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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, 2012 

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 x No o

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 x No o

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

o

Accelerated filer

o

Non accelerated filer

x

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).

Yes o No x

As of November 7, 2012, ETFS White Metals Basket Trust has 750,000 ETFS Physical WM Basket Shares outstanding.

 

 


 

 

ETFS WHITE METALS BASKET TRUST

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2012

INDEX

 

 

 

 

 


 

 

ETFS WHITE METALS BASKET TRUST

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited) 

Condensed Statements of Financial Condition (Unaudited)

At September 30, 2012 and December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2012

 

December 31, 2011 (3)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Investment in Bullion (1)

 

 

 

 

 

Silver

$

20,914,070 

 

$

23,810,067 

Platinum

 

10,249,231 

 

 

11,668,508 

Palladium

 

3,776,111 

 

 

4,299,004 

 

 

34,939,412 

 

 

39,777,579 

Total assets

$

34,939,412 

 

$

39,777,579 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Fees payable to Sponsor

$

20,668 

 

$

20,326 

Total liabilities

 

20,668 

 

 

20,326 

 

 

 

 

 

 

REDEEMABLE SHARES AND SHAREHOLDERS' DEFICIT

 

 

 

 

 

Shares at redemption value to investors (2)

 

41,886,143 

 

 

39,757,253 

Shareholders' deficit

 

(6,967,399)

 

 

Total liabilities, redeemable Shares & shareholders' deficit

$

34,939,412 

 

$

39,777,579 

 

 

 

(1)  Investment in Bullion is valued at the lower of cost or market value. Refer to Note 2.1 for a breakdown of cost and market value per metal.

(2)  Authorized share capital is unlimited with no par value per share. Shares issued and outstanding at September 30, 2012 were 750,000 and at December 31, 2011 were 850,000.

(3)  Derived from audited statement of financial condition as of December 31, 2011.

See Notes to the Unaudited Condensed Financial Statements.

1


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statements of Operations (Unaudited)

For the three months ended September 30, 2012 and 2011 and the nine months ended September 30, 2012 and 2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

 

Ended

 

Ended

 

Ended

 

Ended

 

September 30, 2012

 

September 30, 2011

 

September 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

Value of Bullion transferred to pay expenses

$

52,991 

 

$

97,133 

 

$

179,645 

 

$

264,538 

Cost of Bullion transferred to pay expenses

 

(52,894)

 

 

(85,694)

 

 

(168,380)

 

 

(234,186)

Gain on Bullion transferred to pay expenses

 

97 

 

 

11,439 

 

 

11,265 

 

 

30,352 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on Bullion distributed for the redemption of Shares

 

 

 

403,147 

 

 

561,284 

 

 

3,050,042 

Unrealized gain / (loss) on Bullion

 

1,162,496 

 

 

(5,158,181)

 

 

 

 

(5,267,795)

Total gain / (loss) on Bullion

 

1,162,593 

 

 

(4,743,595)

 

 

572,549 

 

 

(2,187,401)

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Sponsor's Fee

 

56,803 

 

 

95,124 

 

 

179,988 

 

 

276,324 

Total expenses

 

56,803 

 

 

95,124 

 

 

179,988 

 

 

276,324 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain / (loss) from operations

$

1,105,790 

 

$

(4,838,719)

 

$

392,561 

 

$

(2,463,725)

 

 

 

 

 

 

 

 

 

 

 

 

Net gain / (loss) per Share

$

1.47 

 

$

(4.56)

 

$

0.50 

 

$

(2.38)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Shares

 

750,000 

 

 

1,060,870 

 

 

785,401 

 

 

1,033,150 

 

See Notes to the Unaudited Condensed Financial Statements

2


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statements of Cash Flows (Unaudited)

For the three months ended September 30, 2012 and 2011 and the nine months ended September 30, 2012 and 2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

 

Ended

 

Ended

 

Ended

 

Ended

 

September 30, 2012

 

September 30, 2011

 

September 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

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 - net of Bullion receivable

$

 

$

9,266,397 

 

$

 

$

43,599,833 

 

 

 

 

 

 

 

 

 

 

 

 

Value of Bullion distributed for redemption of Shares - at average cost - net of Bullion payable

$

 

$

2,732,651 

 

$

4,669,787 

 

$

18,854,545 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF NET GAIN / (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Net gain / (loss) from operations

$

1,105,790 

 

$

(4,838,719)

 

$

392,561 

 

$

(2,463,725)

Adjustments to reconcile net gain / (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

(Increase) / decrease in Bullion assets

 

(1,109,602)

 

 

(1,289,870)

 

 

4,838,167 

 

 

(19,243,307)

Increase in Bullion payable

 

 

 

7,533,198 

 

 

 

 

7,533,198 

Increase / (decrease) in fees payable to Sponsor

 

3,812 

 

 

(2,010)

 

 

342 

 

 

11,787 

Increase / (decrease) in redeemable Shares:

 

 

 

 

 

 

 

 

 

 

 

Creations

 

 

 

9,266,397 

 

 

 

 

43,599,833 

Redemptions

 

 

 

(10,668,996)

 

 

(5,231,070)

 

 

(29,437,786)

Net cash provided by operating activities

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

Value of Bullion transferred to pay expenses

$

52,991 

 

$

97,133 

 

$

179,645 

 

$

264,538 

 

See Notes to the Unaudited Condensed Financial Statements

3


 

 

ETFS WHITE METALS BASKET TRUST

Condensed Statement of Changes in Shareholders’ Deficit (Unaudited)

For the nine months ended September 30, 2012 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

Ended

 

September 30, 2012

 

 

 

Shareholders' deficit - opening balance

$

Net gain for the period

 

392,561 

Adjustment of redeemable Shares to redemption value

 

(7,359,960)

Shareholders' deficit - closing balance

$

(6,967,399)

 

See Notes to the Unaudited Condensed Financial Statements

 

4


 

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 the Trust’s management, 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 and nine months ended September 30, 2012 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, 2011. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the operating results for the full year.

 

 

 

 

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.

 

5


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.1. Valuation of Bullion

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” (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 Market (“LPPM”), as applicable) for each metal held by the Trust used to determine the net asset value (the “NAV”) of the Trust. Realized gains and losses on transfers of Bullion, or Bullion distributed for the redemption of Shares, are calculated on a trade date basis using average cost.

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 due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the Bullion and all other assets held by the Trust.

At December 31, 2011, the market value of silver, platinum and palladium was below average cost, therefore losses of $3,097,792, $3,013,015 and $821,397, respectively, were realized on the investment in Bullion. The average costs per ounce of silver, platinum and palladium were reduced to $28.18, $1,381.00 and $636.00 respectively.

The table below summarizes the unrealized gains or losses on the Trust’s Bullion holdings as of September 30, 2012 and December 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2012

 

 

Silver

 

 

Platinum

 

 

Palladium

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion - average cost

$

20,914,070 

 

$

10,249,231 

 

$

3,776,111 

 

$

34,939,412 

Unrealized gain on investment in Bullion

 

4,801,776 

 

 

2,129,999 

 

 

35,623 

 

 

6,967,398 

Investment in Bullion - market value

$

25,715,846 

 

$

12,379,230 

 

$

3,811,734 

 

$

41,906,810 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

Silver

 

 

Platinum

 

 

Palladium

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion - average cost

$

23,810,067 

 

$

11,668,508 

 

$

4,299,004 

 

$

39,777,579 

Unrealized gain on investment in Bullion

 

 

 

 

 

 

 

Investment in Bullion - market value

$

23,810,067 

 

$

11,668,508 

 

$

4,299,004 

 

$

39,777,579 

 

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. For the three months ended September 30, 2012 the Trust recognized $1,162,496 of unrealized gain, representing the recovery of lower of cost or market value losses recognized in the previous quarters of 2012.

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.

6


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.2. 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, 2012 or December 31, 2011.

 

7


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.3. Creations and Redemptions of Shares

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 metal 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 gain or loss in the amount of the difference between the market value on the trade date and the historical cost is recorded through the Condensed Statement of Operations.

Changes in the Shares for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are set out below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

Year

 

Ended

 

Ended

 

September 30, 2012

 

December 31, 2011

Number of redeemable Shares

 

 

 

 

 

Opening balance

 

850,000 

 

 

700,000 

Creations

 

 

 

750,000 

Redemptions

 

(100,000)

 

 

(600,000)

Closing balance

 

750,000 

 

 

850,000 

 

 

 

 

 

 

Redeemable Shares

 

 

 

 

 

Opening balance

$

39,757,253 

 

$

37,969,441 

Creations

 

 

 

43,599,832 

Redemptions

 

(5,231,070)

 

 

(34,595,821)

Adjustments to redemption value

 

7,359,960 

 

 

(7,216,199)

Closing balance

$

41,886,143 

 

$

39,757,253 

 

 

 

 

 

 

Redemption value per Share at period end

$

55.85 

 

$

46.77 

 

 

 

 

 

 

8


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

 

 

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.

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 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, 2012 and December 31, 2011.

9


 

ETFS WHITE METALS BASKET TRUST

2. Significant Accounting Policies (Continued)

2.6. Investment in Bullion

Changes in ounces of Bullion and the respective values for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are set out below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2012

 

 

Silver

 

 

Platinum

 

 

Palladium

 

 

Total

Ounces of Bullion:

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

844,927.9 

 

 

8,449.3 

 

 

6,759.4 

 

 

860,136.6 

Redemptions

 

(99,192.5)

 

 

(991.9)

 

 

(793.5)

 

 

(100,977.9)

Transfers of Bullion

 

(3,575.3)

 

 

(35.8)

 

 

(28.6)

 

 

(3,639.7)

Closing balance

 

742,160.1 

 

 

7,421.6 

 

 

5,937.3 

 

 

755,519.0 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion (lower of cost or market):

 

 

 

 

 

 

 

 

 

 

 

Opening balance

$

23,810,067 

 

$

11,668,508 

 

$

4,299,004 

 

$

39,777,579 

Redemptions

 

(2,795,246)

 

 

(1,369,850)

 

 

(504,691)

 

 

(4,669,787)

Transfers of Bullion

 

(100,751)

 

 

(49,427)

 

 

(18,202)

 

 

(168,380)

Closing balance

$

20,914,070 

 

$

10,249,231 

 

$

3,776,111 

 

$

34,939,412 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2011

 

 

Silver

 

 

Platinum

 

 

Palladium

 

 

Total

Ounces of Bullion:

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

699,935.7 

 

 

6,999.4 

 

 

5,599.5 

 

 

712,534.6 

Creations

 

748,540.4 

 

 

7,485.4 

 

 

5,988.3 

 

 

762,014.1 

Redemptions

 

(597,694.2)

 

 

(5,976.9)

 

 

(4,781.6)

 

 

(608,452.7)

Transfers of Bullion

 

(5,854.0)

 

 

(58.6)

 

 

(46.8)

 

 

(5,959.4)

Closing balance

 

844,927.9 

 

 

8,449.3 

 

 

6,759.4 

 

 

860,136.6 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in Bullion (lower of cost or market):

 

 

 

 

 

 

 

 

 

 

 

Opening balance

$

20,136,128 

 

$

11,802,916 

 

$

4,087,618 

 

$

36,026,662 

Creations

 

25,578,767 

 

 

13,336,944 

 

 

4,684,121 

 

 

43,599,832 

Redemptions

 

(18,627,679)

 

 

(10,357,265)

 

 

(3,616,067)

 

 

(32,601,011)

Transfers of Bullion

 

(179,357)

 

 

(101,072)

 

 

(35,271)

 

 

(315,700)

Realized loss on investment in Bullion

 

(3,097,792)

 

 

(3,013,015)

 

 

(821,397)

 

 

(6,932,204)

Closing balance

$

23,810,067 

 

$

11,668,508 

 

$

4,299,004 

 

$

39,777,579 

 

 

 

 

 

 

 

 

 

 

10


 

ETFS WHITE 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 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, 2012 and 2011 the Sponsor’s Fee was $56,803 and $95,124, respectively. For the nine months ended September 30, 2012 and 2011 the Sponsor’s Fee was $179,988 and $276,324, respectively.  At September 30, 2012 and at December 31, 2011, the fees payable to the Sponsor were $20,668 and $20,326, respectively.

 

2.8. Subsequent Events

In accordance with the provisions set forth in Financial Accounting Standards Board Accounting Standards Codification 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. During this period, no material subsequent events were identified.

 

 

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 Trustee and the Custodian and their 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, 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.

 

11


 

 

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, 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 soon 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 ANAV and 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 Market (“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 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 price of an ounce of silver as set at approximately 12:00 noon London time and performed in London, England by the three market making members of the LBMA. 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

12


 

 

computed for such day to determine the 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 Shares outstanding as of the close of trading on the NYSE Arca.

13


 

 

ETFS WHITE METALS BASKET TRUST

The Quarter Ended September 30, 2012

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 increased from $34,162,297 at June 30, 2012 to $41,886,143 at September 30, 2012, a 22.61%  increase for the quarter. The increase in the Trust’s NAV resulted primarily from an increase in the price per ounce of silver, platinum and palladium in the proportions held by the Trust (the “Proportionate Price”) which rose 22.79%. There were no creations or redemptions of Shares during the quarter, therefore, both at June 30, 2012 and September 30, 2012 there were 750,000 Shares outstanding.  

NAV per Share increased 22.61% from $45.55 at June 30, 2012 to $55.85 at September 30, 2012. The Trust’s NAV per Share fell slightly less than the Proportionate Price on a percentage basis due to Sponsor’s Fees, which were $56,803 for the quarter, or 0.60% of the Trust’s assets on an annualized basis.

The NAV per Share of $56.68 at September 14, 2012 was the highest during the quarter, compared with a low of $44.92 at July 12, 2012.

Net gain from operations for the quarter ended September 30, 2012 was $1,105,790, resulting from a net gain of $97 on the transfer of Bullion to pay expenses and an unrealized gain of $1,162,496, offset by Sponsor’s Fees of $56,803. Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended September 30, 2012.

 

The Nine Months Ended September 30, 2012

The Trust’s NAV increased from $39,757,253 at December 31, 2011 to $41,886,143 at September 30, 2012, a 5.35%  increase for the period. The increase in the Trust’s NAV resulted primarily from an increase in the Proportionate Price which rose 19.94%.

There was a decrease in outstanding Shares from 850,000 Shares at December 31, 2011 to 750,000 Shares at September 30, 2012, a result of 100,000 Shares (2 Baskets) being redeemed during the period. There were no creations during the period.

NAV per Share increased 19.41% from $46.77 at December 31, 2011 to $55.85 at September 30, 2012. The Trust’s NAV per Share rose slightly less than the Proportionate Price on a percentage basis due to Sponsor’s Fees, which were $179,988 for the period, or 0.60% of the Trust’s assets on an annualized basis.

The NAV per Share of $59.82 at February 29, 2012 was the highest during the period, compared with a low of $44.92 at July 12, 2012. 

Net gain from operations for the period ended September 30, 2012 was $392,561, resulting from a net gain of $11,265 on the transfer of Bullion to pay expenses and a net gain of $561,284 on Bullion distributed for the redemption of Shares, offset by Sponsor’s Fees of $179,988. Other than the Sponsor’s Fee, the Trust had no expenses during the period ended September 30, 2012.

14


 

 

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, 2012 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.

 

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 15(d)-15(e). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer of the Sponsor concluded that, as of September 30, 2012, 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, 2012 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.

 

15


 

 

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, 2011.

 

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, 2012:

No Baskets were created. 

No Baskets were redeemed. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

Total Baskets
Redeemed

 

Total Shares
Redeemed

 

Average Ounces of Bullion Per Share

 

 

 

 

Silver

 

Platinum

 

Palladium

 

July 2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

August 2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

September 2012

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Total

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

None.

 

Item 5. Other Information

None.

16


 

 

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.”

17


 

 

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 9, 2012

/s/ Graham Tuckwell

 

Graham Tuckwell

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

Date: November 9, 2012

/s/ Christopher Foulds

 

Christopher Foulds

 

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.

 

 

18