 

 

SIGNATURES

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 White Metals Basket Trust

 

(Registrant)

 

 

 

Date: November 10, 2014

/s/ Graham Tuckwell

 

Graham Tuckwell

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

Date: November 10, 2014

/s/ Joseph Roxburgh

 

Joseph Roxburgh

 

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.