Filed 2026-03-02 · Period ending 2025-12-31 · 40,815 words · SEC EDGAR
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# abrdn Palladium ETF Trust (PALL) — 10-K
**Filed:** 2026-03-02
**Period ending:** 2025-12-31
**Accession:** 0001999371-26-004881
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1459862/000199937126004881/)
**Origin leaf:** 3a8287cc7b046252294bba98a0819d06426168623c90a61149fce5f41af43e6a
**Words:** 40,815
---
**
UNITED
STATES**
**SECURITIES
AND EXCHANGE COMMISSION**
**Washington,
D.C. 20549**
**Form
10-K**
|
| ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
**For
the fiscal year ended December 31, 2025**
**or**
|
| 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: 001-34589**
abrdn
Palladium ETF Trust
(*Exact
name of registrant as specified in its charter*)
|
New
York |
|
26-4733157 | |
|
(State or other
jurisdiction of incorporation or organization) |
|
(I.R.S. Employer
Identification No.) | |
|
|
|
| |
|
c/o
abrdn ETFs Sponsor LLC
1900 Market Street, Suite 200 |
|
| |
|
Philadelphia,
PA |
|
19103 | |
|
(Address of principal
executive offices) |
|
(Zip Code) | |
(844)
383-7289
*(Registrants
telephone number, including area code)*
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered | |
|
abrdn Physical Palladium Shares ETF |
|
PALL |
|
NYSE Arca | |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No
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 every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer,
smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
|
Large Accelerated Filer |
|
|
Accelerated Filer |
| |
|
Non-Accelerated Filer |
|
|
Smaller Reporting Company |
| |
|
|
|
|
Emerging Growth Company |
| |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Aggregate
market value of the registrants shares outstanding based upon the closing price of a share on June 30, 2025 as reported
by the NYSE Arca, Inc. on that date: $501,792,375.
As
of February 26, 2026, abrdn Palladium ETF Trust had 7,300,000 abrdn Physical Palladium Shares ETF outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE: None
FORWARD
LOOKING STATEMENTS
This
Annual Report on Form 10-K contains various forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and within the Private
Securities Litigation Reform Act of 1995, as amended. Forward-looking statements usually include the words, anticipates,
believes, estimates, expects, intends, plans, projects,
understands and other words suggesting uncertainty. We remind readers that forward-looking statements are merely
predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could
cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different
from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
The Trust undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Additional
significant uncertainties and other factors affecting forward-looking statements are presented in the Risk Factors section herein.
TABLE
OF CONTENTS
|
PART
I |
2 | |
|
Item
1. Business |
2 | |
|
Trust
Objective |
2 | |
|
Overview
of the Palladium Industry |
3 | |
|
Operation
of the Palladium Bullion Market |
5 | |
|
Secondary
Market Trading |
7 | |
|
Valuation
of Palladium and Computation of Net Asset Value |
8 | |
|
Trust
Expenses |
8 | |
|
Creation
and Redemption of Shares |
9 | |
|
Creation
and Redemption Transaction Fee |
13 | |
|
The
Sponsor |
13 | |
|
The
Trustee |
13 | |
|
The
Custodian |
14 | |
|
Inspection
of Palladium |
14 | |
|
Description
of Shares |
15 | |
|
Custody
of the Trusts Palladium |
15 | |
|
United
States Federal Income Tax Consequences |
16 | |
|
ERISA
and Related Considerations |
18 | |
|
Item
1A. Risk Factors |
19 | |
|
Item
1B. Unresolved Staff Comments |
28 | |
|
Item
1C. Cybersecurity |
28 | |
|
Item
2. Properties |
29 | |
|
Item
3. Legal Proceedings |
29 | |
|
Item
4. Mine Safety Disclosures |
29 | |
|
|
| |
|
PART
II |
29 | |
|
Item
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
29 | |
|
Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations |
32 | |
|
Item
7A. Quantitative and Qualitative Disclosures about Market Risk |
35 | |
|
Item
8. Financial Statements and Sup p lementary Data |
35 | |
|
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |
37 | |
|
Item
9A. Controls and Procedures |
37 | |
|
Item
9B. Other Information |
38 | |
|
|
| |
|
PART
III |
38 | |
|
Item
10. Directors, Executive Officers and Corporate Governance |
38 | |
|
Item
11. Executive Compensation |
38 | |
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
38 | |
|
Item
13. Certain Relationships and Related Transactions, and Director Independence |
38 | |
|
Item
14. Principal Accounting Fees and Services |
38 | |
|
|
| |
|
PART
IV |
41 | |
|
Item
15. Exhibits, Financial Statement Schedule |
41 | |
|
Item
16. Form 10-K Summary |
42 | |
PART
I
Item
1. Business
The
purpose of the abrdn Palladium ETF Trust (the Trust) is to own palladium transferred to the Trust in exchange for
shares issued by the Trust (Shares). Each Share represents a fractional undivided beneficial interest in and ownership
of the Trust. The assets of the Trust consist solely of palladium bullion. The Trust was formed on December 30, 2009 when an initial
deposit of palladium was made in exchange for the issuance of two Baskets (at the time of the initial deposit, a
Basket consisted of 50,000 Shares; effective April 1, 2019, the number of Shares comprising a Basket was reduced to 25,000 Shares, and effective June 18, 2024, the number of Shares comprising a Basket was reduced to 12,500 Shares).
The
sponsor of the Trust is abrdn ETFs Sponsor LLC (the Sponsor). The trustee of the Trust is The Bank of New York Mellon
(the Trustee) and the custodian is ICBC Standard Bank Plc (the Custodian or ICBC).
The
Trust is not managed like a corporation or an active investment vehicle. The Trust has no directors, officers or employees. It
does not engage in any activities designed to obtain a profit from or to improve the losses caused by changes in the price of
palladium.
The
palladium held by the Trust will only be delivered to pay the remuneration due to the Sponsor (the Sponsors Fee),
distributed to Authorized Participants (defined below) in connection with the redemption of Baskets or sold (1) on an as-needed
basis to pay Trust expenses not assumed by the Sponsor, (2) in the event the Trust terminates and liquidates its assets, or (3)
as otherwise required by law or regulation.
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. The Trust does not and will not hold or trade in commodities futures contracts, commodity interests or
any other instruments regulated by the Commodity Exchange Act (the CEA), as administered by the Commodity Futures
Trading Commission (the CFTC) and the National Futures Association (NFA). The Trust is not a commodity
pool for purposes of the CEA and the Shares are not commodity interests, and neither the Sponsor nor the Trustee
is subject to regulation as a commodity pool operator or a commodity trading advisor in connection with the Shares. The Trust
has no fixed termination date.
The
Sponsor of the registrant maintains an Internet website at www.abrdn.com/us/etf through which the registrants annual reports
on Form 10-K, quarterly reports on Form 10-Q, and amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are made available free of charge as soon as reasonably
practicable after they have been filed or furnished to the Securities and Exchange Commission (the SEC). The SEC
maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically at www.sec.gov.
Trust
Objective
The
investment objective of the Trust is for the Shares to reflect the performance of the price of physical palladium, less the
Trusts expenses. The Shares are intended to constitute a simple and cost-effective means of making an investment
similar to an investment in physical palladium. An investment in physical palladium requires expensive and sometimes
complicated arrangements in connection with the assay, transportation, warehousing and insurance of the metal. Traditionally,
such expense and complications have resulted in investments in physical palladium being efficient only in amounts beyond the
reach of many investors.
2
The
Shares are intended to provide institutional and retail investors with a simple and cost-efficient means, with minimal credit
risk, of gaining investment benefits similar to those of holding palladium bullion. The Shares offer an investment that:
|
| Easily
Accessible and Relatively Cost Effective. Investors can access the palladium bullion market through a traditional brokerage
account. The Sponsor believes that investors will be able to more effectively implement strategic and tactical asset allocation
strategies that use palladium bullion by using the Shares instead of using the traditional means of purchasing, trading and holding
palladium bullion and for many investors, transaction costs related to the Shares will be lower than those associated with the
purchase, storage and insurance of physical palladium bullion. |
|
|
| Exchange
Traded and Transparent. The Shares trade on the NYSE Arca, providing investors with an efficient means to implement various
investment strategies. The Shares are eligible for margin accounts and are backed by the assets of the Trust and the Trust does
not hold or employ any derivative securities. Furthermore, the value of the Trusts holdings are reported on the Trusts
website daily. |
|
|
| Minimal
Credit Risk. The Shares represent an interest in physical palladium owned by the Trust (other than an amount held in unallocated
form which is not sufficient to make up a whole plate or ingot of which is held temporarily to effect a creation or redemption
of Shares). Physical palladium of the Trust in the Custodians possession is not subject to borrowing arrangements with
third parties. Other than the palladium temporarily being held in an unallocated palladium account with the Custodian, the physical
palladium of the Trust is not subject to counterparty or credit risks. See Risk FactorsPalladium held in the
Trusts unallocated palladium account and any Authorized Participants unallocated palladium account is not segregated
from the Custodians assets... This contrasts with most other financial products that gain exposure to palladium
through the use of derivatives that are subject to counterparty and credit risks. |
|
Investing
in the Shares does not insulate the investor from certain risks, including price volatility. See Risk Factors.
Overview
of the Palladium Industry
This
section provides a brief introduction to the palladium industry by looking at some of the key participants, detailing the primary
sources of demand and supply.
In
this annual report, the term ounces refers to troy ounces.
*Platinum
Group Metals*
Platinum
and palladium are the two best known metals of the six platinum group metals (PGMs). Platinum and palladium have
the greatest economic importance and are found in the largest quantities. The other fouriridium, rhodium, ruthenium and
osmiumare produced only as co-products of platinum and palladium. PGMs are known for their purity, high melting points
and unique catalytic properties. In addition to their oxidation and reduction properties, they are also extremely resistant to
corrosion. PGMs are utilized in a number of industrial processes, technologies and commercial applications. Their unique chemical
and physical properties make PGMs an excellent raw material, catalyst and ingredient for manufacturing processes. Consumer and
industrial products made with palladium and other PGMs include flat panel monitors, glass fiber, medical tools, computer hard
drives, nylon and razors, among others. PGMs play a critical role in autocatalysis and pollution control in the automotive sector.
PGM
mining is heavily concentrated in southern Africa (South Africa and Zimbabwe), with smaller percentages coming from the United
States, Russia and other locations. South Africa is the worlds leading platinum producer and one of the largest palladium
producers. Russia is the second largest producer of platinum. All of South Africas production is sourced from the Bushveld
Igneous Complex, which hosts the worlds largest resource of PGMs. Together, South Africa and Russia accounted for over
77% of palladium supply in 2024.
3
*World
Palladium Supply and Demand 2015-2024*
The
following table sets forth a summary of the world palladium supply and demand from 2015 - 2024 and is based on information reported
by Johnson Matthey, PGM Market Report. Information for the calendar year ended 2025 is not available as of the date of this report.
|
(thousands
of ounces) | |
2015 | | |
2016 | | |
2017 | | |
2018 | | |
2019 | | |
2020 | | |
2021 | | |
2022 | | |
2023 | | |
2024 | | |
|
Supply | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
South Africa | |
| 2,683 | | |
| 2,570 | | |
| 2,547 | | |
| 2,543 | | |
| 2,571 | | |
| 1,975 | | |
| 2,645 | | |
| 2,288 | | |
| 2,360 | | |
| 2,420 | | |
|
Russia | |
| 2,434 | | |
| 2,781 | | |
| 2,452 | | |
| 2,976 | | |
| 2,987 | | |
| 2,636 | | |
| 2,689 | | |
| 2,200 | | |
| 2,700 | | |
| 2,750 | | |
|
North America | |
| 874 | | |
| 917 | | |
| 956 | | |
| 1,035 | | |
| 1,042 | | |
| 990 | | |
| 908 | | |
| 832 | | |
| 863 | | |
| 814 | | |
|
Zimbabwe | |
| 320 | | |
| 396 | | |
| 386 | | |
| 393 | | |
| 379 | | |
| 410 | | |
| 392 | | |
| 409 | | |
| 427 | | |
| 419 | | |
|
Others | |
| 144 | | |
| 129 | | |
| 131 | | |
| 135 | | |
| 140 | | |
| 185 | | |
| 212 | | |
| 235 | | |
| 247 | | |
| 251 | | |
|
Total
Supply | |
| 6,455 | | |
| 6,793 | | |
| 6,472 | | |
| 7,082 | | |
| 7,119 | | |
| 6,196 | | |
| 6,846 | | |
| 5,964 | | |
| 6,597 | | |
| 6,654 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Secondary
supply | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Automotive | |
| 1,952 | | |
| 1,986 | | |
| 2,357 | | |
| 2,624 | | |
| 2,916 | | |
| 2,689 | | |
| 2,886 | | |
| 2,790 | | |
| 2,389 | | |
| 2,449 | | |
|
Electronics/other | |
| 475 | | |
| 481 | | |
| 479 | | |
| 475 | | |
| 477 | | |
| 430 | | |
| 444 | | |
| 457 | | |
| 466 | | |
| 481 | | |
|
Jewellery | |
| 46 | | |
| 21 | | |
| 21 | | |
| 12 | | |
| 12 | | |
| 9 | | |
| 9 | | |
| 10 | | |
| 10 | | |
| 10 | | |
|
Total
secondary supply | |
| 2,473 | | |
| 2,488 | | |
| 2,857 | | |
| 3,111 | | |
| 3,405 | | |
| 3,128 | | |
| 3,339 | | |
| 3,257 | | |
| 2,865 | | |
| 2,940 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total
combined supply | |
| 8,928 | | |
| 9,281 | | |
| 9,329 | | |
| 10,193 | | |
| 10,524 | | |
| 9,324 | | |
| 10,185 | | |
| 9,221 | | |
| 9,462 | | |
| 9,594 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Demand
by Application | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Auto | |
| 7,657 | | |
| 8,019 | | |
| 8,423 | | |
| 8,837 | | |
| 9,675 | | |
| 8,534 | | |
| 8,452 | | |
| 8,413 | | |
| 8,767 | | |
| 8,313 | | |
|
Chemical | |
| 449 | | |
| 419 | | |
| 435 | | |
| 605 | | |
| 530 | | |
| 498 | | |
| 593 | | |
| 602 | | |
| 539 | | |
| 546 | | |
|
Dental & Biomedical | |
| 474 | | |
| 435 | | |
| 398 | | |
| 364 | | |
| 320 | | |
| 228 | | |
| 208 | | |
| 189 | | |
| 192 | | |
| 177 | | |
|
Electrical & Electronics | |
| 903 | | |
| 872 | | |
| 844 | | |
| 768 | | |
| 711 | | |
| 636 | | |
| 649 | | |
| 547 | | |
| 516 | | |
| 535 | | |
|
Investment | |
| (659 | ) | |
| (646 | ) | |
| (386 | ) | |
| (574 | ) | |
| (87 | ) | |
| (190 | ) | |
| 17 | | |
| (109 | ) | |
| 61 | | |
| 229 | | |
|
Jewellery | |
| 220 | | |
| 189 | | |
| 167 | | |
| 148 | | |
| 128 | | |
| 85 | | |
| 88 | | |
| 87 | | |
| 87 | | |
| 85 | | |
|
Pollution Control | |
| 56 | | |
| 71 | | |
| 78 | | |
| 86 | | |
| 88 | | |
| 75 | | |
| 92 | | |
| 102 | | |
| 123 | | |
| 124 | | |
|
Other | |
| 104 | | |
| 114 | | |
| 91 | | |
| 117 | | |
| 120 | | |
| 93 | | |
| 96 | | |
| 82 | | |
| 85 | | |
| 86 | | |
|
Total
Demand | |
| 9,204 | | |
| 9,473 | | |
| 10,050 | | |
| 10,351 | | |
| 11,485 | | |
| 9,959 | | |
| 10,195 | | |
| 9,913 | | |
| 10,370 | | |
| 10,095 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Movements
in stocks | |
| (276 | ) | |
| (192 | ) | |
| (721 | ) | |
| (158 | ) | |
| (961 | ) | |
| (635 | ) | |
| (10 | ) | |
| (692 | ) | |
| (908 | ) | |
| (501 | ) | |
*Source:
Johnson Matthey PGM Market Reports (2015 2025).*
The
following are some of the main characteristics of the palladium market illustrated by the table:
Russia
has traditionally been the largest producer of palladium, providing on average 40% of supply over the past 10 years. South Africa
has, on average, supplied approximately 37% of production over the past 10 years. In 2024, Russia provided 41.3% of mine supplies,
while South Africa produced 36.4%. North America contributed approximately 13.9% of mine supply in 2024. Scrap supply, from recycling
of autocatalyst and other sources, accounted for roughly 30.6% of total supply in 2024 in line with the value from 2023.
Autocatalysts
continue to be the largest component of palladium demand, averaging 84.2% of total demand from 2015 to 2024, compared to 83.2%
in 2015. Jewelry demand for palladium has tapered off considerably over the last 10 years, contributing only 0.8% of total demand
in 2024, down from a high of 2.4% in 2015. Other industrial demand (chemical, dental and electrical) has fallen from 19.8% of
total demand in 2015 to 12.5% of total demand in 2024. Since 2015, pollution control demand has increased from 0.6% to 1.2% of
total demand. Pollution control demand captures the production demand for emissions control in non-automotive applications.
*Historical
Chart of the Price of Palladium*
The
price of palladium is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements
in the price of palladium in the past are not a reliable indicator of future movements. The following chart illustrates the movements
in the price of an ounce of palladium in U.S. Dollars from December 31, 2015 to December 31, 2025 and is based on information
provided by Bloomberg:
*****
Source: Bloomberg, Aberdeen. Chart data from 12/31/2015 to 12/31/2025. Spot Palladium Price = PLDMLNPM Index.
The
following is a discussion of the movements in the price of Palladium illustrated by the table:
The
strong rally in 2014 palladium prices was completely unwound in 2015, when South African mine supply resumed back to pre-strike
levels and pessimism about industrial demand in China overwhelmed the true tightness in the market. Palladium was then the top
performer of the precious metals complex for 3 consecutive years from 2017 to 2019, where it rose nearly 182% from $676 per troy
ounce on December 31, 2016 to $1,905 per troy ounce on December 31, 2019. The price of palladium reached an all-time high of $2,781/oz
on February 19, 2020, before closing out the year at a price of $2,342/oz on December 31, 2020. Similar to other precious metals,
palladium took a step back in 2021 as it returned -16% (as of December 31, 2021). A decline in autocatalyst demand due to the
pandemic was a big reason for the negative performance seen during the year.
The
price of palladium reached a record high of $3,015 per ounce on March 7, 2022, as Russians invasion of Ukraine infused uncertainty
into global markets and created additional price pressure that pushed the price of palladium nearly 53% above its 2021 close.
While each of the precious metals (gold, silver, platinum) saw prices fluctuate throughout the year, the price of palladium showed
greater correlation with the price of Platinum during the first quarter. The price of palladium fell by roughly 25% between March
8th and March 31st, ending the first quarter at a price of $2,259 per ounce. On June 14th, 2022, the price of palladium fell as
low as $1,810 per ounce, as aggressive interest rate policies from the U.S. Federal Reserve drove the U.S. Dollar higher. Contrary
to the other three precious metals, the price of palladium increased as high as $2,315 per ounce on October 4th, 2022, as supplies
were further constrained by operational challenges in South African and North American mines, as well as a weaker automotive recycling
market. Throughout the year, tailwinds from supply disruptions were countered by weaker automotive and investment demand, higher
interest rates and the risk of a potential recession. As a result, while the other three precious metals rallied to end the year,
the price of palladium reversed course during the fourth quarter to end the year at $1,775 per ounce, down 10% from the end of
2021.
4
In
2023, palladium production in Russia and South Africa continued to impact global supply. Russian production was relatively flat
compared to 2020 and 2021, however sanctions imposed in 2022 constrained the production capacity of Russian metals producer Nornickel,
the worlds largest palladium producer. In contrast, South Africa continued to experience power supply disruptions along with
rising electricity prices. Coupled with labor strikes, political instability, inflation and volatile prices, which compressed
profit margins and subsequently led to a decrease in expected supply from the worlds second leading producer. However, despite
the supply deficit, investors sold short a large amount of palladium that year, in hopes that electric vehicles would curtail
the demand for palladium in gasoline-powered automobiles. Additionally, while a positive outlook at the beginning of the year,
fueled by Chinas loosening of COVID-19 related restrictions, drove the price as high as $1,628 per ounce on April 21, 2023, the
Chinese economic rebound disappointed investors. As a result of these two factors, the price of palladium continued on a downward
trend throughout most of the year before reaching a low of $957 per ounce on December 6, 2023. Fears of additional Russian sanctions
sparked a year-end rally that saw the price climb as high as $1,221 per ounce on December 20, 2023, but the precious metal ultimately
ended the year at $1,136 per ounce, 36% below its 2022 closing price.
In
2024, palladium markets continued to be volatile as the market remained net short and prices did not respond to the existing supply
side deficit as the market worked through above ground stockpiles. While autocatalyst demand continued to be the largest component
of palladium demand, it has not yet returned to pre-pandemic levels, and the price remained between $850 and $1,050 per ounce
for much of the year. In October, the threat of potential new sanctions on Russian exports, which accounts for roughly 40% of
new mined supply, sent the price as high as $1,222 per ounce on October 29, 2024, as short sellers bought long contracts to reduce
their positions. However, once market fears about disruptions in supply dissipated the spot price retreated and ultimately ended
the year at $909 per ounce on December 31, 2024 (-19.98%).
In
2025, palladium markets remained volatile, but benefited from a deficit-driven, supply-constrained environment that saw prices
rebound off 2024 lows. While the palladium market has been in deficit of various magnitudes since 2012, this year saw a turn in
the overwhelming narrative driving weak prices. Several mining companies reduced mining operations into the prior year end and
U.S. government support for EV subsidies waned. Nearly 80% of palladium demand comes from the automotive sector for pollution
control of internal combustion engine vehicles and hybrids. The cessation of the $7.500 EV tax credit in September accelerated
automakers decisions to offer more fossil fuel and hybrid vehicles which use palladium for pollution control. Further, weaker
than anticipated South African supply and recycling, along with revised market forecasts for 2025 and 2026, contributed to a sharp
increase in the spot price of palladium that reached $1,297 per ounce on July 18, 2025, an increase of 42.7% from the end of 2024.
The spot price of palladium pulled back into a tighter range between July and the end of September before pricing became increasingly
sensitive to financial flows, with futures positioning amplifying the movement in spot price driven by U.S. tariff uncertainty,
South African disruptions, tighter leasing markets and strong Chinese imports. The spot price would reach as high as $1,837 per
ounce, before ending the year at $1,567 per ounce on December 31, 2025 (+72.4%).
Operation
of the Palladium Bullion Market
The
global trade in palladium consists of Over-the-Counter (OTC) transactions in spot, forwards, and options and other
derivatives, together with exchange-traded futures and options.
Global
Over-The-Counter Market*
The
OTC market trades on a 24-hour per day continuous basis and accounts for most global palladium trading. Market makers, as well
as others in the OTC market, trade with each other and with their clients on a principal-to-principal basis. All risks and issues
of credit are between the parties directly involved in the transaction. Market makers include the market-making members of the
London Platinum and Palladium Market (LPPM), the trade association that acts as the coordinator for activities conducted
on behalf of its members and other participants in the LPPM. Five member participants of the LPPM are currently participating
in the London Metal Exchanges (LME) administration of the LBMA Palladium prices. In January 2026, the LBMA announced that it intends to appoint
ICE Benchmark Administration (IBA) to replace the LME as the third-party administrator of the LBMA Palladium prices in mid-2026.
The OTC market provides a relatively flexible market in terms of quotes, price, size, destinations for delivery and other factors.
Bullion dealers customize transactions to meet clients requirements. The OTC market has no formal structure and no open-outcry
meeting place.
The
main centers of the OTC market for palladium are London, New York, Hong Kong and Zurich. Mining companies, manufacturers of jewelry
and industrial products, together with investors and speculators, tend to transact their business through one of these market
centers. Centers such as Dubai and several cities in the Far East also transact substantial OTC market business, typically involving
jewelry and small plates or ingots of palladium (1 kilogram or less) and will hedge their exposure by selling into one of these
main OTC centers. Precious metals dealers have offices around the world and most of the worlds major bullion dealers are
either members or associate members of the London Bullion Market Association (LBMA) and/or the LPPM. In the OTC
market for palladium, the standard size of trades between market makers is 1,000 ounces.
Liquidity
in the OTC market can vary from time to time during the course of the 24-hour trading day. Fluctuations in liquidity are reflected
in adjustments to dealing spreadsthe differential between a dealers buy and sell prices.
The period of greatest liquidity in the palladium market generally occurs at the time of day when trading in the European time
zones overlaps with trading in the United States, which is when OTC market trading in London, New York, Zurich and other centers
coincides with futures and options trading on the Commodity Exchange, Inc. (COMEX), a designated contract market
within the CME Group. This period lasts for approximately four hours each New York business day morning.
5
*The
Zurich and London Palladium Bullion Markets*
Although
the market for physical palladium is distributed globally, most palladium is stored and most OTC market trades are cleared through
London and Zurich. In addition to coordinating market activities, the LPPM acts as the principal point of contact between the
market and its regulators. A primary function of the LPPM is its involvement in the promotion of refining standards by maintenance
of the London/Zurich Good Delivery Lists, which are the lists of LPPM accredited refiners of palladium. The LPPM
also coordinates market clearing and vaulting, promotes good trading practices and develops standard documentation.
Palladium
is traded generally on a loco London or loco Zurich basis, meaning the precious metal is physically
held in vaults in London or Zurich or is transferred into accounts established in London or Zurich. Delivery of the palladium
can either be by physical delivery or through the clearing systems to an unallocated account.
The
unit of trade in London and Zurich is the troy ounce, whose conversion between grams is: 1,000 grams equals 32.1507465 troy ounces,
and one troy ounce equals 31.1034768 grams. A good delivery palladium plate or ingot on the LPPM approved list is acceptable for
delivery in settlement of a transaction on the OTC market (a Good Delivery Plate or Ingot). A Good Delivery Plate
or Ingot must contain between 32 and 192.904 troy ounces of palladium with a minimum fineness (or purity) of 999.5 parts per 1,000
(99.95%), be of good appearance, and be easy to handle and stack. The palladium content of a palladium plate or ingot is calculated
by multiplying the gross weight by the fineness of the plate or ingot. A Good Delivery Plate or Ingot must also bear the stamp
of one of the refiners who are on the LPPM approved list. Unless otherwise specified, the palladium spot price always refers to
that of Good Delivery Standards set by the LPPM. Business is generally conducted over the phone and through electronic
dealing systems.
Since
December 1, 2014, the LME has been administering the operation of electronic palladium bullion price fixing system (LMEbullion)
that replicate electronically the manual London palladium fix processes previously employed by the London Platinum and Palladium
Fixing Company Ltd (LPPFCL) as well as providing electronic market clearing processes for palladium bullion transactions
at the fixed prices established by the LME pricing mechanism. The LMEs electronic price fixing processes, like the previous
London palladium fix processes, establishes and publishes fixed prices for troy ounces of palladium twice each London trading
day during fixing sessions beginning at 9:45 a.m. London time (the LBMA Palladium Price AM) and 2:00 p.m. London time
(the LBMA Palladium Price PM). In addition to utilizing the same London palladium fix standards and methods, the LME
also supervises the 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 LBMA Palladium Price PM. The
LME, in administering LMEbullion, uses a pricing methodology that meets the administrative and regulatory needs of palladium market
participants, including the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmark,
(the IOSCO Principles). In January 2026, the LBMA announced that it intends to appoint ICE Benchmark Administration (IBA) to replace the LME as the third-party
administrator of the LBMA Platinum and Palladium prices in mid-2026.
Daily
during London trading hours the LBMA Palladium Price AM and the LBMA Palladium Price PM each provide reference palladium prices
for that days trading. Many long-term contracts will be priced on the basis of either the LBMA Palladium Price AM or the
LBMA Palladium Price PM, and market participants will usually refer to one or the other of these prices when looking for a basis
for valuations. The Trust values its palladium on the basis of the LBMA Palladium Price PM. If there is no LME PM Price on any
day, the Trust will value its palladium on the basis of LBMA Palladium Price AM announced on that day. If neither price is available
for that day, the Trust will value its palladium based on the most recently announced LBMA Palladium Price PM price or LBMA Palladium
Price AM price.
Formal
participation in the LBMA Palladium Price PM is limited to participating LPPM members. Six LPPM members are currently participating
in establishing the LBMA Palladium Price PM (Goldman Sachs International, HSBC Bank USA NA, ICBC Standard Bank plc, Johnson Matthey
plc, StoneX Financial Ltd and BASF Metals Ltd.). Any other market participant wishing to participate in the trading on the LBMA
Palladium Price PM is required to do so through one of the participating LPPM members.
Orders
are placed either with one of the participating LPPM member participants or with another precious metals dealer who will then
be in contact with a participating LPPM member during the fixing. The fix begins with the chair reflecting the market price and
other data, prevailing at the opening of the fix. This is relayed by the LPPM member participants to their dealing rooms which
have direct communication with all interested parties. Any market member may enter the fixing process at any time, or adjust or
withdraw his order. The palladium price is adjusted up or down until all the buy and sell orders are electronically matched, at
which time the price is declared fixed. All fixing orders are transacted on the basis of this fixed price, which is instantly
relayed to the market through various media.
6
The
LBMA and the LME have asserted that the LMEs electronic price fixing processes are similar to the non-electronic processes
previously used to establish the applicable London palladium fix where the London palladium fix process adjusted the palladium
price up or down until all the buy and sell orders entered by the participating LPPM members are matched, at which time the price
was declared fixed. Nevertheless, the LBMA Palladium Price PM has several advantages over the previous London palladium fix. The
LMEs electronic price fixing processes are intended to be transparent. The LME asserts that its electronic price fixing
processes are fully auditable by third parties since an audit trail exists from the beginning of each fixing session. The LME
also asserts that the market operation, compliance, internal audit and third-party complaint handling capabilities of the LME
supports the integrity of the LBMA Palladium Price PM.
Since
December 1, 2014, the Sponsor determined that the London palladium fix, which has been revised based on the new LME method and
is now known as the LBMA Palladium Price PM, is an appropriate basis for valuing palladium bullion received upon purchase of the
Trusts Shares, delivered upon redemption of the Trusts Shares and for determining the value of the Trusts
palladium bullion each trading day. The Sponsor also determined that the LBMA Palladium Price PM fairly represents the commercial
value of Palladium bullion held by the Trust and the Benchmark Price (as defined inTrust Agreement) as of any day
is such days LBMA Palladium Price PM or such days LBMA Palladium Price AM if such days LBMA Palladium Price
PM is not available.
As
of December 1, 2014, the LPPFCL transferred ownership of the historic and future intellectual property of the twice daily fix
for platinum and palladium bullion to a subsidiary company of the LBMA.
*Futures
Exchanges*
The
most significant palladium futures exchanges are the COMEX, a designated contract market within the CME Group, and the Tokyo Commodity
Exchange (TOCOM). The COMEX is the largest exchange in the world for trading precious metals futures and options
and launched palladium futures in 1968, followed with options in 2010. The TOCOM has been trading palladium since 1992. Trading
on these exchanges is based on fixed delivery dates and transaction sizes for the futures and options contracts traded. Trading
costs are negotiable. As a matter of practice, only a small percentage of the futures market turnover ever comes to physical delivery
of the palladium represented by the contracts traded. Both exchanges permit trading on margin. Margin trading can add to the speculative
risk involved given the potential for margin calls if the price moves against the contract holder. The COMEX trades palladium
futures almost continuously (with one short break in the evening) through its CME Globex electronic trading system and clears
through its central clearing system. On June 6, 2003, the TOCOM adopted a similar clearing system. In each case, the exchange
acts as a counterparty for each member for clearing purposes.
Market
Regulation
The
global palladium markets are overseen and regulated by both governmental and self-regulatory organizations. In addition, certain
trade associations have established rules and protocols for market practices and participants. In the United Kingdom, responsibility
for the regulation of the financial market participants, including the major participating members of the LPPM falls under the
authority of the Financial Conduct Authority (FCA) as provided by the Financial Services and Markets Act 2000 (FSM
Act). Under this act, all U.K.-based banks, together with other investment firms, are subject to a range of requirements,
including fitness and properness, capital adequacy, liquidity, and systems and controls.
The
FCA is responsible for regulating investment products, including derivatives, and those who deal in investment products. Regulation
of spot, commercial forwards, and deposits of palladium not covered by the FSM Act is provided for by The London Code of Conduct
for Non-Investment Products, which was established by market participants in conjunction with the Bank of England.
The
TOCOM has authority to perform financial and operational surveillance on its members trading activities, scrutinize positions
held by members and large-scale customers, and monitor the price movements of futures markets by comparing them with cash and
other derivative markets prices. To act as a Futures Commission Merchant Broker on the TOCOM, a broker must obtain a license
from Japans Ministry of Economy, Trade and Industry (METI), the regulatory authority that oversees the operations
of the TOCOM.
The
CFTC regulates trading in commodity contracts, such as futures, options and swaps. In addition, under the CEA, the CFTC has jurisdiction
to prosecute manipulation and fraud in any commodity (including precious metals) traded in interstate commerce as spot as well
as deliverable forwards. The CFTC is the exclusive regulator of U.S. commodity exchanges and clearing houses.
Secondary
Market Trading
While
the Trusts investment objective is for the Shares to reflect the performance of the price of physical palladium, less
the Trusts expenses, the Shares may trade in the secondary market on the NYSE Arca at prices that are lower or higher
relative to their net asset value (the value of the Trusts assets less its liabilities (NAV)) per Share.
The amount of the discount or premium in the trading price relative to the NAV per Share may be influenced by non-concurrent
trading hours between the NYSE Arca, COMEX and the London and Zurich palladium markets. While the Shares trade on the NYSE
Arca until 4:00 PM New York time, liquidity in the global palladium market is reduced after the close of the COMEX at 1:30 PM
New York time. As a result, during this time, trading spreads, and the resulting premium or discount, on the Shares may
widen.
7
Valuation
of Palladium and Computation of Net Asset Value
On
each day that the NYSE Arca is open for regular trading, as promptly as practicable after 4:00 p.m., New York time, on such day
(the Evaluation Time), the Trustee evaluates the palladium held by the Trust and determines both the adjusted net
asset value (ANAV) and the NAV of the Trust. For the purposes of making these calculations, a business day means
any day other than a day when NYSE Arca is closed for regular trading.
At
the Evaluation Time, the Trustee values the Trusts palladium on the basis of that days LBMA Palladium Price PM or,
if no LBMA Palladium Price PM Fix is made on such day, or has not been announced by the Evaluation Time, the LBMA Palladium Price
AM announced on that day will be used. If neither price is available for that day, the Trust will value its palladium based on
the most recently announced LBMA Palladium Price PM or LBMA Palladium Price AM, unless the Sponsor determines that such price
is inappropriate as a basis for evaluation. In the event the Sponsor determines that the applicable LBMA Palladium Price PM or
such other publicly available price as the Sponsor may deem fairly represents the commercial value of the Trusts palladium
is not an appropriate basis for evaluation of the Trusts palladium, it shall identify an alternative basis for such evaluation
to be employed by the Trustee. Neither the Trustee nor the Sponsor shall be liable to any person for the determination that the
LBMA Palladium Price PM or such other publicly available price is not appropriate as a basis for evaluation of the Trusts
palladium or for any determination as to the alternative basis for such evaluation provided that such determination is made in
good faith. See *Operation of the Palladium MarketThe Zurich and London Palladium Bullion Markets*for
a description of the LBMA Palladium Price PM.
Once
the value of the palladium has been determined, the Trustee subtracts all estimated accrued but unpaid fees (other than the fees
accruing for such day on which the valuation takes place which are computed by reference to the value of the Trust or its assets),
expenses and other liabilities of the Trust from the total value of the palladium and any other assets of the Trust. The resulting
figure is the ANAV of the Trust. The ANAV of the Trust is used to compute the Sponsors Fee.
All
fees accruing for the day on which the valuation takes place which are computed by reference to the value of the Trust or its
assets are calculated using the ANAV calculated for such day. The Trustee subtracts from the ANAV the amount of accrued fees so
computed for such day and the resulting figure is the NAV of the Trust. The Trustee also determines the NAV per Share by dividing
the NAV of the Trust by the number of the Shares outstanding as of the close of trading on the NYSE Arca (which includes the net
number of any Shares created or redeemed on such evaluation day).
Any
estimate of the accrued but unpaid fees, expenses and liabilities of the Trust for purposes of computing the NAV of the Trust
and ANAV made by the Trustee in good faith shall be conclusive upon all persons interested in the Trust and no revision or correction
in any computation made under the Trust Agreement will be required by reason of any difference in amounts estimated from those
actually paid.
The
Sponsor and the Shareholders may rely on any evaluation furnished by the Trustee, and the Sponsor has no responsibility for the
evaluations accuracy. The determinations the Trustee makes will be made in good faith upon the basis of, and the Trustee
will not be liable for any errors contained in, information reasonably available to it. The Trustee will not be liable to the
Sponsor, The Depository Trust Company (DTC), Authorized Participants, the Shareholders or any other person for errors
in judgment. However, the preceding liability exclusion will not protect the Trustee against any liability resulting from bad
faith or gross negligence in the performance of its duties.
On
May 23, 2024, the Sponsor entered into an Amendment (the Trust Amendment) to the Depositary Trust Agreement (the
Trust Agreement) with the Trustee. The Trust Amendment reflects the following changes, effective as of June 18,
2024, as approved and directed by the Sponsor on behalf of the Trust: (1) the amendment of the definition of Benchmark
Price to mean, as of any day, (i) such days LBMA Palladium Price PM or such days LBMA Palladium Price
AM if such days LBMA Palladium Price PM is not available; or (ii) such other publicly available price which is reasonably
available to the Trustee at no cost to the Trustee and which the Sponsor may determine fairly represents the commercial value
of palladium held by the Trust and instructs the Trustee to use as the Benchmark Price; (2) the deletion and replacement
of the defined term for London PM Fix with the defined term LBMA Palladium Price PM, which means the
price of a troy ounce of palladium as determined by the LME, the third party administrator of the London palladium price selected
by the LBMA, or any successor administrator of the London palladium price, at or about 2:00 p.m. London, England time;
and (3) the addition of the new definition for LBMA Palladium Price AM which means the price of a troy ounce
of palladium as determined by the LME, the third party administrator of the London palladium price selected by the LBMA, or any
successor administrator of the London palladium price, at or about 9:45 a.m. London, England time.
Trust
Expenses
The
Trusts only ordinary recurring expense is the Sponsors Fee. In exchange for the Sponsors Fee, the Sponsor
has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustees monthly fee
and out-of-pocket expenses, the Custodians fee and reimbursement of the Custodians expenses under the Custody Agreements,
Exchange listing fees, SEC registration fees, printing and mailing costs, audit fees and up to $100,000 per annum in legal expenses.
The Sponsor also paid the costs of the Trusts organization and the initial sale of the Shares, including the applicable
SEC registration fees.
8
The
Sponsors Fee accrues daily at an annualized rate equal to 0.60% of the ANAV of the Trust and is payable monthly in arrears.
The Sponsor, from time to time, may temporarily waive all or a portion of the Sponsors Fee at its discretion for a stated
period of time.
Presently,
the Sponsor does not intend to waive any of its fee.
Furthermore,
the Sponsor may, in its sole discretion, agree to rebate all or a portion of the Sponsors Fee attributable to Shares held
by institutional investors subject to minimum shareholding and lock up requirements as determined by the Sponsor to foster stability
in the Trusts asset levels. Any such rebate will be subject to negotiation and written agreement between the Sponsor and
the investor on a case by case basis. The Sponsor is under no obligation to provide any rebates of the Sponsors Fee. Neither
the Trust nor the Trustee will be a party to any Sponsors Fee rebate arrangements negotiated by the Sponsor. Any Sponsors
Fee rebate shall be paid from the funds of the Sponsor and not from the assets of the Trust.
The
Sponsors Fee is paid by delivery of palladium to an account maintained by the Custodian for the Sponsor on an unallocated
basis, monthly on the first business day of the month in respect of fees payable for the prior month. The delivery is of that
number of ounces of palladium which equals the daily accrual of the Sponsors Fee for such prior month calculated at the
LBMA Palladium Price PM.
The
Trustee will, when directed by the Sponsor, and, in the absence of such direction, may, in its discretion, sell palladium in such
quantity and at such times as may be necessary to permit payment in cash of Trust expenses not assumed by the Sponsor. The Trustee
is authorized to sell palladium at such times and in the smallest amounts required to permit such payments as they become due,
it being the intention to avoid or minimize the Trusts holdings of assets other than palladium. Accordingly, the amount
of palladium to be sold will vary from time to time depending on the level of the Trusts expenses and the market price
of palladium. The Custodian is authorized to purchase from the Trust, at the request of the Trustee, palladium needed to cover
Trust expenses not assumed by the Sponsor at the price used by the Trustee to determine the value of the palladium held by the
Trust on the date of the sale.
The
Sponsors Fee for the year ended December 31, 2025 was $3,203,228 (December 31, 2024: $1,737,833; December 31, 2023: $1,464,063).
Cash
held by the Trustee pending payment of the Trusts expenses will not bear any interest. Each delivery or sale of palladium
by the Trust to pay the Sponsors Fee or other Trust expenses will be a taxable event to Shareholders.
Creation
and Redemption of Shares
The
Trust creates and redeems Shares from time to time, but only in one or more Baskets (a Basket equals a block of 12,500 Shares). The
number of Shares in a block that constitutes a Basket for the purposes of creation and redemptions in the Trust was reduced from
50,000 to 25,000 effective April 1, 2019, and reduced from 25,000 to 12,500 effective June 18, 2024. 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 physical palladium
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.
Authorized
Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered
broker-dealers or other securities market participants, such as banks and other financial institutions, which are not required
to register as broker-dealers to engage in securities transactions, and (2) participants in DTC. To become an Authorized Participant,
a person must enter into an Authorized Participant Agreement with the Sponsor and the Trustee. The Authorized Participant Agreement
provides the procedures for the creation and redemption of Baskets and for the delivery of the palladium and any cash required
for such creations and redemptions. The Authorized Participant Agreement and the related procedures attached thereto may be amended
by the Trustee and the Sponsor, without the consent of any Shareholder or Authorized Participant. Authorized Participants pay
a transaction fee of $500 to the Trustee for each order they place to create or redeem one or more Baskets. Authorized Participants
who make deposits with the Trust in exchange for Baskets receive no fees, commissions or other form of compensation or inducement
of any kind from either the Sponsor or the Trust for serving as an Authorized Participant, and no such person has any obligation
or responsibility to the Sponsor or the Trust to effect any sale or resale of Shares.
Authorized
Participants are cautioned that some of their activities will result in their being deemed participants in a distribution in a
manner which would render them statutory underwriters and subject them to the prospectus-delivery and liability provisions of
the Securities Act.
9
Prior
to initiating any creation or redemption order, an Authorized Participant must have entered into an agreement with the
Custodian or a palladium clearing bank to establish an Authorized Participant Unallocated Account in London
(Authorized Participant Unallocated Bullion Account Agreement). Authorized Participant Unallocated Accounts may
only be used for transactions with the Trust. Palladium held in Authorized Participant Unallocated Accounts is typically not
segregated from the Custodians or other palladium clearing banks assets, as a consequence of which an
Authorized Participant will have no proprietary interest in any specific plates or ingots of palladium held by the Custodian
or the clearing bank. Credits to its Authorized Participant Unallocated Account are therefore at risk of the
Custodians or other palladium clearing banks insolvency. No fees will be charged by the Custodian for the use
of the Authorized Participant Unallocated Account as long as the Authorized Participant Unallocated Account is used solely
for palladium transfers to and from the Trust Unallocated Account and the Custodian (or one of its affiliates) receives
compensation for maintaining the Trust Allocated Account. Authorized Participants should be aware that the Custodians
liability threshold under the Authorized Participant Unallocated Bullion Account Agreement is generally gross negligence, not
negligence, which is the Custodians liability threshold under the Trusts Custody Agreements.
As
the terms of the Authorized Participant Unallocated Bullion Account Agreement differ in certain respects from the terms of the
Trust Unallocated Account Agreement, potential Authorized Participants should review the terms of the Authorized Participant Unallocated
Bullion Account Agreement carefully. A copy of the Authorized Participant Agreement may be obtained by potential Authorized Participants
from the Trustee.
Certain
Authorized Participants are expected to have the facility to participate directly in the physical palladium market and the palladium
futures markets. In some cases, an Authorized Participant may from time to time acquire palladium from or sell palladium to its
affiliated palladium trading desk, which may profit in these instances. Each Authorized Participant must be registered as a broker-dealer
under the Securities Exchange Act of 1934 (Exchange Act) and regulated by FINRA or be exempt from being or otherwise
not be required to be so regulated or registered, and be qualified to act as a broker or dealer in the states or other jurisdictions
where the nature of its business so requires. Certain Authorized Participants are regulated under federal and state banking laws
and regulations.
Each
Authorized Participant has its own set of rules and procedures, internal controls and information barriers as it determines is
appropriate in light of its own regulatory regime.
Authorized
Participants may act for their own accounts or as agents for broker-dealers, custodians and other securities market participants
that wish to create or redeem Baskets. An order for one or more Baskets may be placed by an Authorized Participant on behalf of
multiple clients. As of the date of this report, Goldman Sachs & Co., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC,
Merrill Lynch Professional Clearing Corp., Mizuho Securities USA LLC, Morgan Stanley & Co. Inc., Scotia Capital (USA) LLC,
UBS Securities LLC and Virtu Americas, LLC have each signed an Authorized Participant Agreement with the Trust and, upon the effectiveness
of such agreement, may create and redeem Baskets as described above. Persons interested in purchasing Baskets should contact the
Sponsor or the Trustee to obtain the contact information for the Authorized Participants. Shareholders who are not Authorized
Participants will only be able to redeem their Shares through an Authorized Participant.
All
palladium is delivered to the Trust and distributed by the Trust in unallocated form through credits and debits between Authorized Participant
Unallocated Accounts and the Trust Unallocated Account. Palladium transferred from an Authorized Participant Unallocated Account to the
Trust in unallocated form will first be credited to the Trust Unallocated Account. Thereafter, the Custodian will allocate, specific
plates or ingots of palladium, in each case representing the amount of palladium credited to the Trust Unallocated Account (to the extent
such amount is representable by palladium plates or ingots) to the Trust Allocated Account. The movement of palladium is reversed for
the distribution of palladium to an Authorized Participant in connection with the redemption of Baskets.
All
physical palladium represented by a credit to any Authorized Participant Unallocated Account and to the Trust Unallocated Account
and all physical palladium held in the Trust Allocated Account with the Custodian or for the Custodian by the Zurich Sub-Custodian
must be of at least a minimum fineness (or purity) of 999.5 parts per 1,000 (99.95%) and otherwise conform to the rules, regulations
practices and customs of the LPPM, including the specifications for a Good Delivery Palladium Plate or Ingot.
Under
the Authorized Participant Agreement, the Sponsor has agreed to indemnify the Authorized Participants against certain liabilities,
including liabilities under the Securities Act.
The
following description of the procedures for the creation and redemption of Baskets is only a summary and an investor should refer
to the relevant provisions of the Trust Agreement and the form of Authorized Participant Agreement for more detail.
Creation
Procedures
On
any business day, an Authorized Participant may place an order with the Trustee to create one or more Baskets. Creation and redemption
orders are accepted on business days the NYSE Arca is open for regular trading. Settlements of such orders requiring
receipt or delivery, or confirmation of receipt or delivery, of palladium in the United Kingdom, or another jurisdiction will
occur on business days when (1) banks in the United Kingdom, or other jurisdiction and (2) the London palladium
markets are regularly open for business. If such banks or the London palladium markets are not open for regular business for a
full day, such a day will only be a business day for settlement purposes if the settlement procedures can be completed
by the end of such day. Redemption settlements including palladium deliveries loco London may be delayed longer than two, but
no more than five, business days following the redemption order date. Settlement of orders requiring receipt or delivery, or confirmation
of receipt or delivery, of Shares will occur, after confirmation of the applicable palladium delivery, on business days
when the NYSE Arca is open for regular trading. In the event of a level 3 market-wide circuit breaker resulting in a trading halt
for the remainder of the trading day, the time of the market-wide trading halt is considered the close of regular trading and
no creation orders for the current trade date will be accepted after that time (the cutoff). Orders placed after
the cutoff will be deemed to be rejected and will not be processed. Orders should be placed in proper form on the following business
day. Purchase orders must be placed no later than 3:59:59 p.m. on each business day the NYSE Arca is open for regular trading.
10
By
placing a purchase order, an Authorized Participant agrees to deposit palladium with the Trust. Prior to the delivery of Baskets
for a purchase order, the Authorized Participant must also have wired to the Trustee the non-refundable transaction fee due for
the purchase order.
*Determination
of required deposits*
The
amount of the required palladium deposit is determined by dividing the number of ounces of palladium held by the Trust by the
number of Baskets outstanding, as adjusted for the amount of palladium constituting estimated accrued but unpaid fees and expenses
of the Trust.
Fractions
of a fine ounce of palladium smaller than 0.001 of a fine ounce which are included in the palladium deposit amount are disregarded
in the foregoing calculation. All questions as to the composition of a Creation Basket Deposit will be finally determined by the
Trustee. The Trustees determination of the Creation Basket Deposit shall be final and binding on all persons interested
in the Trust*.*
*Delivery
of required deposits*
An
Authorized Participant who places a purchase order is responsible for crediting its Authorized Participant Unallocated Account
with the required palladium deposit amount by the prescribed settlement date in London. Upon receipt of the palladium deposit
amount, the Custodian, after receiving appropriate instructions from the Authorized Participant and the Trustee, will transfer
on the prescribed settlement date the palladium deposit amount from the Authorized Participant Unallocated Account to the Trust
Unallocated Account and the Trustee will direct DTC to credit the number of Baskets ordered to the Authorized Participants
DTC account. The expense and risk of delivery, ownership and safekeeping of palladium until such palladium has been received by
the Trust shall be borne solely by the Authorized Participant. The Trustee may accept delivery of palladium by such other means
as the Sponsor, from time to time, my determine with the Trustee to be acceptable for the Trust, provided that the same is disclosed
in a prospectus relating to the Trust filed with the SEC pursuant to Rule 424 under the Securities Act. If palladium is to be
delivered other than as described above, the Sponsor is authorized to establish such procedures and to appoint such custodians
and establish such custody accounts in addition to those described in this report, as the Sponsor determines to be desirable.
Acting
on standing instructions given by the Trustee, the Custodian will transfer the palladium deposit amount from the Trust Unallocated
Account to the Trust Allocated Account by transferring palladium plates and ingots from its inventory to the Trust Allocated Account.
The Custodian uses commercially reasonable efforts to complete the transfer of palladium to the Trust Allocated Account prior
to the time by which the Trustee is to credit the Basket to the Authorized Participants DTC account; if, however, such
transfers have not been completed by such time, the number of Baskets ordered will be delivered against receipt of the palladium
deposit amount in the Trust Unallocated Account, and all Shareholders will be exposed to the risks of unallocated palladium to
the extent of that palladium deposit amount until the Custodian completes the allocation process. See Risk FactorsPalladium
held in the Trusts unallocated palladium account and any Authorized Participants unallocated palladium account is
not segregated from the Custodians assets
Because
palladium is only allocated in multiples of whole plates or ingots, the amount of palladium allocated from the Trust Unallocated
Account to the Trust Allocated Account may be less than the total fine ounces of palladium credited to the Trust Unallocated Account.
Any balance will be held in the Trust Unallocated Account. The Custodian uses commercially reasonable efforts to minimize the
amount of palladium held in the Trust Unallocated Account; no more than 192.904 troy ounces of palladium (maximum weight to make
one Good Delivery Palladium Plate or Ingot) is expected to be held in the Trust Unallocated Account at the close of each business
day.
*Rejection
of purchase orders*
The
Trustee may reject a purchase order or a Creation Basket Deposit if such order or Creation Basket Deposit is not presented in
proper form as described in the Authorized Participant Agreement or if the fulfillment of the order, in the opinion of counsel,
might be unlawful. None of the Trustee, the Sponsor or the Custodian will be liable for the rejection of any purchase order or
Creation Basket Deposit.
Redemption
Procedures
The
procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures for the creation of Baskets.
On any business day, an Authorized Participant may place an order with the Trustee to redeem one or more Baskets. Redemption orders
must be placed no later than 3:59:59 p.m. on each business day the NYSE Arca is open for regular trading. In the event of a level
3 market-wide circuit breaker resulting in a trading halt for the remainder of the trading day, the time of the market wide trading
halt is considered the close of regular trading and no redemption orders for the current trade date will be accepted after that
time (the cutoff). Orders placed after the cutoff will be deemed to be rejected and will not be processed. Orders
should be placed in proper form on the following business day. A redemption order so received is effective on the date it is received
in satisfactory form by the Trustee. The redemption procedures allow Authorized Participants to redeem Baskets and do not entitle
an individual Shareholder to redeem any Shares in an amount less than a Basket, or to redeem Baskets other than through an Authorized
Participant.
11
By
placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTCs book-entry
system to the Trust by the prescribed settlement date. Prior to the delivery of the redemption distribution for a redemption order,
the Authorized Participant must also have wired to the Trustee the non-refundable transaction fee due for the redemption order.
*Determination
of redemption distribution*
The
redemption distribution from the Trust consists of a credit to the redeeming Authorized Participants Authorized Participant
Unallocated Account representing the amount of the palladium held by the Trust evidenced by the Shares being redeemed. Fractions
of a fine ounce of palladium included in the redemption distribution smaller than 0.001 of a fine ounce are disregarded.
Redemption
distributions will be subject to the deduction of any applicable tax or other governmental charges which may be due.
*Delivery
of redemption distribution*
The
redemption distribution due from the Trust will be delivered to the Authorized Participant on the prescribed settlement date following
a loco London redemption order date if, by 10:00 a.m. New York time on the settlement date, the Trustees DTC account has
been credited with the Baskets to be redeemed. If a loco swap or physical transfer is necessary to effect a loco London redemption,
the redemption distribution due from the Trust will be delivered to the Authorized Participant on or before the prescribed settlement
date if, by 10:00 a.m. New York time on the prescribed settlement date, the Trustees DTC account has been credited with
the Baskets to be redeemed. In the event that, by 10:00 a.m. New York time on the prescribed settlement date, the Trustees
DTC account has not been credited with the total number of Shares corresponding to the total number of Baskets to be redeemed
pursuant to such redemption order, the Trustee shall send to the Authorized Participant and the Custodian via fax or electronic
mail message notice of such fact and the Authorized Participant shall have one business day following receipt of such notice to
correct such failure. If such failure is not cured within such one business day period, the Trustee (in consultation with the
Sponsor) will cancel such redemption order and will send via fax or electronic mail message notice of such cancellation to the
Authorized Participant and the Custodian, and the Authorized Participant will be solely responsible for all costs incurred by
the Trust, the Trustee or the Custodian related to the cancelled order. The Trustee is also authorized to deliver the redemption
distribution notwithstanding that the Baskets to be redeemed are not credited to the Trustees DTC account by 10:00 a.m.
New York time on the prescribed settlement date if the Authorized Participant has collateralized its obligation to deliver the
Baskets through DTCs book entry system on such terms as the Sponsor and the Trustee may from time to time agree upon.
The
Custodian transfers the redemption palladium amount from the Trust Allocated Account to the Trust Unallocated Account and, thereafter,
to the redeeming Authorized Participants Authorized Participant Unallocated Account. The Authorized Participant and the
Trust are each at risk in respect of palladium credited to their respective unallocated accounts in the event of the Custodians
insolvency. See Risk FactorsPalladium held in the Trusts unallocated palladium account and any Authorized
Participants unallocated palladium account is not segregated from the Custodians assets
As
with the allocation of palladium to the Trust Allocated Account which occurs upon a purchase order, if in transferring palladium
from the Trust Allocated Account to the Trust Unallocated Account in connection with a redemption order there is an excess amount
of palladium transferred to the Trust Unallocated Account, the excess over the palladium redemption amount will be held in the
Trust Unallocated Account. The Custodian uses commercially reasonable efforts to minimize the amount of palladium held in the
Trust Unallocated Account; no more than 192.904 ounces of palladium (maximum weight to make one Good Delivery Palladium Plate
or Ingot) is expected to be held in the Trust Unallocated Account at the close of each business day.
*Suspension
or rejection of redemption orders*
The
Trustee may, in its discretion, and will when directed by the Sponsor, suspend the right of redemption, or postpone the redemption
settlement date, (1) for any period during which the NYSE Arca is closed other than customary weekend or holiday closings, or
trading on the NYSE Arca is suspended or restricted or (2) for any period during which an emergency exists as a result of which
delivery, disposal or evaluation of palladium is not reasonably practicable. None of the Sponsor, the Trustee or the Custodian
are liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.
The
Trustee will reject a redemption order if the order is not in proper form as described in the Authorized Participant Agreement
or if the fulfillment of the order, in the opinion of its counsel, might be unlawful.
12
Creation
and Redemption Transaction Fee
To
compensate the Trustee for services in processing the creation and redemption of Baskets, an Authorized Participant is required
to pay a transaction fee to the Trustee of $500 per order to create or redeem Baskets. An order may include multiple Baskets.
The transaction fee may be reduced, increased or otherwise changed by the Trustee with the consent of the Sponsor. From time to
time, the Trustee, with the consent of the Sponsor, may waive all or a portion of the applicable transaction fee. The Trustee
shall notify DTC of any agreement to change the transaction fee and will not implement any increase in the fee for the redemption
of Baskets until 30 days after the date of the notice.
The
Sponsor
The
Trusts Sponsor is abrdn ETFs Sponsor LLC (known as Aberdeen Standard Investments ETFs Sponsor LLC prior to March 1, 2022
and ETF Securities USA LLC prior to October 1, 2018), a Delaware limited liability company formed on June 17, 2009.
The
Sponsors office is located at c/o abrdn ETFs Sponsor LLC, 1900 Market Street, Suite 200, Philadelphia, PA 19103. Prior
to April 27, 2018, the Sponsor was wholly-owned by ETF Securities Limited, a Jersey, Channel Islands based company. Effective
April 27, 2018, ETF Securities Limited sold its membership interest in the Sponsor to abrdn Inc. (known as Aberdeen Standard Investments
Inc. prior to January 1, 2022), a Delaware corporation. As a result of the sale, abrdn Inc. became the sole member of the Sponsor.
abrdn Inc. is a wholly-owned indirect subsidiary of Aberdeen Group plc. (Aberdeen). Aberdeen has retained abrdn as an operational abbreviation across its subsidiary legal entities (including
the Sponsor, fund names and descriptors). Under the Delaware Limited Liability Company Act and the governing documents of the Sponsor,
the sole member of the Sponsor, abrdn Inc., is not responsible for the debts, obligations and liabilities of the Sponsor solely
by reason of being the sole member of the Sponsor.
*The
Sponsors Role*
The
Sponsor arranged for the creation of the Trust, and is responsible for the ongoing registration of the Shares for their
public offering in the United States and the listing of the Shares on the NYSE Arca. The Sponsor has agreed to assume
generally the organizational expenses of the Trust and the following administrative and marketing expenses incurred by the
Trust: the Trustees monthly fee and out-of-pocket expenses, the Custodians fee and the reimbursement of
the Custodians expenses under the Custody Agreements, exchange listing fees, SEC registration fees, printing and
mailing costs, audit fees and up to $100,000 per annum in legal expenses. The Sponsor also paid the costs of the
Trusts organization and the initial sale of the Shares, including the applicable SEC registration fees.
The
Sponsor does not exercise day-to-day oversight over the Trustee or the Custodian. The Sponsor may remove the Trustee and appoint
a successor Trustee (i) if the Trustee ceases to meet certain objective requirements (including the requirement that it have capital,
surplus and undivided profits of at least $150 million), (ii) if, having received written notice of a material breach of its obligations
under the Trust Agreement, the Trustee has not cured the breach within 30 days, or (iii) if the Trustee refuses to consent to
the implementation of an amendment to the Trusts initial Internal Control Over Financial Reporting. The Sponsor also has
the right to replace the Trustee during the 90 days following any merger, consolidation or conversion in which the Trustee is
not the surviving entity or, in its discretion, on the fifth anniversary of the creation of the Trust or on any subsequent third
anniversary thereafter. The Sponsor also has the right to approve any new or additional custodian that the Trustee may wish to
appoint and any new or additional sub-custodian that the Custodian may wish to appoint.
The
Sponsor or one of its affiliates or agents (1) develops a marketing plan for the Trust on an ongoing basis, (2) prepares marketing
materials regarding the Shares, including the content of the Trusts website and (3) executes the marketing plan for the
Trust.
The
Trustee
The
Bank of New York Mellon, a banking corporation organized under the laws of the State of New York with trust powers (BNYM),
serves as the Trustee. BNYM has a Trust office at 240 Greenwich Street, New York, NY 10286. BNYM is subject to supervision by
the New York State Financial Services Department and the Board of Governors of the Federal Reserve System.
Information
regarding creation and redemption Basket composition, NAV of the Trust, transaction fees and the names of the parties that have
each executed an Authorized Participant Agreement may be obtained from BNYM. A copy of the Trust Agreement is available for inspection
at BNYMs trust office identified above. Under the Trust Agreement, the Trustee is required to have capital, surplus and
undivided profits of at least $150 million.
*The
Trustees Role*
The
Trustee is generally responsible for the day-to-day administration of the Trust, including keeping the Trusts operational
records. The Trustees principal responsibilities include (1) transferring the Trusts palladium as needed to pay
the Sponsors Fee in palladium (palladium transfers are expected to occur approximately monthly in the ordinary course),
(2) valuing the Trusts palladium and calculating the NAV of the Trust and the NAV per Share, (3) receiving and processing
orders from Authorized Participants to create and redeem Baskets and coordinating the processing of such orders with the Custodian
and DTC, (4) selling the Trusts palladium as needed to pay any extraordinary Trust expenses that are not assumed by the
Sponsor, (5) when appropriate, making distributions of cash or other property to Shareholders, and (6) receiving and reviewing
reports from or on the Custodians custody of and transactions in the Trusts palladium. The Trustee shall, with respect
to directing the Custodian, act in accordance with the instructions of the Sponsor. If the Custodian resigns, the Trustee shall
appoint an additional or replacement Custodian selected by the Sponsor.
13
The
Trustee intends to regularly communicate with the Sponsor to monitor the overall performance of the Trust. The Trustee does not
monitor the performance of the Custodian or any other sub-custodian other than to review the reports provided by the Custodian
pursuant to the Custody Agreements. The Trustee, along with the Sponsor, will liaise with the Trusts legal, accounting
and other professional service providers as needed. The Trustee will assist and support the Sponsor with the preparation of all
periodic reports required to be filed with the SEC on behalf of the Trust.
The
Trustees monthly fees and out-of-pocket expenses are paid by the Sponsor.
Affiliates
of the Trustee may from time to time act as Authorized Participants or purchase or sell palladium or Shares for their own account,
as agent for their customers and for accounts over which they exercise investment discretion. Affiliates of the Trustee are subject
to the same transaction fee as other Authorized Participants.
The
Custodian
Effective
May 23, 2024, the Trustee, at the direction of the Sponsor, entered into an Allocated Account Agreement and Unallocated Account Agreement
with ICBC providing for the custody of the Trusts palladium. Effective August 8, 2024, JPMorgan Chase Bank N.A. no longer serves
as a custodian of the Trusts palladium.
ICBC
is a public limited company incorporated under the laws of England and Wales, serves as a Custodian of the Trusts palladium.
ICBCs office is located at 20 Gresham Street, London, EC2V 7JE, United Kingdom.
*The
Custodians Role*
The
Custodian is responsible for the safekeeping of the Trusts palladium deposited with it by Authorized Participants in connection
with the creation of Baskets. The Custodian facilitates the transfer of palladium in and out of the Trust through the unallocated
palladium accounts it will maintain for each Authorized Participant and the unallocated and allocated palladium accounts it maintains
for the Trust. The Custodian holds at its London, England vault premises that portion of the Trusts allocated palladium
to be held in London. The Custodian is responsible for allocating specific plates or ingots of physical palladium to the Trusts
allocated palladium account. The Custodian provides the Trustee with regular reports detailing the palladium transfers in and
out of the Trusts unallocated and allocated palladium accounts and identifying the palladium plates or ingots held in the
Trusts allocated palladium account.
The
Custodians fees and expenses under the Custody Agreements are paid by the Sponsor.
The
Custodian and its affiliates may from time to time act as Authorized Participants or purchase or sell palladium or Shares for
their own account, as agent for their customers and for accounts over which they exercise investment discretion. The Custodian
and its affiliates are subject to the same transaction fee as other Authorized Participants.
Inspection
of Palladium
Under
the Custody Agreements, the Trustee, the Sponsor and the Trusts auditors and inspectors may, only up to twice a year,
visit the premises of the Custodian for the purpose of examining the Trusts palladium and certain related records
maintained by the Custodian. The Trustee and the Sponsor have no right to visit the premises of any sub-custodian for the
purposes of examining the Trusts palladium or any records maintained by the sub-custodian, and no sub-custodian is
obligated to cooperate in any review the Trustee or the Sponsor may wish to conduct of the facilities, procedures, records or
creditworthiness of such sub-custodian.
The
Sponsor has exercised its right to visit the Custodian in order to examine the palladium and the records maintained by the
Custodian. Inspections were conducted by Bureau Veritas Commodities UK Ltd, a leading commodity inspection and testing
company retained by the Sponsor, as of August 4, 2025 and January 5, 2026. The results can be found on
www.abrdn.com/usa/etf.
There
can be no guarantee that the Sponsor or the Trusts auditors and inspectors will be able to perform physical inspections
of the Trusts palladium as planned. Local policies, regulations, or ordinances, as well as polices or restrictions adopted
by the Custodian or a sub-custodian, may temporarily prevent, or otherwise impair the ability of, the Sponsor or the Trusts
auditors and inspectors, from performing a physical inspection of the Trusts palladium on a desired date. In those situations,
the Sponsor or the Trusts auditors and inspectors may seek to verify the palladium held by the Trust by alternate means,
including through virtual inspections of the Trusts palladium and/or a review of pertinent records.
14
Description
of the Shares
*General*
The
Trustee is authorized under the Trust Agreement to create and issue an unlimited number of Shares. The Trustee creates Shares only
in Baskets (a Basket equals a block of 12,500 Shares) and only upon the order of an Authorized Participant. The number of Shares in a block that constitutes a Basket for the purposes of creation and redemptions in the Trust was reduced from 50,000
to 25,000 effective April 1, 2019, and reduced from 25,000 to 12,500 effective June 18, 2024. The Shares represent units of fractional undivided beneficial interest in and
ownership of the Trust and have no par value. Any creation and issuance of Shares above the amount registered on the Trusts
then-current and effective registration statement with the SEC will require the registration of such additional Shares.
*Description
of Limited Rights*
The
Shares do not represent a traditional investment and Shareholders should not view them as similar to shares of a corporation operating
a business enterprise with management and a board of directors. Shareholders do not have the statutory rights normally associated
with the ownership of shares of a corporation, including, for example, the right to bring oppression or derivative
actions. All Shares are of the same class with equal rights and privileges. Each Share is transferable, is fully paid and non-assessable
and entitles the holder to vote on the limited matters upon which Shareholders may vote under the Trust Agreement. The Shares
do not entitle their holders to any conversion or pre-emptive rights, or, except as provided below, any redemption rights or rights
to distributions.
*Distributions*
If
the Trust is terminated and liquidated, the Trustee will distribute to the Shareholders any amounts remaining after the satisfaction
of all outstanding liabilities of the Trust and the establishment of such reserves for applicable taxes, other governmental charges
and contingent or future liabilities as the Trustee shall determine. Shareholders of record on the record date fixed by the Trustee
for a distribution will be entitled to receive their pro rata portion of any distribution.
*Voting
and Approvals*
Under
the Trust Agreement, Shareholders have no voting rights, except in limited circumstances. The Trustee may terminate the Trust
upon the agreement of Shareholders owning at least 75% of the outstanding Shares. In addition, certain amendments to the Trust
Agreement require advance notice to the Shareholders before the effectiveness of such amendments, but no Shareholder vote or approval
is required for any amendment to the Trust Agreement.
*Redemption
of the Shares*
The
Shares may only be redeemed by or through an Authorized Participant and only in Baskets.
*Book-Entry
Form*
Individual
certificates will not be issued for the Shares. Instead, one or more global certificates is deposited by the Trustee with DTC
and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the Shares outstanding
at any time. Under the Trust Agreement, Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers and
trust companies (DTC Participants), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC
Participant (Indirect Participants), and (3) those banks, brokers, dealers, trust companies and others who hold interests in the
Shares through DTC Participants or Indirect Participants. The Shares are only transferable through the book-entry system of DTC.
Shareholders who are not DTC Participants may transfer their Shares through DTC by instructing the DTC Participant holding their
Shares (or by instructing the Indirect Participant or other entity through which their Shares are held) to transfer the Shares.
Transfers will be made in accordance with standard securities industry practice.
Custody
of the Trusts Palladium
Custody
of the physical palladium deposited with and held by the Trust is provided by the Custodian at its London, England vaults and
by other sub-custodians on a temporary basis. The Custodian is a market maker, clearer and approved weigher under the rules of
the LPPM.
15
The
Custodian is the custodian of the physical palladium credited to the Trust Allocated Account in accordance with the Custody Agreements.
The Custodian segregates the physical palladium credited to the Trusts Allocated Account from any other precious metal
it holds or holds for others by entering appropriate entries in its books and records. Under the Custody Agreements, the Trustee,
the Sponsor and the Trusts auditors and inspectors may inspect the vaults of the Custodian. See Inspection of Palladium.
The
Custodian, as instructed by the Trustee on behalf of the Trust, is authorized to accept, on behalf of the Trust, deposits of palladium
in unallocated form. Acting on standing instructions specified in the Custody Agreements, the Custodian allocates palladium deposited
in unallocated form with the Trust by selecting plates or ingots of palladium for deposit to the Trust Allocated Account. All
physical palladium allocated to the Trust must conform to the rules, regulations, practices and customs of the LPPM, and the Custodian
must replace any non-conforming palladium with conforming palladium as soon as practical upon a determination by the Custodian
any palladium is non-conforming.
The
process of withdrawing palladium from the Trust for a redemption of a Basket follows the same general procedure as for depositing
palladium with the Trust for a creation of a Basket, only in reverse. Each transfer of palladium between the Trust Allocated Account
and the Trust Unallocated Account connected with a creation or redemption of a Basket may result in a small amount of
palladium being held in the Trust Unallocated Account after the completion of the transfer. In making deposits and withdrawals
between the Trust Allocated Account and the Trust Unallocated Account, the Custodian will use commercially reasonable efforts
to minimize the amount of palladium held in the Trust Unallocated Account as of the close of each business day. See Creation
and Redemption of Shares.
United
States Federal Income Tax Consequences
The
following discussion of the material US federal income tax consequences generally applies to the purchase, ownership and
disposition of Shares by a US Shareholder (as defined below), and certain US federal income tax consequences that may apply
to an investment in Shares by a Non-US Shareholder (as defined below). The discussion is based on the United States Internal
Revenue Code of 1986 as amended (the Code). The discussion below is based on the Code, United States Treasury
Regulations (Treasury Regulations) promulgated under the Code and judicial and administrative interpretations
of the Code, all as in effect on the date of this annual report and all of which are subject to change either prospectively
or retroactively. The tax treatment of Shareholders may vary depending upon their own particular circumstances. Certain
Shareholders (including broker-dealers, traders, banks and other financial institutions, insurance companies, real estate
investment trusts, tax-exempt entities, Shareholders whose functional currency is not the U.S. Dollar or other
investors with special circumstances) may be subject to special rules not discussed below. In addition, the following
discussion applies only to investors who hold Shares as capital assets within the meaning of Code section 1221
and not as part of a straddle, hedging transaction or a conversion or constructive sale transaction. Moreover, the discussion
below does not address the effect of any state, local or foreign tax law or any transfer tax on an owner of Shares.
Purchasers of Shares are urged to consult their own tax advisors with respect to all federal, state, local and foreign tax
law or any transfer tax considerations potentially applicable to their investment in Shares.
For
purposes of this discussion, a US Shareholder is a Shareholder that is:
|
| An
individual who is a citizen or resident of the United States; |
|
|
| A
corporation (or other entity treated as a corporation for US federal tax purposes) created or organized in or under the laws of
the United States or any political subdivision thereof; |
|
|
| An
estate, the income of which is includible in gross income for US federal income tax purposes regardless of its source; or |
|
|
| A
trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one
or more US persons have the authority to control all substantial decisions of the trust. |
|
*Taxation
of the Trust*
The
Trust is classified as a grantor trust for US federal income tax purposes. As a result, the Trust itself is not
subject to US federal income tax. Instead, the Trusts income and expenses flow through to the Shareholders,
and the Trustee reports the Trusts income, gains, losses and deductions to the Internal Revenue Service (IRS)
on that basis.
A
Shareholder that is not a US Shareholder as defined above (other than a partnership, or an entity treated as a partnership for
US federal tax purposes) generally is considered a Non-US Shareholder for purposes of this discussion. For US federal
income tax purposes, the treatment of any beneficial owner of an interest in a partnership, including any entity treated as a
partnership for US federal income tax purposes, generally depends upon the status of the partner and upon the activities of the
partnership. Partnerships and partners in partnerships should consult their tax advisors about the US federal income tax consequences
of purchasing, owning and disposing of Shares.
16
*Taxation
of US Shareholders*
Shareholders
generally are treated, for US federal income tax purposes, as if they directly owned a pro rata share of the underlying assets
held by the Trust. Shareholders are also treated as if they directly received their respective pro rata share of the Trusts
income, if any, and as if they directly incurred their respective pro rata share of the Trusts expenses. In the case of
a Shareholder that purchases Shares for cash, its initial tax basis in its pro rata share of the assets held in the Trust at the
time it acquires its Shares is equal to its cost of acquiring the Shares. In the case of a Shareholder that acquires its Shares
as part of a creation of a Basket, the delivery of palladium to the Trust in exchange for the Shares is not a taxable event to
the Shareholder, and the Shareholders tax basis and holding period for the Shares are the same as its tax basis and holding
period for the palladium delivered in exchange therefore (except to the extent of any cash contributed for such Shares). For purposes
of this discussion, it is assumed that all of a Shareholders Shares are acquired on the same date and at the same price
per Share. Shareholders that hold multiple lots of Shares, or that are contemplating acquiring multiple lots of Shares, should
consult their tax advisors.
When
the Trust sells or transfers palladium, for example to pay expenses, a Shareholder generally will recognize a gain or loss in
an amount equal to the difference between (1) the Shareholders pro rata share of the amount realized by the Trust upon
the sale or transfer and (2) the Shareholders tax basis for its pro rata share of the palladium that was sold or transferred.
Such gain or loss will generally be long-term or short-term capital gain or loss, depending upon whether the Shareholder has a
holding period in its Shares of longer than one year. A Shareholders tax basis for its share of any palladium sold by the
Trust generally will be determined by multiplying the Shareholders total basis for its Shares immediately prior to the
sale, by a fraction the numerator of which is the amount of palladium sold, and the denominator of which is the total amount of
the palladium held by the Trust immediately prior to the sale. After any such sale, a Shareholders tax basis for its pro
rata share of the palladium remaining in the Trust will be equal to its tax basis for its Shares immediately prior to the sale,
less the portion of such basis allocable to its share of the palladium that was sold.
Upon
a Shareholders sale of some or all of its Shares, the Shareholder will be treated as having sold a pro rata share of the
palladium held in the Trust at the time of the sale. Accordingly, the Shareholder generally will recognize a gain or loss on the
sale in an amount equal to the difference between (1) the amount realized pursuant to the sale of the Shares, and (2) the Shareholders
tax basis for the Shares sold, as determined in the manner described in the preceding paragraph.
A
redemption of some or all of a Shareholders Shares in exchange for the underlying palladium represented by the Shares redeemed
generally will not be a taxable event to the Shareholder. The Shareholders tax basis for the palladium received in the
redemption generally will be the same as the Shareholders tax basis for the Shares redeemed. The Shareholders holding
period with respect to the palladium received should include the period during which the Shareholder held the Shares redeemed.
A subsequent sale of the palladium received by the Shareholder will be a taxable event.
An
Authorized Participant and other investors may be able to re-invest, on a tax-deferred basis, in-kind redemption proceeds received
from exchange-traded products that are substantially similar to the Trust in the Trusts Shares. Authorized Participants
and other investors should consult their tax advisors as to whether and under what circumstances the reinvestment in the Shares
of proceeds from substantially similar exchange-traded products can be accomplished on a tax-deferred basis.
Under
current law, gains recognized by individuals, estates or trusts from the sale of collectibles, including physical
palladium, held for more than one year are taxed at a maximum federal income tax rate of 28%, rather than the 20% rate applicable
to most other long-term capital gains. For these purposes, gains recognized by an individual upon the sale of Shares held for
more than one year, or attributable to the Trusts sale of any physical palladium which the Shareholder is treated (through
its ownership of Shares) as having held for more than one year, generally will be taxed at a maximum rate of 28%. The tax rates
for capital gains recognized upon the sale of assets held by an individual US Shareholder for one year or less or by a corporate
taxpayer are generally the same as those at which ordinary income is taxed.
In
addition, high-income individuals and certain trusts and estates are subject to a 3.8% Medicare contribution tax that is imposed
on net investment income and gain. Shareholders should consult their tax advisor regarding this tax.
*Brokerage
Fees and Trust Expenses*
Any
brokerage or other transaction fees incurred by a Shareholder in purchasing Shares is treated as part of the Shareholders
tax basis in the Shares. Similarly, any brokerage fee incurred by a Shareholder in selling Shares reduces the amount realized
by the Shareholder with respect to the sale.
Shareholders
will be required to recognize gain or loss upon a sale of palladium by the Trust (as discussed above), even though some or all
of the proceeds of such sale are used by the Trustee to pay Trust expenses. Shareholders may deduct their respective pro rata
share of each expense incurred by the Trust to the same extent as if they directly incurred the expense. Shareholders who are
individuals, estates or trusts, however, may be required to treat some or all of the expenses of the Trust, to the extent that
such expenses may be deducted, as miscellaneous itemized deductions. Miscellaneous itemized deductions, including expenses for
the production of income, will not be deductible for either regular federal income tax or alternative minimum tax purposes for
taxable years beginning after December 31, 2017 and before January 1, 2026 and thereafter generally are (i) deductible only to
the extent that the aggregate of a Shareholders miscellaneous itemized deductions exceeds 2% of such Shareholders
adjusted gross income for federal income tax purposes, (ii) not deductible for the purposes of the alternative minimum tax and
(iii) are subject to the overall limitation on itemized deductions under the Code.
17
*Investment
by Regulated Investment Companies*
Mutual
funds and other investment vehicles which are regulated investment companies within the meaning of Code section
851 should consult with their tax advisors concerning (1) the likelihood that an investment in Shares, although they are a security
within the meaning of the Investment Company Act of 1940, may be considered an investment in the underlying palladium for purposes
of Code section 851(b), and (2) the extent to which an investment in Shares might nevertheless be consistent with preservation
of their qualification under Code section 851. In administrative guidance, the IRS stated that it will no longer issue rulings
under Code section 851(b) relating to the determination of whether or not an instrument or position is a security,
but, instead, intends to defer to guidance from the SEC for such determination.
*United
States Information Reporting and Backup Withholding Tax for US and Non-US Shareholders*
The
Trustee or the appropriate broker will file certain information returns with the IRS, and provides certain tax-related information
to Shareholders, in accordance with applicable Treasury Regulations. Each Shareholder will be provided with information regarding
its allocable portion of the Trusts annual income (if any) and expenses.
A
US Shareholder may be subject to US backup withholding tax in certain circumstances unless it provides its taxpayer identification
number and complies with certain certification procedures. Non-US Shareholders may have to comply with certification procedures
to establish that they are not a US person in order to avoid the backup withholding tax.
The
amount of any backup withholding tax will be allowed as a credit against a Shareholders US federal income tax liability
and may entitle such a Shareholder to a refund, provided that the required information is furnished to the IRS.
*Income
Taxation of Non-US Shareholders*
The
Trust does not expect to generate taxable income except for gains (if any) upon the sale of palladium. A Non-US Shareholder generally
is not subject to US federal income tax with respect to gains recognized upon the sale or other disposition of Shares, or upon
the sale of palladium by the Trust, unless (1) the Non-US Shareholder is an individual and is present in the United States for
183 days or more during the taxable year of the sale or other disposition, and the gain is treated as being from United States
sources; or (2) the gain is effectively connected with the conduct by the Non-US Shareholder of a trade or business in the United
States.
*Taxation
in Jurisdictions other than the United States*
Prospective
purchasers of Shares that are based in or acting out of a jurisdiction other than the United States are advised to consult their
own tax advisers as to the tax consequences, under the laws of such jurisdiction (or any other jurisdiction not being the United
States to which they are subject), of their purchase, holding, sale and redemption of or any other dealing in Shares and, in particular,
as to whether any value added tax, other consumption tax or transfer tax is payable in relation to such purchase, holding, sale,
redemption or other dealing.
ERISA
and Related Considerations
The
Employee Retirement Income Security Act of 1974, as amended (ERISA), and/or Code section 4975 impose certain requirements
on certain employee benefit plans and certain other plans and arrangements, including individual retirement accounts and annuities,
Keogh plans, and certain commingled investment vehicles or insurance company general or separate accounts in which such plans
or arrangements are invested (collectively, Plans), and on persons who are fiduciaries with respect to the investment
of plan assets of a Plan. Government plans and some church plans are not subject to the fiduciary responsibility
provisions of ERISA or the provisions of section 4975 of the Code, but may be subject to substantially similar rules under other
federal law, or under state or local law (Other Law).
In
contemplating an investment of a portion of Plan assets in Shares, the Plan fiduciary responsible for making such investment should
carefully consider, taking into account the facts and circumstances of the Plan and the Risk Factors discussed above
and whether such investment is consistent with its fiduciary responsibilities under ERISA or Other Law, including, but not limited
to: (1) whether the investment is permitted under the Plans governing documents, (2) whether the fiduciary has the authority
to make the investment, (3) whether the investment is consistent with the Plans funding objectives, (4) the tax effects
of the investment on the Plan, and (5) whether the investment is prudent considering the factors discussed in this report. In
addition, ERISA and Code section 4975 prohibit a broad range of transactions involving assets of a plan and persons who are parties
in interest under ERISA or disqualified persons under section 4975 of the Code. A violation of these rules
may result in the imposition of significant excise taxes and other liabilities. Plans subject to Other Law may be subject to similar
restrictions.
18
It
is anticipated that the Shares will constitute publicly offered securities as defined in the Department of Labor Plan
Asset Regulations, 2510.3-101 (b)(2) as modified by section 3(42) of ERISA. Accordingly, pursuant to the Plan Asset Regulations,
only Shares purchased by a Plan, and not an interest in the underlying assets held in the Trust, should be treated as assets of the Plan,
for purposes of applying the fiduciary responsibility rules of ERISA and the prohibited transaction rules
of ERISA and the Code. Fiduciaries of plans subject to Other Law should consult legal counsel to determine whether there would be a similar
result under the Other Law.
*Investment
by Certain Retirement Plans*
Code
section 408(m) provides that the acquisition of a collectible by an individual retirement account (IRA) or
a participant-directed account maintained under any plan that is tax-qualified under Code section 401(a) (Tax Qualified Account)
is treated as a taxable distribution from the account to the owner of the IRA, or to the participant for whom the Tax Qualified Account
is maintained, of an amount equal to the cost to the account of acquiring the collectible. The term collectible is defined
to include, with certain exceptions, any metal or gem. The IRS has issued several private letter rulings to the effect
that a purchase by an IRA, or by a participant-directed account under a Code section 401(a) plan, of publicly-traded shares in a trust
holding precious metals will not be treated as resulting in a taxable distribution to the IRA owner or Tax Qualified Account participant
under Code section 408(m). However the private letter rulings provide that, if any of the Shares so purchased are distributed from the
IRA or Tax Qualified Account to the IRA owner or Tax Qualified Account participant, or if any precious metal is received by such IRA
or Tax Qualified Account upon the redemption of any of the Shares purchased by it, the Shares or precious metal so distributed will be
subject to federal income tax in the year of distribution, to the extent provided under the applicable provisions of Code sections 408(d),
408(m) or 402. Accordingly, potential IRA or Tax Qualified Account investors are urged to consult with their own professional advisors
concerning the treatment of an investment in Shares under Code section 408(m).
Item
1A. Risk Factors
Shareholders
should consider carefully the risks described below before making an investment decision. Shareholders should also refer to the
other information included in this report, including the Trusts financial statements and the related notes.
RISKS
RELATED TO PALLADIUM
*The
price of palladium may be affected by the sale of ETVs tracking the palladium markets.*
To
the extent existing exchange traded vehicles (ETVs) tracking the palladium markets represent a significant proportion
of demand for physical palladium bullion, large redemptions of the securities of these ETVs could negatively affect physical palladium
bullion prices and the price and NAV of the Shares.
*Crises
may motivate large-scale sales of palladium which could decrease the price of palladium and adversely affect an investment in
the Shares.*
The
possibility of large-scale distress sales of palladium in times of crisis may have a short-term negative impact on the price of
palladium and adversely affect an investment in the Shares. For example, the 2008 financial credit crisis resulted in significantly
depressed prices of palladium largely due to forced sales and deleveraging from institutional investors such as hedge funds and
pension funds as expectations of economic growth slumped. Crises in the future may impair palladiums price performance
which would, in turn, adversely affect an investment in the Shares.
*Several
factors may have the effect of causing a decline in the prices of palladium and a corresponding decline in the price of Shares.
Among them:*
|
| A
significant increase in palladium hedging activity by palladium producers. Should there be an increase in the level of hedge activity
of palladium producing companies, it could cause a decline in world palladium prices, adversely affecting the price of the Shares. |
|
|
| A
significant change in the attitude of speculators, investors and central banks towards palladium. Should the speculative community
take a negative view towards palladium or central banking authorities determine to sell national palladium reserves, either event
could cause a decline in world palladium prices, negatively impacting the price of the Shares. |
|
19
|
| A
widening of interest rate differentials between the cost of money and the cost of palladium could negatively affect the price
of palladium which, in turn, could negatively affect the price of the Shares. |
|
|
| A
combination of rising money interest rates and a continuation of the current low cost of borrowing palladium could improve the
economics of selling palladium forward. This could result in an increase in hedging by palladium mining companies and short selling
by speculative interests, which would negatively affect the price of palladium. Under such circumstances, the price of the Shares
would be similarly affected. |
|
|
| Autocatalysts,
automobile components that use palladium, accounted for approximately 85% of the net global demand in palladium in 2022. While
the automotive sector in China and the US is showing signs of recovery, the European market is currently experiencing declining
demand and, in certain cases, solvency concerns. Reduced automotive industry sales in Europe may result in a decline in autocatalyst
demand. |
|
|
| A
decline in the global automotive industry may impact the price of palladium and affect the price of the Shares. |
|
Conversely,
several factors may trigger a temporary increase in the price of palladium prior to your investment in the Shares. For example,
sudden increased investor interest in palladium may cause an increase in world palladium prices, increasing the price of the Shares.
If that is the case, you will be buying Shares at prices affected by the temporarily high prices of palladium, and you may incur
losses when the causes for the temporary increase disappear.
*A
decline in the automobile industry or a shift from gasoline-powered to electric vehicles may have the effect of causing a decline
in the price of palladium and a corresponding decline in the price of Shares.*
Autocatalysts,
automobile components for emissions control that use palladium, accounted for approximately 85% of the global demand in palladium
in 2022. Increased automotive industry sales may result in an increase in autocatalyst demand. A contraction in the global automotive
industry or more widespread acceptance of electric vehicles may decrease demand, thus impacting the price of palladium and the
price of Shares.
*The
value of the Shares relates directly to the value of the palladium held by the Trust and fluctuations in the price of palladium
could materially adversely affect an investment in the Shares.*
The
Shares are designed to mirror as closely as possible the performance of the price of palladium bullion, and the value of the Shares
relates directly to the value of the palladium held by the Trust, less the Trusts liabilities (including estimated accrued
but unpaid expenses). The price of palladium has fluctuated widely over the past several years. Several factors may affect the
price of palladium, including:
|
| Global
palladium supply, which is influenced by such factors as production and cost levels in major palladium-producing countries such
as Russia and South Africa. Recycling, autocatalyst demand, industrial demand, jewelry demand and investment demand are also important
drivers of palladium supply and demand. Sales of existing stockpiles of palladium have been a key source of supply in the past
decade and could potentially soon be exhausted, placing a higher burden on new mine supply; |
|
|
| Currency
exchange rates; |
|
|
| Interest
rates; |
|
|
| Investment
and trading activities of hedge funds and commodity funds; |
|
|
| Global
or regional political, economic or financial events and situations; and |
|
|
| A
significant change in investor interest, including in response to online campaigns or other activities specifically targeting
investments in palladium. |
|
In
addition, investors should be aware that there is no assurance that palladium will maintain its long-term value in terms of purchasing
power in the future. In the event that the price of palladium declines, the Sponsor expects the value of an investment in the
Shares to decline proportionately.
20
RISKS
RELATED TO PALLADIUM
The
value of the Shares relates directly to the value of the palladium held by the Trust and fluctuations in the price of palladium
could materially adversely affect an investment in the Shares.
The
Shares are designed to mirror as closely as possible the performance of the price of physical palladium, and the value of the
Shares relates directly to the value of the palladium held by the Trust, less the Trusts liabilities (including estimated
accrued but unpaid expenses). The price of physical palladium has fluctuated widely over the past several years, as discussed
below. Several factors may affect the price of palladium, including:
|
| Global
palladium supply, which is influenced by such factors as production and cost levels in major palladium-producing countries such
as Russia and South Africa. Recycling, autocatalyst demand, industrial demand, jewelry demand and investment demand are also important
drivers of palladium supply and demand. Sales of existing stockpiles of palladium have been a key source of supply in the past
decade and could potentially soon be exhausted, placing a higher burden on new mine supply; |
|
|
| Investors
expectations with respect to the rate of inflation; |
|
|
| Currency
exchange rates; |
|
|
| Interest
rates; |
|
|
| Investment
and trading activities of hedge funds and commodity funds; |
|
|
| Global
or regional political, economic or financial events and situations; and |
|
|
| A
significant change in investor interest, including in response to online campaigns or other activities specifically targeting
investments in palladium. |
|
In
addition, investors should be aware that there is no assurance that palladium will maintain its long-term value in terms of purchasing
power in the future. In the event that the price of palladium declines, the Sponsor expects the value of an investment in the
Shares to decline proportionately.
The
price of physical palladium has fluctuated widely over the past several years.
The
price of physical palladium, and the value of the Shares, has been highly volatile and could continue to be subject to wide fluctuations
in response to various factors. See Overview of the Palladium Industry Historical Chart of the Price of Palladium
for discussion of the fluctuation of palladium prices.
Several
factors may have the effect of causing a decline in the prices of palladium and a corresponding decline in the price of Shares.
Among them:
|
| A
significant increase in palladium hedging activity by palladium producers. Should there be an increase in the level of hedge activity
of palladium producing companies, it could cause a decline in world palladium prices, adversely affecting the price of the Shares. |
|
|
| A
significant change in the attitude of speculators and investors towards palladium. Should the speculative community take a negative
view towards palladium, it could cause a decline in world palladium prices, negatively impacting the price of the Shares. |
|
|
| A
widening of interest rate differentials between the cost of money and the cost of palladium could negatively affect the price
of palladium which, in turn, could negatively affect the price of the Shares. |
|
|
| A combination of rising money interest rates
and a continuation of the current low cost of borrowing palladium could improve the economics of selling palladium forward.
This could result in an increase in hedging by palladium mining companies and short selling by speculative interests, which
would negatively affect the price of palladium. Under such circumstances, the price of the Shares
would be similarly affected. |
|
Conversely,
several factors may trigger a temporary increase in the price of palladium prior to your investment in the Shares. For example,
sudden increased investor interest in palladium may cause an increase in world palladium prices, increasing the price of the Shares.
If that is the case, you will be buying Shares at prices affected by the temporarily high prices of palladium, and you may incur
losses when the causes for the temporary increase disappear.
A
decline in the automobile industry may have the effect of causing a decline in the price of palladium and a corresponding decline
in the price of Shares.
Autocatalysts,
automobile components for emissions control that use palladium, accounted for approximately 84% of the net global demand in palladium
in 2023. Reduced automotive industry sales may result in a decline in autocatalyst demand which may impact the price of palladium
and the price of Shares.
Crises
may motivate large-scale sales of palladium which could decrease the price of palladium and adversely affect an investment in
the Shares.
The
possibility of large-scale distress sales of palladium in times of crisis may have a short-term negative impact on the price of
palladium and adversely affect an investment in the Shares. For example, the 2008 financial credit crisis resulted in significantly
depressed prices of palladium largely due to forced sales and deleveraging from institutional investors such as hedge funds and
pension funds as expectations of economic growth slumped. Crises in the future may impair palladiums price performance
which would, in turn, adversely affect an investment in the Shares.
The
price of palladium may be affected by the sale of ETVs tracking the palladium markets.
To
the extent existing exchange traded vehicles (ETVs) tracking palladium markets represent a significant proportion
of demand for physical palladium bullion, large redemptions of the securities of these ETVs could negatively affect physical palladium
bullion prices and the price and NAV of the Shares.
21
RISKS
RELATED TO THE SHARES
Since
there is no limit on the amount of palladium that the Trust may acquire, the Trust, as it grows, may have an impact on the supply
and demand of palladium that ultimately may affect the price of the Shares in a manner unrelated to other factors affecting the
global market for palladium.
The
Trust Agreement places no limit on the amount of palladium the Trust may hold. Moreover, the Trust may issue an unlimited number
of Shares, subject to registration requirements, and thereby acquire an unlimited amount of palladium. The global market for palladium
is characterized by supply and demand constraints that are generally not present in the markets for other precious metals such
as gold and silver. From 2019 to 2023, world palladium mine supply averaged 6.5 million ounces, while world net demand averaged
10.4 million ounces. If the amount of palladium acquired by the Trust is large enough in relation to global palladium supply and
demand, further in-kind creations and redemptions of Shares could have an impact on the supply and demand of palladium unrelated
to other factors affecting the global market for palladium. Such an impact could affect the price for palladium that would directly
affect the price at which Shares are traded on the Exchange or the price of future Baskets created or redeemed by the Trust. The
Trust and the Sponsor cannot provide Shareholders any assurance that increased metal holdings by the Trust in the future will
have no such long-term metal price impact thereby affecting Share trading prices.
The
Shares and their value could decrease if unanticipated operational or trading problems arise.
There
may be unanticipated problems or issues with respect to the mechanics of the Trusts operations and the trading of the Shares
that could have a material adverse effect on an investment in the Shares. In addition, although the Trust is not actively managed
by traditional methods, to the extent that unanticipated operational or trading problems or issues arise, the Sponsors
past experience and qualifications may not be suitable for solving these problems or issues.
Discrepancies,
disruptions or unreliability of the LBMA Price PM could impact the value of the Trusts palladium and the market price of
the Shares.
The
Trustee values the Trusts palladium pursuant to the LBMA Price PM. In the event that the LBMA Price PM proves to be an
inaccurate benchmark, or the LBMA Price PM varies materially from the prices determined by other mechanisms for valuing palladium,
the value of the Trusts palladium and the market price of the Shares could be adversely impacted. Any future developments
in the LBMA Price PM, to the extent it has a material impact on the LBMA Price PM, could adversely impact the value of the Trusts
palladium and the market price of the Shares. It is possible that electronic failures or other unanticipated events may occur
that could result in delays in the announcement of, or the inability of the benchmark to produce, the LBMA Price PM on any given
date. Furthermore,
any actual or perceived disruptions that result in the perception that the LBMA Price PM is vulnerable to actual or attempted
manipulation could adversely affect the behavior of market participants, which may have an effect on the price of palladium. If
the LBMA Price PM is unreliable for any reason, the price of palladium and the market price for the Shares may decline or be subject
to greater volatility.
If
the process of creation and redemption of Baskets encounters any unanticipated difficulties, the possibility for arbitrage transactions
intended to keep the price of the Shares closely linked to the price of palladium may not exist and, as a result, the price of
the Shares may fall.
If
the processes of creation and redemption of Shares (which depend on timely transfers of palladium to and by the Custodian) encounter
any unanticipated difficulties, potential market participants who would otherwise be willing to purchase or redeem Baskets to
take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying
palladium may not take the risk that, as a result of those difficulties, they may not be able to realize the profit they expect.
If this is the case, the liquidity of Shares may decline and the price of the Shares may fluctuate independently of the price
of palladium and may fall. Additionally, redemptions could be suspended in any period during which (1) the NYSE Arca is closed
(other than customary weekend or holiday closings) or trading on the NYSE Arca is suspended or restricted, or (2) an emergency
exists as a result of which delivery, disposal or evaluation of the palladium is not reasonably practicable.
A
possible short squeeze due to a sudden increase in demand of Shares that largely exceeds supply may lead to price
volatility in the Shares.
Investors
may purchase Shares to hedge existing palladium exposure or to speculate on the price of palladium. Speculation on the price of
palladium may involve long and short exposures. To the extent aggregate short exposure exceeds the number of Shares available
for purchase (for example, in the event that large redemption requests by Authorized Participants dramatically affect Share liquidity),
investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders. Those repurchases
may in turn, dramatically increase the price of the Shares until additional Shares are created through the creation process. This
is often referred to as a short squeeze. A short squeeze could lead to volatile price movements in Shares that are
not directly correlated to the price of palladium.
22
The
liquidity of the Shares may be affected by the withdrawal from participation of one or more Authorized Participants.
In
the event that one or more Authorized Participants having substantial interests in Shares or otherwise responsible for a significant
portion of the Shares daily trading volume on the Exchange withdraw from participation, the liquidity of the Shares will
likely decrease which could adversely affect the market price of the Shares and result in Shareholders incurring a loss on their
investment.
Shareholders
do not have the protections associated with ownership of shares in an investment company registered under the Investment Company
Act of 1940 or the protections afforded by the CEA.
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. Consequently, Shareholders do not have the regulatory protections provided to investors in investment companies. The
Trust does not and will not hold or trade in commodity futures contracts, commodity interests or any other instruments
regulated by the CEA, as administered by the CFTC and the NFA. Furthermore, the Trust is not a commodity pool for purposes of
the CEA, and neither the Sponsor nor the Trustee is subject to regulation by the CFTC as a commodity pool operator or a commodity
trading advisor in connection with the Trust or the Shares. Consequently, Shareholders do not have the regulatory protections
provided to investors in CEA-regulated instruments or commodity pools operated by registered commodity pool operators or advised
by registered commodity trading advisors.
The
Trust may be required to terminate and liquidate at a time that is disadvantageous to Shareholders.
If
the Trust is required to terminate and liquidate, such termination and liquidation could occur at a time which is disadvantageous
to Shareholders, such as when palladium prices are lower than the palladium prices at the time when Shareholders purchased their
Shares. In such a case, when the Trusts palladium is sold as part of the Trusts liquidation, the resulting proceeds
distributed to Shareholders will be less than if palladium prices were higher at the time of sale.
The
lack of an active trading market for the Shares may result in losses on investment at the time of disposition of the Shares.
Although
Shares are listed for trading on the NYSE Arca, it cannot be assumed that an active trading market for the Shares will be maintained.
If an investor needs to sell Shares at a time when no active market for Shares exists, such lack of an active market will most
likely adversely affect the price the investor receives for the Shares (assuming the investor is able to sell them).
Shareholders
do not have the rights enjoyed by investors in certain other vehicles.
As
interests in an investment trust, the Shares have none of the statutory rights normally associated with the ownership of shares
of a corporation (including, for example, the right to bring oppression or derivative actions). In
addition, the Shares have limited voting and distribution rights (for example, Shareholders do not have the right to elect directors
or approve amendments to the Trust Agreement and do not receive dividends).
An
investment in the Shares may be adversely affected by competition from other methods of investing in palladium.
The
Trust competes with other financial vehicles, including traditional debt and equity securities issued by companies in the palladium
industry and other securities backed by or linked to palladium, direct investments in palladium and investment vehicles similar
to the Trust. Market and financial conditions, and other conditions beyond the Sponsors control, may make it more attractive
to invest in other financial vehicles or to invest in palladium directly, which could limit the market for the Shares and reduce
the liquidity of the Shares.
The
amount of palladium represented by each Share will decrease over the life of the Trust due to the recurring deliveries of palladium
necessary to pay the Sponsors Fee in-kind and potential sales of palladium to pay in cash the Trust expenses not assumed
by the Sponsor. Without increases in the price of palladium sufficient to compensate for that decrease, the price of the Shares
will also decline proportionately over the life of the Trust.
The
amount of palladium represented by each Share decreases each day by the Sponsors Fee. In addition, although the Sponsor
has agreed to assume all organizational and certain administrative and marketing expenses incurred by the Trust (the Trustees
monthly fee and out-of-pocket expenses, the Custodians fee and reimbursement of the Custodians expenses under the
Custody Agreements, exchange listing fees, SEC registration fees, printing and mailing costs, audit fees and up to $100,000 per
annum in legal expenses), in exceptional cases certain Trust expenses may need to be paid by the Trust. Because the Trust does
not have any income, it must either make payments in-kind by deliveries of palladium (as is the case with the Sponsors
Fee) or it must sell palladium to obtain cash (as in the case of any exceptional expenses). The result of these sales of palladium
and recurring deliveries of palladium to pay the Sponsors Fee in-kind is a decrease in the amount of palladium represented
by each Share. New deposits of palladium, received in exchange for new Shares issued by the Trust, will not reverse this trend.
A
decrease in the amount of palladium represented by each Share results in a decrease in each Shares price even if the price
of palladium does not change. To retain the Shares original price, the price of palladium must increase. Without that increase,
the lesser amount of palladium represented by the Share will have a correspondingly lower price. If this increase does not occur,
or is not sufficient to counter the lesser amount of palladium represented by each Share, Shareholders will sustain losses on
their investment in Shares.
23
An
increase in Trust expenses not assumed by the Sponsor, or the existence of unexpected liabilities affecting the Trust, will require
the Trustee to sell larger amounts of palladium, and will result in a more rapid decrease of the amount of palladium represented
by each Share and a corresponding decrease in its value.
The
sale of the Trusts palladium to pay expenses not assumed by the Sponsor, or unexpected liabilities affecting the Trust,
at a time of low palladium prices could adversely affect the value of the Shares.
The
Trustee sells palladium held by the Trust to pay Trust expenses not assumed by the Sponsor on an as-needed basis irrespective
of then-current palladium prices. The Trust is not actively managed and no attempt will be made to buy or sell palladium to protect
against or to take advantage of fluctuations in the price of palladium. Consequently, the Trusts palladium may be sold
at a time when the palladium price is low, resulting in the sale of more palladium than would be required if the Trust sold when
prices were higher. The sale of the Trusts palladium to pay expenses not assumed by the Sponsor, or unexpected liabilities
affecting the Trust, at a time of low Palladium prices could adversely affect the value of the Shares.
The
value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor or the Trustee under the Trust
Agreement.
Under
the Trust Agreement, each of the Sponsor and the Trustee has a right to be indemnified from the Trust for any liability or expense
it incurs without gross negligence, bad faith, willful misconduct, willful malfeasance or reckless disregard on its part. That
means the Sponsor or the Trustee may require the assets of the Trust to be sold in order to cover losses or liability suffered
by it. Any sale of that kind would reduce the NAV of the Trust and the value of the Shares.
The
Shares may trade at a price which is at, above or below the NAV per Share and any discount or premium in the trading price relative
to the NAV per Share may widen as a result of non-concurrent trading hours between the NYSE Arca and London, Zurich and COMEX.
The
Shares may trade at, above or below the NAV per Share. The NAV per Share fluctuates with changes in the market value of the Trusts
assets. The trading price of the Shares fluctuates in accordance with changes in the NAV per Share as well as market supply and
demand. The amount of the discount or premium in the trading price relative to the NAV per Share may be influenced by non-concurrent
trading hours between the NYSE Arca and the major palladium markets. While the Shares trade on the NYSE Arca until 4:00 p.m. New
York time, liquidity in the market for palladium will be reduced after the close of the major world palladium markets, including
London, Zurich and the COMEX. As a result, during these periods, trading spreads, and the resulting premium or discount on the
Shares, may widen.
Purchasing
activity in the palladium market associated with Basket creations or selling activity following Basket redemptions may affect
the price of palladium and Share trading prices. These price changes may adversely affect an investment in the Shares.
Purchasing
activity associated with acquiring the palladium required for deposit into the Trust in connection with the creation of Baskets
may temporarily increase the market price of palladium, which will result in higher prices for the Shares. Temporary increases
in the market price of palladium may also occur as a result of the purchasing activity of other market participants. Other market
participants may attempt to benefit from an increase in the market price of palladium that may result from increased purchasing
activity of palladium connected with the issuance of Baskets. Consequently, the market price of palladium may decline immediately
after Baskets are created. If the price of palladium declines, the trading price of the Shares may also decline.
Selling
activity associated with sales of palladium withdrawn from the Trust in connection with the redemption of Baskets may temporarily
decrease the market price of palladium, which will result in lower prices for the Shares. Temporary decreases in the market price
of palladium may also occur as a result of the selling activity of other market participants. If the price of palladium declines,
the trading price of the Shares may also decline.
The
Sponsor is unable to ascertain whether the palladium price movements since the commencement of the Trusts initial public
offering on January 8, 2010 were attributable to the Trusts Basket creation and redemption process or independent metal
market forces or both. Nevertheless, the Trust and the Sponsor cannot assure Shareholders that future Basket creations or redemptions
will have no effect on the palladium metal prices and, consequently, Share trading prices.
RISKS
RELATED TO THE CUSTODY OF PALLADIUM
The
Trusts palladium may be subject to loss, damage, theft or restriction on access.
There
is a risk that part or all of the Trusts palladium could be lost, damaged or stolen. Access to the Trusts palladium
could also be restricted by natural events (such as an earthquake) or human actions (such as a terrorist attack). Any of these
events may adversely affect the operations of the Trust and, consequently, an investment in the Shares.
24
The
Trusts lack of insurance protection and the Shareholders limited rights of legal recourse against the Trust, the
Trustee, the Sponsor, the Custodian and any sub-custodian exposes the Trust and its Shareholders to the risk of loss of the Trusts
palladium for which no person is liable.
The
Trust does not insure its palladium. The Custodian maintains insurance with regard to its business on such terms and conditions
as it considers appropriate in connection with its custodial obligations and is responsible for all costs, fees and expenses arising
from the insurance policy or policies. The Trust is not a beneficiary of any such insurance and does not have the ability to dictate
the existence, nature or amount of coverage. Therefore, Shareholders cannot be assured that the Custodian maintains adequate insurance
or any insurance with respect to the palladium held by the Custodian on behalf of the Trust. In addition, the Custodian and the
Trustee do not require any direct or indirect sub-custodians to be insured or bonded with respect to their custodial activities
or in respect of the palladium held by them on behalf of the Trust. Further, Shareholders recourse against the Trust, the
Trustee and the Sponsor under New York law, the Custodian, under English law, and any other sub-custodians under the law governing
their custody operations is limited. Consequently, a loss may be suffered with respect to the Trusts palladium which is
not covered by insurance and for which no person is liable in damages.
The
Custodians limited liability under the Custody Agreements and English law may impair the ability of the Trust to recover
losses concerning its palladium and any recovery may be limited, even in the event of fraud, to the market value of the palladium
at the time the fraud is discovered.
The
liability of the Custodian is limited under the Custody Agreements. Under the Custody Agreements between the Trustee and the Custodian
which establish the Trust Unallocated Account and the Trust Allocated Account, the Custodian is only liable for losses that are
the direct result of its own negligence, fraud or willful default in the performance of its duties. Any such liability is further
limited to the market value of the palladium lost or damaged at the time such negligence, fraud or willful default is discovered
by the Custodian provided the Custodian notifies the Trust and the Trustee promptly after the discovery of the loss or damage.
Under each Authorized Participant Unallocated Bullion Account Agreement (between the Custodian and an Authorized Participant establishing
an Authorized Participant Unallocated Account), the Custodian is not contractually or otherwise liable for any losses suffered
by any Authorized Participant or Shareholder that are not the direct result of its own gross negligence, fraud or willful default
in the performance of its duties under such agreement, and in no event will its liability exceed the market value of the balance
in the Authorized Participant Unallocated Account at the time such gross negligence, fraud or willful default is discovered by
the Custodian. For any Authorized Participant Unallocated Bullion Account Agreement between an Authorized Participant and another
palladium clearing bank, the liability of the palladium clearing bank to the Authorized Participant may be greater or lesser than
the Custodians liability to the Authorized Participant described in the preceding sentence, depending on the terms of the
agreement. In addition, the Custodian will not be liable for any delay in performance or any non-performance of any of its obligations
under the Allocated Account Agreement, the Unallocated Account Agreement or the Authorized Participant Unallocated Bullion Account
Agreement by reason of any cause beyond its reasonable control, including acts of God, war or terrorism. As a result, the recourse
of the Trustee or a Shareholder, under English law, is limited. Furthermore, under English common law, the Custodian or any sub-custodian
will not be liable for any delay in the performance or any non-performance of its custodial obligations by reason of any cause
beyond its reasonable control.
The
obligations of the Custodian are governed by English law, which may frustrate the Trust in attempting to seek legal redress against
the Custodian or any other sub-custodian concerning its palladium.
The
obligations of the Custodian under the Custody Agreements are, and the Authorized Participant Unallocated Bullion Account Agreements
may be, governed by English law. The Custodian may enter into arrangements with other sub-custodians for the temporary custody
of the Trusts palladium, which arrangements may also be governed by English law. The Trust is a New York common law trust.
Any United States, New York or other court situated in the United States may have difficulty interpreting English law (which,
insofar as it relates to custody arrangements, is largely derived from court rulings rather than statute), LPPM rules or the customs
and practices in the London custody market. It may be difficult or impossible for the Trust to sue any sub-custodian in a United
States, New York or other court situated in the United States. In addition, it may be difficult, time consuming and/or expensive
for the Trust to enforce in a foreign court a judgment rendered by a United States, New York or other court situated in the United
States.
The
Trust may not have adequate sources of recovery if its palladium is lost, damaged, stolen or destroyed.
If
the Trusts palladium is lost, damaged, stolen or destroyed under circumstances rendering a party liable to the Trust, the
responsible party may not have the financial resources sufficient to satisfy the Trusts claim. For example, as to a particular
event of loss, the only source of recovery for the Trust might be limited to the Custodian or any sub-custodian or, to the extent
identifiable, other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources
(including liability insurance coverage) to satisfy a valid claim of the Trust.
25
Shareholders
and Authorized Participants lack the right under the Custody Agreements to assert claims directly against the Custodian and any
sub-custodian.
Neither
the Shareholders nor any Authorized Participant have a right under the Custody Agreements to assert a claim of the Trust against
the Custodian or any sub-custodian. Claims under the Custody Agreements may only be asserted by the Trustee on behalf of the Trust.
Because
the Trustee does not, and the Custodian has limited obligations to, oversee or monitor the activities of sub-custodians who may
hold the Trusts palladium, failure by the sub-custodians to exercise due care in the safekeeping of the Trusts palladium
could result in a loss to the Trust.
Under
the Allocated Account Agreement, the Custodian may appoint from time to time one or more sub-custodians to hold the Trusts
palladium on a temporary basis pending delivery to the Custodian. Any sub-custodian selected by the Custodian shall be a member
of the LBMA or any equity member of the London Precious Metals Clearing Limited, except for the Governor and Company of the Bank
of England. The Custodian is not currently using a sub-custodian as of the date of this report. The Custodian is required under
the Allocated Account Agreement to use reasonable care in appointing any sub-custodians, making the Custodian liable only for
negligence or bad faith in the selection of such sub-custodians, and has an obligation to use commercially reasonable efforts
to obtain delivery of the Trusts palladium from any sub-custodians appointed by the Custodian. Otherwise, the Custodian
is not liable for the acts or omissions of its sub-custodians. These sub-custodians may in turn appoint further sub-custodians,
but the Custodian is not responsible for the appointment of these further sub-custodians. The Custodian does not undertake to
monitor the performance by sub-custodians of their custody functions or their selection of further sub-custodians. The Trustee
does not monitor the performance of the Custodian other than to review the reports provided by the Custodian pursuant to the Custody
Agreements and does not undertake to monitor the performance of any sub-custodian. Furthermore, the Trustee may have no right
to visit the premises of any sub-custodian for the purposes of examining the Trusts palladium or any records maintained
by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct of the
facilities, procedures, records or creditworthiness of such sub-custodian. In addition, the ability of the Trustee to monitor
the performance of the Custodian may be limited because under the Allocated Account Agreement and the Unallocated Account Agreement
the Trustee has only limited rights to visit the premises of the Custodian for the purpose of examining the Trusts palladium
and certain related records maintained by the Custodian. See Custody of the Trusts Palladium for more information
about sub-custodians that may hold the Trusts palladium.
The
obligations of any sub-custodian of the Trusts palladium are not determined by contractual arrangements but by LPPM rules
and London palladium market customs and practices, which may prevent the Trusts recovery of damages for losses on its palladium
custodied with sub-custodians.
There
are expected to be no written contractual arrangements between sub-custodians that hold the Trusts palladium and the Trustee
or the Custodian because traditionally such arrangements are based on the LPPMs rules and on the customs and practices
of the London palladium markets. In the event of a legal dispute with respect to or arising from such arrangements, it may be
difficult to define such customs and practices. The LPPMs rules may be subject to change outside the control of the Trust.
Under English law, neither the Trustee nor the Custodian would have a supportable breach of contract claim against a sub-custodian
for losses relating to the safekeeping of palladium. If the Trusts palladium is lost or damaged while in the custody of
a sub-custodian, the Trust may not be able to recover damages from the Custodian or the sub-custodian. Whether a sub-custodian
will be liable for the failure of sub-custodians appointed by it to exercise due care in the safekeeping of the Trusts
palladium will depend on the facts and circumstances of the particular situation. Shareholders cannot be assured that the Trustee
will be able to recover damages from sub-custodians whether appointed by the Custodian or by another sub-custodian for any losses
relating to the safekeeping of palladium by such sub-custodians.
Palladium
bullion allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and,
if a Basket is issued against such palladium, the Trust may suffer a loss.
Neither
the Trustee nor the Custodian independently confirms the fineness of the physical palladium allocated to the Trust in connection
with the creation of a Basket. The palladium bullion allocated to the Trust by the Custodian may be different from the reported
fineness or weight required by the LPPMs standards for palladium plates or ingots delivered in settlement of a palladium
trade (London Good Delivery Standards), the standards required by the Trust. If the Trustee nevertheless issues a Basket against
such palladium, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust
may suffer a loss.
Palladium
held in the Trusts unallocated palladium account and any Authorized Participants unallocated palladium account will
not be segregated from the Custodians assets. If the Custodian becomes insolvent, its assets may not be adequate to satisfy
a claim by the Trust or any Authorized Participant. In addition, in the event of the Custodians insolvency, there may be
a delay and costs incurred in identifying the bullion held in the Trusts allocated palladium account.
Palladium
which is part of a deposit for a purchase order or part of a redemption distribution is held for a time in the Trust Unallocated
Account and, previously or subsequently in, the Authorized Participant Unallocated Account of the purchasing or redeeming Authorized
Participant. During those times, the Trust and the Authorized Participant, as the case may be, have no proprietary rights to any
specific plates or ingots of palladium held by the Custodian and are each an unsecured creditor of the Custodian with respect
to the amount of palladium held in such unallocated accounts. In addition, if the Custodian fails to allocate the Trusts
palladium in a timely manner, in the proper amounts or otherwise in accordance with the terms of the Unallocated Account Agreement,
or if a sub-custodian fails to so segregate palladium held by it on behalf of the Trust, unallocated palladium will not be segregated
from the Custodians assets, and the Trust will be an unsecured creditor of the Custodian with respect to the amount so
held in the event of the insolvency of the Custodian. In the event the Custodian becomes insolvent, the Custodians assets
might not be adequate to satisfy a claim by the Trust or the Authorized Participant for the amount of palladium held in their
respective unallocated palladium accounts.
26
In
the case of the insolvency of the Custodian, a liquidator may seek to freeze access to the palladium held in all of the accounts
held by the Custodian, including the Trust Allocated Account. Although the Trust would be able to claim ownership of properly
allocated palladium, the Trust could incur expenses in connection with asserting such claims, and the assertion of such a claim
by the liquidator could delay creations and redemptions of Baskets.
In
issuing Baskets, the Trustee relies on certain information received from the Custodian which is subject to confirmation after
the Trustee has relied on the information. If such information turns out to be incorrect, Baskets may be issued in exchange for
an amount of palladium which is more or less than the amount of palladium which is required to be deposited with the Trust.
The
Custodians definitive records are prepared after the close of its business day. However, when issuing Baskets, the Trustee
relies on information reporting the amount of palladium credited to the Trusts accounts which it receives from the Custodian
during the business day and which is subject to correction during the preparation of the Custodians definitive records
after the close of business. If the information relied upon by the Trustee is incorrect, the amount of palladium actually received
by the Trust may be more or less than the amount required to be deposited for the issuance of Baskets.
GENERAL
RISKS
The
Trust relies on the information and technology systems of the Trustee, the Custodian, the Marketing Agent and the Sponsor, which
could be adversely affected by information systems interruptions, cybersecurity attacks or other disruptions which could have
a material adverse effect on the Trusts record keeping and operations.
The
Custodian, the Trustee, the Marketing Agent and the Sponsor depend upon information technology infrastructure, including network,
hardware and software systems to conduct their business as it relates to the Trust. A cybersecurity incident, or a failure to
protect their computer systems, networks and information against cybersecurity threats, could result in a loss of information
and adversely impact their ability to conduct their business, including their business on behalf of the Trust. Despite implementation
of network and other cybersecurity measures, their security measures may not be adequate to protect against all cybersecurity
threats.
War,
a major terrorist attack and other geopolitical events, including but not limited to the war between Russia and Ukraine, outbreaks
or public health emergencies (as declared by the World Health Organization), the continuation or expansion of war or other hostilities,
or a prolonged government shutdown may cause volatility in the price of Bullion due to the importance of a country or region to
the Bullion markets, market access restrictions imposed on some local Bullion producers and refiners, potential impacts to global
transportation and shipping and other supply chain disruptions. These events are unpredictable and may lead to extended periods
of price volatility.
The
operations of the Trust, the exchanges, brokers and counterparties with which the Trust does business, and the markets in which
the Trust does business, could be severely disrupted in the event of war, a major terrorist attack and other geopolitical events,
including but not limited to, the war between Russia and Ukraine, outbreaks or public health emergencies (as declared by the World
Health Organization), the continuation or expansion of war or other hostilities, or a prolonged government shutdown. Such events
may cause volatility in the price of Bullion due to the importance of a country or region to the Bullion markets, market access
restrictions imposed on some local Bullion producers and refiners, or potential impacts to global transportation, shipping, and
other supply chain disruptions.
In
late February 2022, Russia invaded Ukraine, significantly amplifying already existing geopolitical tensions among Russia and other
countries in the region and in the West. The responses of countries and political bodies to Russias actions, the larger
overarching tensions, and Ukraines military response and the potential for wider conflict may increase financial market
volatility generally, have severe adverse effects on regional and global economic markets, and cause volatility in the price of
palladium and the share price of the Trust. The conflict in Ukraine, along with global political fallout and implications including
sanctions, shipping disruptions, collateral war damage, and a potential expansion of the conflict beyond Ukraines borders,
could disturb the Bullion markets. Russia is one of the worlds largest producers of several precious metals, including
palladium. On April 8, 2022, the LPPM suspended its accreditation of two Russian refiners of platinum and palladium. The LPPM
stated that existing bars produced by the refiners before their suspension will still be accepted as good delivery. See Overview
of the Palladium Industry Historical Chart of the Price of Palladium for a discussion of how the Russian palladium
refiners accreditation has impacted the palladium market and how Russias production levels have impacted palladium prices subsequent
to the suspension.
War
and other geopolitical events in eastern Europe, including but not limited to Russia and Ukraine, may cause volatility in commodity
prices including precious metals prices. These events are unpredictable and may lead to extended periods of price volatility.
27
The
Trust may be negatively impacted by the effects of the spread of illnesses or other public health emergencies on the global economy
and the markets and service providers relevant to the performance of the Trust.
Public health emergencies, such as the COVID-19 pandemic, could have serious negative effects
on social, economic and financial systems, including significant uncertainty and volatility in the financial markets. For instance,
the suspension of operations of mines, refineries and vaults that extract, produce or store palladium, restrictions on travel
that delay or prevent the transportation of palladium and an increase in demand for palladium may disrupt supply chains for palladium,
which could cause secondary market spreads to widen and compromise the Trusts ability to settle transactions on time. Any
inability of the Trust to issue or redeem Shares or the Custodian or any sub-custodian to receive or deliver palladium as a result
of an infectious disease outbreak or public health emergency will negatively affect the Trusts operations. Future infectious
illness outbreaks or other public health emergencies could have similar or other unforeseen impacts and may exacerbate pre-existing
political, social and economic risks in certain countries or globally, which could adversely affect the value of the Shares.
Public health emergencies could increase the Trusts costs
and affect liquidity in the market for palladium, as well as the correlation between the price of the Shares and the net asset
value of the Trust, any of which could adversely affect the value of your Shares. In addition, public health emergencies could impair the information technology and other operational systems upon which the Trusts
service providers, including the Sponsor, the Trustee and the Custodian, rely, and could otherwise disrupt the ability of employees
of the Trusts service providers to perform essential tasks on behalf of the Trust. Governmental and quasi-governmental
authorities and regulators throughout the world have at times responded to major economic disruptions with a variety of fiscal
and monetary policy changes, including, but not limited to, direct capital infusions into companies and other issuers, new monetary
tools and lower interest rates. An unexpected or sudden reversal of these policies, or the ineffectiveness of these policies,
is likely to increase volatility in the market for palladium, which could adversely affect the price of the Shares.
Further, public health emergencies could interfere with or prevent the operation of the electronic
auction hosted by IBA to determine the LBMA Palladium Price PM, which the Trustee uses to value the palladium held by the Trust
and calculate the net asset value of the Trust. Public health emergencies could also cause
the closure of futures exchanges, which could eliminate the ability of Authorized Participants to hedge purchases of Baskets,
increasing trading costs of Shares and resulting in a sustained premium or discount in the Shares. Each of these outcomes would
negatively impact the Trust.
Potential
conflicts of interest may arise among the Sponsor or its affiliates and the Trust.
Conflicts
of interest may arise among the Sponsor and its affiliates, on the one hand, and the Trust and its Shareholders, on the other
hand. As a result of these conflicts, the Sponsor may favor its own interests and the interests of its affiliates over the Trust
and its Shareholders. As an example, the Sponsor, its affiliates and their officers and employees are not prohibited from engaging
in other businesses or activities, including those that might be in direct competition with the Trust.
Item
1B. Unresolved Staff Comments
None.
Item
1C. Cybersecurity
Cybersecurity
The
Trust, through its service providers, has processes in place to assess, identify and manage material risks from cybersecurity
threats. The Trusts business is dependent on the communications and information systems of the Trustee, the Sponsor, the
Custodian and other third-party service providers. The Trustee is responsible for day-to-day administration of the Trust and has
implemented a cybersecurity program that applies to the Trustee and its business, including the administration of the Trust.
Cybersecurity
Program Overview
The
Trustee has instituted a cybersecurity program designed to identify, assess and mitigate cyber risks applicable to the administration
by the Trustee of the Trust. The cyber risk management program involves risk assessments, implementation of security measures
and ongoing monitoring of systems and networks, including networks on which the Trust relies. The Trustee actively monitors the
current threat landscape to seek to identify material risks arising from new and evolving cybersecurity threats, including material
risks faced by the Trust.
28
The
Trust relies on the Trustee, the Sponsor and the Custodian to engage external experts, including cybersecurity assessors, risk
management and information technology professionals, attorneys, consultants and auditors to evaluate cybersecurity measures and
risk management processes, including those applicable to the Trust.
Board
Oversight of Cybersecurity Risks
The
Trust has no board of trustees and is administered by the Trustee pursuant to the Trust Agreement. Accordingly, the Trust relies
on the Trustee, the Sponsor and the Custodian for oversight of cybersecurity risks applicable to the Trust.
Managements
Role in Cybersecurity Risk Management
The
Trust has no officers or employees and is administered by the Trustee pursuant to the Trust Agreement. Accordingly, the Trust
relies on the Trustee, the Sponsor and the Custodian for management of cybersecurity risks applicable to the Trust.
Assessment
of Cybersecurity Risk
The
potential impact of risks from cybersecurity threats to the Trust are assessed by the Trustee, the Sponsor, the Custodian and
third-party service providers on an ongoing basis, and how such risks could materially affect the Trusts objective, operational
results and financial condition are regularly evaluated. During the reporting period, the Trustee has not identified any risks
from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Trustee believes have materially
affected, or are reasonably likely to materially affect, the Trust, including its objective, operational results and financial
condition.
Item
2. Properties
Not
applicable.
Item
3. Legal Proceedings
None.
Item
4. Mine Safety Disclosure
Not
applicable.
PART
II
Item
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The
Trusts Shares have been listed on the NYSE Arca under the symbol PALL since its initial public offering on January 8, 2010.
The
following tables set out the range of high and low closing prices for the Shares as reported for NYSE Arca transactions for each
of the quarters during the years ended December 31, 2025 and 2024:
**Fiscal Year Ended December 31, 2025:
Quarter Ended**
|
| |
High | | |
Low | | |
|
March 31, 2025 | |
$ | 93.44 | | |
$ | 83.17 | | |
|
June 30, 2025 | |
$ | 104.70 | | |
$ | 82.39 | | |
|
September 30, 2025 | |
$ | 119.30 | | |
$ | 98.50 | | |
|
December 31, 2025 | |
$ | 175.94 | | |
$ | 110.34 | | |
29
|
Fiscal Year Ended December 31, 2024: Quarter Ended | |
|
| |
High | | |
Low | | |
|
March 31, 2024 | |
$ | 101.12 | | |
$ | 78.77 | | |
|
June 30, 2024 | |
$ | 100.29 | | |
$ | 80.25 | | |
|
September 30, 2024 | |
$ | 102.56 | | |
$ | 77.61 | | |
|
December 31, 2024 | |
$ | 113.89 | | |
$ | 82.51 | | |
The number of outstanding
Shares of the Trust as of February 26, 2026 was 7,300,000.
*Holders*
*Monthly Share Price*
The
following table sets forth, for each of the most recent six months, the high and low closing prices of the Shares, as reported
for NYSE Arca transactions.
|
Month | |
High | | |
Low | | |
|
August
2025 | |
$ | 111.30 | | |
$ | 98.50 | | |
|
September 2025 | |
$ | 116.95 | | |
$ | 100.60 | | |
|
October 2025 | |
$ | 148.17 | | |
$ | 110.34 | | |
|
November 2025 | |
$ | 134.59 | | |
$ | 123.33 | | |
|
December 2025 | |
$ | 175.94 | | |
$ | 129.44 | | |
|
January 2026 | |
$ | 197.02 | | |
$ | 145.71 | | |
30
*Issuer
Purchase of Equity Securities*
The
Trust issues and redeems Shares only with Authorized Participants in exchange for palladium, only in aggregations of 12,500 Shares referred to as
a Basket. A list of current Authorized Participants is available from the Sponsor or the Trustee and is included in Item 7 of
this report. Although the Trust does not purchase Shares directly from its Shareholders, in connection with the redemption of
Baskets, the Trust redeemed as follows during the years ended December 31, 2025 and 2024:
|
Month | |
Total
number of Shares
redeemed | | |
Average ounces of palladium per
share | | |
|
January 2025 | |
| 375,000 | | |
| 0.091 | | |
|
February 2025 | |
| | | |
| | | |
|
March 2025 | |
| 200,000 | | |
| 0.091 | | |
|
April 2025 | |
| 337,500 | | |
| 0.091 | | |
|
May 2025 | |
| 62,500 | | |
| 0.091 | | |
|
June 2025 | |
| | | |
| | | |
|
July 2025 | |
| 75,000 | | |
| 0.091 | | |
|
August 2025 | |
| 400,000 | | |
| 0.091 | | |
|
September 2025 | |
| | | |
| | | |
|
October 2025 | |
| 350,000 | | |
| 0.091 | | |
|
November 2025 | |
| 112,500 | | |
| 0.091 | | |
|
December 2025 | |
| | | |
| | | |
|
Total | |
| 1,912,500 | | |
| 0.091 | | |
|
| |
| | |
| | |
|
Month | |
Total number of Shares
redeemed | | |
Average ounces of palladium per
share | | |
|
January 2024 | |
| | | |
| | | |
|
February 2024 | |
| 75,000 | | |
| 0.092 | | |
|
March 2024 | |
| 100,000 | | |
| 0.092 | | |
|
April 2024 | |
| | | |
| 0.092 | | |
|
May 2024 | |
| | | |
| 0.092 | | |
|
June 2024 | |
| 262,500 | | |
| | | |
|
July 2024 | |
| 87,500 | | |
| 0.092 | | |
|
August 2024 | |
| 87,500 | | |
| 0.092 | | |
|
September 2024 | |
| 262,500 | | |
| 0.092 | | |
|
October 2024 | |
| | | |
| | | |
|
November 2024 | |
| 650,000 | | |
| 0.091 | | |
|
December 2024 | |
| 350,000 | | |
| 0.091 | | |
|
Total | |
| 1,875,000 | | |
| 0.092 | | |
Item 6. [Reserved]
31
Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations
*This
information should be read in conjunction with the financial statements and notes to the financial statements included with this
report. The discussion and analysis that follows may contain statements that relate to future events or future performance. In
some cases, such forward-looking statements can be identified by terminology such as may, should,
expect, plan, anticipate, believe, estimate, predict,
potential or the negative of these terms or other comparable terminology. We remind readers that forward-looking
statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown
risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially
different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking
statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Trust undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.*
*Introduction*
The
abrdn Standard Palladium ETF Trust (the Trust) is a trust formed under the laws of the State of New York. The Trust
does not have any officers, directors, or employees, and is administered by The Bank of New York Mellon (the Trustee)
acting as trustee pursuant to the Depositary Trust Agreement (the Trust Agreement) between the Trustee and abrdn
ETFs Sponsor LLC, the sponsor of the Trust (the Sponsor). The Trust issues shares (Shares) representing
fractional undivided beneficial interests in its net assets. The assets of the Trust consist of palladium bullion held by a custodian
as an agent of the Trust and responsible only to the Trustee.
The
Trust is a passive investment vehicle and the objective of the Trust is for the value of each Share to approximately reflect,
at any given time, the price of the palladium bullion owned by the Trust, less the Trusts liabilities (anticipated to be
principally for accrued operating expenses), divided by the number of outstanding Shares. The Trust does not engage in any activities
designed to obtain a profit from, or ameliorate losses caused by, changes in the price of palladium.
The
Trust issues and redeems Shares only in exchange for palladium, only in aggregations of 12,500 Shares or integral multiples thereof (each,
a Basket), and only in transactions with registered broker-dealers (or other securities market participants not
required to register as broker-dealers, such as a bank or other financial institution) that (1) are participants in DTC and (2)
have previously entered into an agreement with the Trust governing the terms and conditions of such issuance (such dealers, the
Authorized Participants). The number of Shares in a block that constitutes a Basket for the purposes of creation and redemptions in the Trust was reduced from 50,000
to 25,000 effective April 1, 2019, and reduced from 25,000 to 12,500 effective June 18, 2024.
As
of the date of this annual report the Authorized Participants that have signed an Authorized Participant Agreement with the Trust
are Goldman Sachs & Co., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Merrill Lynch Professional Clearing Corp.,
Mizuho Securities USA LLC, Morgan Stanley & Co. Inc., Scotia Capital (USA) Inc., UBS Securities LLC and Virtu Americas, LLC.
Shares
of the Trust trade on the NYSE Arca under the symbol PALL.
Investing
in the Shares does not insulate the investor from certain risks, including price volatility. The following table illustrates the
movement in the NAV of the Shares against the corresponding palladium price (per 1/10 of an oz. of palladium) since inception:
NAV
per Share vs. Palladium Price from December 30, 2009 (the Date of Inception) to December 31, 2025
*****
32
The
divergence of the NAV per Share from the palladium price over time reflects the cumulative effect of the Trust expenses that arise
if an investment had been held since inception.
Critical
Accounting Policy
The
financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements relies on estimates and assumptions that impact the Trusts
financial position and results of operations. These estimates and assumptions affect the Trusts application of accounting
policies. Below we describe the valuation of palladium bullion, a critical accounting policy that we believe is important to understanding
the results of operations and financial position. In addition, please refer to Note 2 to the Financial Statements for further
discussion of the Trusts accounting policies.
Valuation
of Palladium*
Palladium
is held by the Custodian on behalf of the Trust, at its London, England vaulting premises. Palladium may also be held by UBS AG,
or any other firm selected by the Custodian to hold the Trusts palladium in the Trusts allocated account in the
firms Zurich vault premises and whose appointment has been approved by the Sponsor. Palladium is recorded at fair value.
The cost of palladium is determined according to the average cost method and the fair value is based on the LBMA Palladium Price
PM or the LBMA Palladium Price AM if no LBMA Palladium Price PM is available. If neither price is available for that day, the
Trust will value its palladium based on the most recently announced LBMA Palladium Price PM or LBMA Palladium Price AM. Realized
gains and losses on transfers of palladium, or palladium distributed for the redemption of Shares, are calculated on a trade date
basis as the difference between the fair value and cost of palladium transferred*.*
**
**
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
December 31, 2023 | | |
|
(Amounts in 000s of US$) | |
| | | |
| | | |
| | | |
|
Investment in palladium - cost | |
$ | 797,137 | | |
$ | 490,759 | | |
$ | 356,585 | | |
|
Unrealized gain/(loss) on investment in palladium | |
| 203,238 | | |
| (136,516 | ) | |
| (137,164 | ) | |
|
Investment in palladium - fair value | |
$ | 1,000,375 | | |
$ | 354,243 | | |
$ | 219,421 | | |
**
**Inspection
of Palladium**
Under
the Custody Agreements, the Trustee, the Sponsor and the Trusts auditors and inspectors may, only up to twice a year,
visit the premises of the Custodian for the purpose of examining the Trusts palladium and certain related records
maintained by the Custodian. The Trustee and the Sponsor have no right to visit the premises of any sub-custodian for the
purposes of examining the Trusts palladium or any records maintained by the sub-custodian, and no sub-custodian is
obligated to cooperate in any review the Trustee or the Sponsor may wish to conduct of the facilities, procedures, records or
creditworthiness of such sub-custodian.
The
Sponsor has exercised its right to visit the Custodian in order to examine the palladium and the records maintained by them. Inspections
were conducted by Bureau Veritas Commodities UK Ltd, a leading commodity inspection and testing company retained by the Sponsor,
as of August 4, 2025 and January 5, 2026.
There
can be no guarantee that the Sponsor or the Trusts auditors and inspectors will be able to perform physical inspections
of the Trusts palladium as planned. Local policies, regulations, or ordinances, as well as polices or restrictions adopted
by the Custodian or a sub-custodian, may temporarily prevent, or otherwise impair the ability of, the Sponsor or the Trusts
auditors and inspectors, from performing a physical inspection of the Trusts palladium on a desired date. In those situations,
the Sponsor or the Trusts auditors and inspectors may seek to verify the palladium held by the Trust by alternate means,
including through virtual inspections of the Trusts palladium and/or a review of pertinent records.
Liquidity
and Capital Resources
The
Trust is not aware of any trends, demands, conditions, events or uncertainties that are reasonably likely to result in material
changes to its liquidity needs. In exchange for the Sponsors Fee, the Sponsor has agreed to assume most of the expenses
incurred by the Trust. As a result, the only expense of the Trust during the period covered by this report was the Sponsors
Fee. The Trusts only source of liquidity is its transfers and sales of palladium.
33
The
Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trusts palladium as necessary to pay the
Trusts expenses not otherwise assumed by the Sponsor. The Trustee will not sell palladium to pay the Sponsors Fee
but will pay the Sponsors Fee through in-kind transfers of palladium to the Sponsor. At December 31, 2025 and 2024, the
Trust did not have any cash balances.
|
Results of Operations
Financial Highlights | |
| | |
|
| |
| | |
|
| |
Year
Ended
December
31, 2025 | | |
Year
Ended
December 31, 2024 | | |
Year
Ended
December 31, 2023 | | |
|
(Amounts in 000s
of US$) | |
| | |
| | |
| | |
|
Total
gain/(loss) on palladium | |
$ | 325,152 | | |
$ | (65,908 | ) | |
$ | (109,918 | ) | |
|
Net
change assets from operations | |
$ | 321,949 | | |
$ | (67,646 | ) | |
$ | (111,382 | ) | |
|
Net
cash provided by operating activities | |
$ | | | |
$ | | | |
$ | | | |
The
net asset value of the Trust will be obtained by subtracting the Trusts expenses and liabilities on any day from the value
of the palladium owned by the Trust on that day; the NAV per Share will be obtained by dividing the net asset value of the Trust
on a given day by the number of Shares outstanding on that day. On each day on which the Exchange is open for regular trading,
the Trustee will determine the net asset value of the Trust and the NAV per Share as promptly as practicable after 4:00 p.m. (New
York time). The Trustee will value the Trusts palladium on the basis of LBMA Palladium Price PM. If there is no LBMA Palladium
Price PM on any day, the Trustee is authorized to use the LBMA Palladium Price AM announced on that day. If neither price is available
for that day, the Trustee will value the Trusts Palladium based on the most recently announced LBMA Palladium Price PM
or LBMA Palladium Price AM. If the Sponsor determines that such price is inappropriate to use, the Sponsor will identify an alternate
basis for evaluation to be employed by the Trustee. Further, the Sponsor may instruct the Trustee to use on an on-going basis
a different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trusts
palladium.
*The
year ended December 31, 2025*
The
Trusts NAV increased from $354,057,800 at December 31, 2024 to $1,035,462,345 at December 31, 2025, a 192.46% increase
for the year. The increase in the Trusts NAV resulted primarily from an increase in outstanding shares, which rose from
4,262,500 at December 31, 2024 to 7,275,000 at December 31, 2025, a result of 4,925,000 Shares (394 baskets) being created and
1,912,000 Shares (153 Baskets) being redeemed during the year. There was an increase in the price per ounce of palladium, which
rose 72.39% from $909.00 at December 31, 2024 to 1,567.00 at December 31, 2025.
The
NAV per Share increased 71.36% from $83.06 at December 31, 2024 to $142.33 at December 31, 2025. The Trusts NAV per Share
rose slightly less than the price per ounce of palladium on a percentage basis due to the Sponsors Fee, which was $3,203,228
for the year, or 0.60% of the Trusts ANAV.
The
NAV per Share of $166.88 at December 23, 2025 was the highest during the year, compared with a low of $82.20 at April 9, 2025.
The
increase in net assets from operations for the year ended December 31, 2025 was $321,948,064, resulting from a change in unrealized
appreciation of $339,753,509, offset by a realized loss of $227,303 on the transfer of palladium to pay expenses and a realized
loss of $14,374,914 on palladium distributed for the redemption of Shares and the Sponsors Fee of $3,203,228. Other than
the Sponsors Fee, the Trust had no expenses during the year ended December 31, 2025.
*The
year ended December 31, 2024*
The
Trusts NAV increased from $219,309,330 at December 31, 2023 to $354,057,800 at December 31, 2024, a 61.44% increase for
the year. The increase in the Trusts NAV resulted primarily from an increase in outstanding shares, which rose from 2,100,000
at December 31, 2023 to 4,262,500 at December 31, 2024, a result of 4,037,500 Shares (323 baskets) being created and 1,875,000
Shares (150 Baskets) being redeemed during the year. There was a decrease in the price per ounce of palladium, which fell 19.98%
from $1,136.00 at December 31, 2023 to $909.00 at December 31, 2024.
The
NAV per Share decreased 20.46% from $104.43 at December 31, 2023 to $83.06 at December 31, 2024. The Trusts NAV per Share
fell slightly more than the price per ounce of palladium on a percentage basis due to the Sponsors Fee, which was $1,737,833
for the year, or 0.60% of the Trusts ANAV.
34
The
NAV per Share of $111.78 at October 29, 2024 was the highest during the year, compared with a low of $78.04 at August 5, 2024.
The
decrease in net assets from operations for the year ended December 31, 2024 was $67,646,310, resulting from a realized loss
of $813,307 on the transfer of palladium to pay expenses and a realized loss of $65,743,179 on palladium distributed
for the redemption of Shares, offset by a change in unrealized gain on investment in palladium of $648,009 and the
Sponsors Fee of $1,737,833. Other than the Sponsors Fee, the Trust had no expenses during the year ended
December 31, 2024.
*The
year ended December 31, 2023*
The Trusts NAV decreased from $295,490,794 at December 31, 2022 to $219,309,330 at December 31,
2023, a 25.78% decrease for the year. The change in the Trusts NAV resulted from an increase in outstanding shares, which rose
from 1,800,000 at December 31, 2022 to 2,100,000 at December 31, 2023, a result of 575,000 Shares (23 baskets) being created and 275,000
Shares (11 Baskets) being redeemed during the year and a decrease in the price per ounce of palladium, which fell 36.00% from $1,775.00
at December 31, 2022 to $1,136.00 at December 31, 2023.
The NAV per Share decreased 36.39% from $164.16 at December 31, 2022 to $104.43
at December 31, 2023. The Trusts NAV per Share fell slightly more than the price per ounce of palladium on a percentage basis due
to the Sponsors Fee, which was $1,464,063 for the year, or 0.60% of the Trusts ANAV.
The NAV per Share of $166.63 at January
10, 2023 was the highest during the year, compared with a low of $88.01 at December 6, 2023.
The decrease in net assets from operations
for the year ended December 31, 2023 was $111,381,953, resulting from a realized loss of $578,564 on the transfer of palladium to pay
expenses, a realized loss of $10,746,737 on palladium distributed for the redemption of Shares, a change in unrealized loss on investment
in palladium of $98,592,589 and the Sponsors Fee of $1,464,063. Other than the Sponsors Fee, the Trust had no expenses during
the year ended December 31, 2023.
*Off-Balance
Sheet Arrangements*
The
Trust is not a party to any off-balance sheet arrangements.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
The
Trust Agreement does not authorize the Trustee to borrow for payment of the Trusts ordinary expenses. The Trust does not
engage in transactions in foreign currencies which could expose the Trust or holders of Shares to any foreign currency related
market risk. The Trust invests in no derivative financial instruments and has no foreign operations or long-term debt instruments.
Item
8. Financial Statements and Supplementary Data *(Unaudited)*
*Quarterly
Income Statements*
**Year
Ended December 31, 2025**
****
****
|
| |
Three months ended | | |
| | |
|
| |
March 31 | | |
June 30 | | |
September 30 | | |
December 31 | | |
Year ended December 31 | | |
|
(Amounts in 000s of US$, except for Share and per Share data) | |
| | |
| | |
| | |
| | |
| | |
|
EXPENSES | |
| | |
| | |
| | |
| | |
| | |
|
Sponsors Fee | |
$ | 521 | | |
$ | 582 | | |
$ | 819 | | |
$ | 1,281 | | |
$ | 3,203 | | |
|
Total expenses | |
| 521 | | |
| 582 | | |
| 819 | | |
| 1,281 | | |
| 3,203 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net investment loss | |
| (521 | ) | |
| (582 | ) | |
| (819 | ) | |
| (1,281 | ) | |
| (3,203 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
REALIZED AND UNREALIZED GAINS / (LOSSES) | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Realized gain on platinum transferred to pay expenses | |
| (178 | ) | |
| (138 | ) | |
| (28 | ) | |
| 117 | | |
| (227 | ) | |
|
Realized gain / (loss) on platinum distributed for the redemption of Shares | |
| (14,652 | ) | |
| (11,095 | ) | |
| 1,274 | | |
| 10,098 | | |
| (14,375 | ) | |
|
Change in unrealized gain / (loss) on investment in platinum | |
| 45,378 | | |
| 73,133 | | |
| 46,906 | | |
| 174,337 | | |
| 339,754 | | |
|
Total gain / (loss) on investment in platinum | |
| 30,548 | | |
| 61,900 | | |
| 48,152 | | |
| 184,552 | | |
| 325,152 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Change in net assets from operations | |
$ | 30,027 | | |
$ | 61,318 | | |
$ | 47,333 | | |
$ | 183,271 | | |
$ | 321,949 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net increase / (decrease) in net assets per Share | |
$ | 7.58 | | |
$ | 14.59 | | |
$ | 9.30 | | |
$ | 28.73 | | |
$ | 65.50 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Weighted average number of Shares | |
| 3,959,583 | | |
| 4,204,121 | | |
| 5,090,353 | | |
| 6,378,804 | | |
| 4,915,342 | | |
35
**Year Ended December 31, 2024**
|
| |
| | |
Three months ended | | |
| | |
Year ended | | |
|
| |
March 31 | | |
June 30 | | |
September 30 | | |
December 31 | | |
December 31 | | |
|
(Amounts in 000s of US$, except for Share and per Share data) | |
| | |
| | |
| | |
| | |
| | |
|
EXPENSES | |
| | |
| | |
| | |
| | |
| | |
|
Sponsors Fee | |
$ | 315 | | |
$ | 396 | | |
$ | 416 | | |
$ | 611 | | |
$ | 1,738 | | |
|
Total expenses | |
| 315 | | |
| 396 | | |
| 416 | | |
| 611 | | |
| 1,738 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net investment loss | |
| (315 | ) | |
| (396 | ) | |
| (416 | ) | |
| (611 | ) | |
| (1,738 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
REALIZED AND UNREALIZED GAINS / (LOSSES) | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Realized gain on palladium transferred to pay expenses | |
| (228 | ) | |
| (213 | ) | |
| (229 | ) | |
| (143 | ) | |
| (813 | ) | |
|
Realized gain / (loss) on palladium distributed for the redemption of Shares | |
| (11,719 | ) | |
| (11,584 | ) | |
| (16,344 | ) | |
| (26,096 | ) | |
| (65,743 | ) | |
|
Change in unrealized gain on investment in Bullion | |
| (8,862 | ) | |
| 984 | | |
| 26,905 | | |
| (18,379 | ) | |
| 648 | | |
|
Total gain / (loss) on investment in palladium | |
| (20,809 | ) | |
| (10,813 | ) | |
| 10,332 | | |
| (44,618 | ) | |
| (65,908 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Change in net assets from operations | |
$ | (21,124 | ) | |
$ | (11,209 | ) | |
$ | 9,916 | | |
$ | (45,229 | ) | |
$ | (67,646 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net increase in net assets per Share | |
$ | (9.02 | ) | |
$ | (3.81 | ) | |
$ | 3.13 | | |
$ | (10.38 | ) | |
$ | (21.10 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Weighted average number of Shares | |
| 2,342,582 | | |
| 2,942,857 | | |
| 3,166,304 | | |
| 4,356,929 | | |
| 3,205,255 | | |
****
*Note:
Quarterly balances may not add to totals due to independent rounding.*
36
The
financial statements required by Regulation S-X, together with the report of the Trusts independent registered public accounting
firm appear on pages F-1 to F-13 of this filing.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item
9A. Controls and Procedures
The
Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commissions 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 Trusts 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 December 31, 2025, the Trusts disclosure controls and procedures were effective.
Internal
controls over financial reporting have been maintained throughout the Trusts fiscal year ended December 31, 2025. There
have been no changes that have materially affected, or are reasonably likely to materially affect, the Trusts or Sponsors
internal control over financial reporting.
*Managements
Report on Internal Control over Financial Reporting*
The
Sponsors management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined under Exchange Act Rules 13a-15(f) and 15d-15(f). The Trusts internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control
over financial reporting includes those policies and procedures that:
|
(1) | pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
Trusts assets; |
|
|
(2) | provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that the Trusts receipts and expenditures are being made only in accordance
with appropriate authorizations; and |
|
|
(3) | provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Trusts
assets that could have a material effect on the financial statements. |
|
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become ineffective because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The
Chief Executive Officer and Chief Financial Officer of the Sponsor assessed the effectiveness of the Trusts internal control
over financial reporting as of December 31, 2025. In making this assessment, they used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in *Internal ControlIntegrated Framework (2013)*. Their
assessment included an evaluation of the design of the Trusts internal control over financial reporting and testing of
the operational effectiveness of its internal control over financial reporting. Based on their assessment and those criteria,
the Chief Executive Officer and Chief Financial Officer of the Sponsor concluded that the Trust maintained effective internal
control over financial reporting as of December 31, 2025.
KPMG
LLP, the independent registered public accounting firm that audited and reported on the financial statements included in this
Form 10-K, as stated in their report which is included herein, issued an attestation report on the effectiveness of the Trusts
internal control over financial reporting as of December 31, 2025.
37
Report
of Independent Registered Public Accounting Firm
Item
9B. Other Information
No
officers or directors of the Trust have adopted, modified or terminated trading plans under either a Rule 10b5-1 or non-Rule 10b51
trading arrangement for the year ended December 31, 2025.
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not
applicable.
38
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
The
Trust has no officers, employees or board of trustees and is administered by the Trustee pursuant to the Trust Agreement. Accordingly,
the Trust has not adopted a code of ethics or an insider trading policy governing the purchase, sale and other disposition of
the Trusts securities. The biographies of the President and Chief Executive Officer of the Sponsor and the Chief Financial
Officer and Treasurer of the Sponsor are set out below:
Steven
Dunn President and Chief Executive Officer
Steven
Dunn, CIMA, is the Head of US Wealth Management at Aberdeen Investments. Mr. Dunn also guides the firms strategic direction and
distribution strategy for ETFs. Previously, he was a Director with Deutsche Asset and Wealth Management in charge of managing
relationships with US ETF Strategists and overseeing the Eastern Division sales team. Prior to that, Mr. Dunn was a
consultant at Brandywine Global Investment Management and has also held sales and distribution strategy positions at iShares,
Blackrock and Vanguard. Mr. Dunn holds a B.A. degree in Public Administration from Shippensburg University of
Pennsylvania and has completed his MBA at Pennsylvania State University. He holds the Series 7, 24, and 63 registrations as
well as the Certified Investment Management Analyst (CIMA).
Sharon
Ferrari Chief Financial Officer and Treasurer
Sharon
Ferrari is currently a Director, Product Management at abrdn Inc. (the parent company of the Sponser). Ms. Ferrari joined abrdn Inc.
in 2008. Prior to working at abrdn Inc., Ms. Ferrari worked at Delaware Investments for about 3 years and began her career at SEI
Investments. Ms. Ferrari holds a BS in Business Administration from University of Pittsburgh and a MBA from Villanova
University.
Item
11. Executive Compensation
The
Trust has no directors or executive officers. The only ordinary expense paid by the Trust is the Sponsors Fee.
**Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters****
**
*Security Ownership of
Certain Beneficial Owners*
There
are no persons known by the Trust to own directly or indirectly beneficially more than 5% of the outstanding Shares of the Trust.
*Security
Ownership of Management*
Not
applicable.
*Change
in Control*
Neither
the Sponsor nor the Trustee knows of any arrangements which may subsequently result in a change in control of the Trust.
**Item 13. Certain Relationships and Related Transactions, and Director Independence**
The Trust has no directors or executive officers.
**Item 14. Principal Accounting Fees and Services**
Fees for services performed by KPMG LLP for the years ended December 31, 2025 and 2024
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Audit fees KPMG | |
$ | 80,000 | | |
$ | 94,000 | | |
|
Audit related fees - KPMG | |
| | | |
| | | |
|
| |
$ | 80,000 | | |
$ | 94,000 | | |
39
Audit
Fees are fees paid by the Sponsor to KPMG LLP for professional services for the audit of the Trusts financial statements
included in the Form 10-K and review of financial statements included in the Form 10-Qs, and for services that are normally provided
by the accountants in connection with regulatory filings or engagements. Audit Related Fees are paid by the Sponsor to KPMG LLP
for assurance and related services that are reasonably related to the performance of the audit or review of the Trusts
financial statements. These services include the accountant providing a consent letter related to the Trusts registration
statement filing.
Pre-Approval
Policies and Procedures
As
referenced in Item 10 above, the Trust has no board of directors, and as a result, has no pre-approval policies or procedures
with respect to fees paid to KPMG LLP. Such determinations are made by the Sponsor.
40
PART
IV
Item
15. Exhibits, Financial Statement Schedules
**1.
Financial Statements**
See
Index to Financial Statements on Page F-1 for a list of the financial statements being filed herein.
2.
Financial Statement Schedules
Schedules
have been omitted since they are either not required, not applicable, or the information has otherwise been included.
|
Exhibit
No. |
Description | |
|
4.1(a) |
Depositary
Trust Agreement, incorporated by reference to Exhibit 4.1 filed with Registration Statement No. 333-158380 on
December 31, 2009 | |
|
|
| |
|
4.1(b) |
Amendment
to the Depositary Trust Agreement, incorporated by reference to Exhibit 4.1(b) filed with the Trusts Annual
Report
on Form 10-K for the y ear ended December 31, 2019 filed on February 28, 2020 | |
|
|
| |
|
4.1(c) |
Second
Amendment to the Depositary Trust Agreement, incorporated by reference to Exhibit 4.1 filed with the Trusts
Current
Report on Form 8-K on March 14, 2022 | |
|
|
| |
|
4.1(d) |
Third
Amendment to the Depositary Trust Agreement, incorporated by reference to Exhibit 4.1 filed with the Trusts
Current
Report on Form 8-K on May 28, 2024 | |
|
|
| |
|
4.2 |
Form of Authorized Participant Agreement, incorporated by reference to Exhibit 4.2 filed with the Trusts Annual Report on Form 10-K on February 28, 2025. | |
|
|
| |
|
4.3 |
Certificate
of Beneficial Interest, incorporated by reference to Exhibit 4.3 filed with Registration Statement No. 333-158380
on December 31, 2009 | |
|
|
| |
|
10.1 |
Allocated
Account Agreement, incorporated by reference to Exhibit 10.1 filed with the Trusts Current Report on Form 8-K
on May 28, 2024 | |
|
|
| |
|
10.2 |
Unallocated
Account Agreement, incorporated by reference to Exhibit 10.2 filed with the Trusts Current Report on Form
8-K on
May 28, 2024 | |
|
|
| |
|
10.3 |
Depository
Agreement, incorporated by reference to Exhibit 10.3 filed with Registration Statement No. 333-158380 on December
31, 2009 | |
|
|
| |
|
10.4(a) |
Marketing
Agent Agreement, incorporated by reference to Exhibit 10.4 filed with Registration Statement No. 333-158380 on
December 31, 2009 | |
41
|
10.4(b) |
Novation
of and Amendment No. 1 to the Marketing Agent Agreement effective as of October 1, 2018, incorporated by reference
to Exhibit 10.4(b) filed with the Trusts Annual Report on Form 10-K on March 1, 2019 | |
|
|
| |
|
23.1 |
Consent of KPMG LLP, Independent Registered Public Accounting Firm | |
|
|
| |
|
31.1 |
Chief
Executive Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
|
| |
|
31.2 |
Chief
Financial Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
|
| |
|
32.1 |
Chief
Executive Officers 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 Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 | |
|
|
| |
|
97.1 |
Policy
for Recovery of Erroneously Awarded Compensation, incorporated by reference to Exhibit 97.1 filed with the Trusts
Annual Report of Form 10-K on February 29, 2024. | |
|
|
| |
|
101 |
The
following financial statements from the Trusts Annual Report on Form 10-K for the year ended December 31, 2025, formatted
in Inline XBRL: (i) Statements of Assets and Liabilities, (ii) Statements of Operations, (iii) Statements of Changes in Net
Assets, and (iv) Notes to the Financial Statements. | |
|
|
| |
|
101.SCH |
Inline
XBRL Taxonomy Extension Schema Document | |
|
|
| |
|
101.CAL |
Inline
XBRL Taxonomy Extension Calculation Document | |
|
|
| |
|
101.DEF |
Inline
XBRL Taxonomy Extension Definitions Document | |
|
|
| |
|
101.LAB |
Inline
XBRL Taxonomy Extension Labels Document | |
|
|
| |
|
101.PRE |
Inline
XBRL Taxonomy Extension Presentation Document | |
|
|
| |
|
104 |
The
cover page from the Trusts Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL
(included as Exhibit 101). | |
Item
16. Form 10-K Summary
Not
applicable.
42
ABRDN
PALLADIUM ETF TRUST
FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2025
**INDEX**
****
****
|
|
Page | |
|
|
| |
|
Report of Independent
Registered Public Accounting Firm |
F-2 | |
|
|
| |
|
Statements of Assets
and Liabilities at December 31, 2025 and 2024 |
F-4 | |
|
|
| |
|
Schedules of Investments
at December 31, 2025 and 2024 |
F-5 | |
|
|
| |
|
Statements of Operations
for the years ended December 31, 2025, 2024 and 2023 |
F-6 | |
|
|
| |
|
Statements of Changes
in Net Assets for the years ended December 31, 2025, 2024 and 2023 |
F-7 | |
|
|
| |
|
Financial Highlights
for the years ended December 31, 2025, 2024 and 2023 |
F-8 | |
|
|
| |
|
Notes to the Financial
Statements |
F-9 | |
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
*KPMG LLP
Suite 4000
1735
Market Street
Philadelphia, PA 19103-7501
To the Sponsor, Trustee and Shareholders
abrdn Palladium ETF Trust:
Auditor Opinion
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities
of abrdn Palladium ETF Trust (the Trust) including the schedules of investments, as of December 31, 2025 and December 31, 2024, the related
statements of operations and changes in net assets and the financial highlights for each of the years in the three-year period ended December
31, 2025, and the related notes (collectively, the financial statements).In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Trust as of December 31, 2025 and December 31, 2024, and the results of its operations,
changes in its net assets and financial highlights for each of the years in the three-year period ended December 31, 2025, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the Trusts internal control over financial reporting as of December
31, 2025, based oncriteria established in Internal Control Integrated Framework (2013)* issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2026 expressed an unqualified opinion on the effectiveness
of the Trusts internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Trusts
management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Trust in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which they relates.
|
|
KPMG LLP, a Delaware limited
liability partnership, and its subsidiaries are part of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. |
| |
F-2
*
Evaluation of the evidence pertaining to
the existence of the palladium holdings
As presented on the December 31, 2025 schedule of investments and in
Note 2.2, the fair value of the Trust's investment in palladium is $1,000,375 thousand, representing 96.61% of the Trust's net assets,
and 638,401.4 ounces of palladium holdings. The investment in palladium was held by a third-party
custodian (the custodian).
We identified the evaluation of the evidence pertaining to the existence
of the palladium holdings as a critical audit matter. Given the nature and volume of the palladium holdings, subjective auditor judgment
was required to evaluate the extent and nature of evidence obtained to assess the existence of palladium held by the custodian.
The following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical
audit matter. This included controls over (1) the comparison of the Trust's records of palladium held to the custodian's records, (2)
the approval of palladium deposits and withdrawals by the trustee of the Trust and (3) the physical counts of the Trust's palladium holdings
performed at the custodian's locations by a third party engaged by the Trust's sponsor. We obtained a schedule directly from the custodian
of the Trust's palladium holdings held by the custodian as of December 31, 2025. We compared the total ounces on such schedule to the
Trust's record of palladium holdings. We also attended and observed a part of the physical counts of the Trust's palladium holdings. We
obtained and read the physical counts results reports of the third party and reconciled those reports to both the Trust's and custodian's
records.
We have served as the Trusts auditor since 2015.
Philadelphia, Pennsylvania
March 2, 2026
Auditor ID: 185
F-3
**abrdn
Palladium ETF Trust**
Statements
of Assets and Liabilities
At
December 31, 2025and 2024
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
(Amounts in 000s of US$, except for Share and per Share data) | |
| | | |
| | | |
|
ASSETS | |
| | | |
| | | |
|
Investment in palladium (cost: December 31, 2025: $797,137; December 31, 2024: $490,759) | |
$ | 1,000,375 | | |
$ | 354,243 | | |
|
Palladium receivable | |
| 35,583 | | |
| | | |
|
Total assets | |
| 1,035,958 | | |
| 354,243 | | |
|
| |
| | | |
| | | |
|
LIABILITIES | |
| | | |
| | | |
|
Fees payable to Sponsor | |
| 495 | | |
| 185 | | |
|
Total liabilities | |
| 495 | | |
| 185 | | |
|
| |
| | | |
| | | |
|
NET ASSETS(1) | |
$ | 1,035,462 | | |
$ | 354,058 | | |
|
(1) |
Authorized
share capital is Unlimited with no par value per Share. Shares issued and outstanding at December 31, 2025 were 7,275,000
and at December 31, 2024 were 4,262,500. Net asset values per Share at December 31, 2025 and December 31, 2024 were $142.33
and $83.06, respectively. | |
**See
Notes to the Financial Statements**
F-4
**abrdn
Palladium ETF Trust**
Schedules
of Investments
At
December 31, 2025 and 2024
|
| |
December 31, 2025 | | |
|
Description | |
oz | | |
Cost | | |
Fair Value | | |
% of Net Assets | | |
|
Investment in palladium (in 000s of US$, except for oz and percentage data) | |
|
Palladium | |
| 638,401.4 | | |
$ | 797,137 | | |
$ | 1,000,375 | | |
| 96.61 | % | |
|
Total investment in palladium | |
| 638,401.4 | | |
$ | 797,137 | | |
$ | 1,000,375 | | |
| 96.61 | % | |
|
Other assets less liabilities | |
| | | |
| | | |
| 35,087 | | |
| 3.39 | % | |
|
Net Assets | |
| | | |
| | | |
$ | 1,035,462 | | |
| 100.00 | % | |
|
| |
December 31, 2024 | | |
|
Description | |
oz | | |
Cost | | |
Fair Value | | |
% of Net Assets | | |
|
Investment in palladium (in 000s of US$, except for oz and percentage data) | |
|
Palladium | |
| 389,706.3 | | |
$ | 490,759 | | |
$ | 354,243 | | |
| 100.05 | % | |
|
Total investment in palladium | |
| 389,706.3 | | |
$ | 490,759 | | |
$ | 354,243 | | |
| 100.05 | % | |
|
Less liabilities | |
| | | |
| | | |
| (185 | ) | |
| (0.05 | )% | |
|
Net Assets | |
| | | |
| | | |
$ | 354,058 | | |
| 100.00 | % | |
**See
Notes to the Financial Statements**
F-5
**abrdn
Palladium ETF Trust**
Statements
of Operations
For
the years ended December 31, 2025, 2024, and 2023
|
| |
Year Ended December 31, 2025 | | |
Year Ended December 31, 2024 | | |
Year Ended December 31, 2023 | | |
|
(Amounts in 000s of US$, except for Share and per Share data) | |
| | | |
| | | |
| | | |
|
EXPENSES | |
| | | |
| | | |
| | | |
|
Sponsors Fee | |
$ | 3,203 | | |
$ | 1,738 | | |
$ | 1,464 | | |
|
Total expenses | |
| 3,203 | | |
| 1,738 | | |
| 1,464 | | |
|
Net investment loss | |
| (3,203 | ) | |
| (1,738 | ) | |
| (1,464 | ) | |
|
| |
| | | |
| | | |
| | | |
|
REALIZED AND UNREALIZED GAINS / (LOSSES) | |
| | | |
| | | |
| | | |
|
Realized gain / (loss) on palladium transferred to pay expenses | |
| (227 | ) | |
| (813 | ) | |
| (579 | ) | |
|
Realized (loss) on palladium distributed for the redemption of Shares | |
| (14,375 | ) | |
| (65,743 | ) | |
| (10,746 | ) | |
|
Change in unrealized gain / (loss) on investment in palladium | |
| 339,754 | | |
| 648 | | |
| (98,593 | ) | |
|
Total gain / (loss) on investment in palladium | |
| 325,152 | | |
| (65,908 | ) | |
| (109,918 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Change in net assets from operations | |
$ | 321,949 | | |
$ | (67,646 | ) | |
$ | (111,382 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net increase / (decrease) in net assets per Share | |
$ | 65.50 | | |
$ | (21.10 | ) | |
$ | (56.28 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Weighted average number of Shares | |
| 4,915,342 | | |
| 3,205,225 | | |
| 1,979,041 | | |
**See
Notes to the Financial Statements**
F-6
**abrdn
Palladium ETF Trust**
Statements
of Changes in Net Assets
For
the years ended December 31, 2025, 2024 and 2023
|
| |
Year Ended December 31, 2025 | | |
|
(Amounts in 000s of US$, except for Share data) | |
Shares | | |
Amount | | |
|
Opening balance at January 1, 2025 | |
| 4,262,500 | | |
$ | 354,058 | | |
|
Net investment loss | |
| | | |
| (3,203 | ) | |
|
Realized (loss) on investment in palladium | |
| | | |
| (14,602 | ) | |
|
Change in unrealized gain on investment in palladium | |
| | | |
| 339,754 | | |
|
Creations | |
| 4,925,000 | | |
| 557,679 | | |
|
Redemptions | |
| (1,912,500 | ) | |
| (198,224 | ) | |
|
Closing balance at December 31, 2025 | |
| 7,275,000 | | |
$ | 1,035,462 | | |
|
| |
Year Ended December 31, 2024 | | |
|
(Amounts in 000s of US$, except for Share data) | |
Shares | | |
Amount | | |
|
Opening balance at January 1, 2024 | |
| 2,100,000 | | |
$ | 219,309 | | |
|
Net investment loss | |
| | | |
| (1,738 | ) | |
|
Realized (loss) on investment in palladium | |
| | | |
| (66,556 | ) | |
|
Change in unrealized gain on investment in palladium | |
| | | |
| 648 | | |
|
Creations | |
| 4,037,500 | | |
| 372,697 | | |
|
Redemptions | |
| (1,875,000 | ) | |
| (170,302 | ) | |
|
Closing balance at December 31, 2024 | |
| 4,262,500 | | |
$ | 354,058 | | |
|
| |
Year Ended December 31, 2023 | | |
|
(Amounts in 000s of US$, except for Share data) | |
Shares | | |
Amount | | |
|
Opening balance at January 1, 2023 | |
| 1,800,000 | | |
$ | 295,491 | | |
|
Net investment loss | |
| | | |
| (1,464 | ) | |
|
Realized (loss) on investment in palladium | |
| | | |
| (11,325 | ) | |
|
Change in unrealized (loss) on investment in palladium | |
| | | |
| (98,593 | ) | |
|
Creations | |
| 575,000 | | |
| 73,610 | | |
|
Redemptions | |
| (275,000 | ) | |
| (38,410 | ) | |
|
Closing balance at December 31, 2023 | |
| 2,100,000 | | |
$ | 219,309 | | |
**See
Notes to the Financial Statements**
F-7
**abrdn
Palladium ETF Trust**
Financial
Highlights
For
the yearsended December 31, 2025, 2024and 2023
|
| |
Year Ended December 31, 2025 | | |
Year Ended December 31, 2024 | | |
Year Ended December 31, 2023 | | |
|
Per Share Performance (for a Share outstanding throughout the entire period) | |
| | | |
| | | |
| | | |
|
Net asset value per Share at beginning of period | |
$ | 83.06 | | |
$ | 104.43 | | |
$ | 164.16 | | |
|
Income from investment operations: | |
| | | |
| | | |
| | | |
|
Net investment loss | |
| (0.65 | ) | |
| (0.54 | ) | |
| (0.74 | ) | |
|
Total realized and unrealized gains or losses on investment in palladium | |
| 59.92 | | |
| (20.83 | ) | |
| (58.99 | ) | |
|
Change in net assets from operations | |
| 59.27 | | |
| (21.37 | ) | |
| (59.73 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net asset value per Share at end of period | |
$ | 142.33 | | |
$ | 83.06 | | |
$ | 104.43 | | |
|
| |
| | | |
| | | |
| | | |
|
Weighted average number of Shares | |
| 4,915,342 | | |
| 3,205,225 | | |
| 1,979,041 | | |
|
| |
| | | |
| | | |
| | | |
|
Expense ratio | |
| 0.60 | % | |
| 0.60 | % | |
| 0.60 | % | |
|
| |
| | | |
| | | |
| | | |
|
Net investment loss ratio | |
| (0.60 | )% | |
| (0.60 | )% | |
| (0.60 | )% | |
|
| |
| | | |
| | | |
| | | |
|
Total return, net asset value | |
| 71.36 | % | |
| (20.46 | )% | |
| (36.39 | )% | |
|
| |
| | | |
| | | |
| | | |
**See
Notes to the Financial Statements**
F-8
abrdn
Palladium ETF Trust
Notes
to the Financial Statements
|
1. | Organization |
|
The
abrdn Palladium ETF Trust (the Trust) is a common law trust formed on December 30, 2009 under New York law pursuant to
a depositary trust agreement (the Trust Agreement) executed by abrdn ETFs Sponsor LLC (the Sponsor) and The
Bank of New York Mellon as Trustee (the Trustee). The Trust holds palladium and effective June 18, 2024, issues abrdn Physical
Palladium Shares ETF (Shares) in minimum blocks of 12,500
Shares (also referred to as Baskets) in exchange
for deposits of palladium and distributes palladium in connection with the redemption of Baskets. The number of Shares in a block that constitutes a Basket for the purposes of creation and redemptions in the Trust was reduced from 50,000
to 25,000 effective April 1, 2019, and reduced from 25,000 to 12,500 effective June 18, 2024. 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 abrdn Inc., which is a wholly-owned indirect subsidiary of Aberdeen Group plc. 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 physical palladium, less the Trusts
expenses. The Trust is designed to provide an individual owner of beneficial interests in the Shares (a Shareholder)
an opportunity to participate in the palladium market through an investment in securities.
|
2. | Significant
Accounting Policies |
|
The
preparation of financial statements in accordance with U.S. GAAP 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 |
|
The
Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 946, Financial ServicesInvestment Companies*, and has concluded that for
reporting purposes, the Trust is classified as an Investment Company. 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.
|
2.2. | Valuation
of Palladium |
|
The
Trust follows the provisions of ASC 820, *Fair Value Measurement* (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.
At
the Evaluation Time, the Trustee will value the Trusts palladium on the basis of the London Bullion Market Association
("LBMA") Palladium Price PM. If there is no LBMA Palladium Price PM on any day, the Trustee is authorized to use the
LBMA Palladium Price AM announced on that day. If neither price is available for that day, the Trustee will value the Trusts
palladium based on the most recently announced LBMA Palladium Price PM or LBMA Palladium Price AM. Realized gains and losses on
transfers of palladium, or palladium distributed for the redemption of Shares, are calculated on a trade date basis as the difference
between the fair value and average cost of palladium transferred.
F-9
abrdn
Palladium ETF Trust
Notes
to the Financial Statements
The
LME is responsible for the administration of the electronic palladium price fixing system (LMEbullion) that
replicates electronically the manual London palladium fix processes previously employed by the London Platinum and Palladium
Fixing Company Ltd (LPPFCL), as well as providing electronic market clearing processes for palladium bullion
transactions at the fixed prices established by the LME pricing mechanism. LMEbullion, like the previous London palladium fix
processes, establishes and publishes fixed prices for troy ounces of palladium twice each London trading day during fixing
sessions beginning at 9:45 a.m. London time (the LBMA Palladium Price AM) and 2:00 p.m. London time (the
LBMA Palladium Price PM).
Once
the value of palladium 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 Sponsors
Fee), from the fair value of the palladium and all other assets held by the Trust.
The
Trust recognizes changes in fair value of the investment in palladium as changes in unrealized gains or losses on investment in
palladium through the Statement of Operations.
The
per Share amount of palladium exchanged for a purchase or redemption is calculated daily by the Trustee using the LBMA Palladium
Price PM to calculate the palladium amount in respect of any liabilities for which covering palladium sales have not yet been
made, and represents the per Share amount of palladium 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*
ASC
820 establishes 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 Trust 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 Trusts 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.
F-10
**abrdn
Palladium ETF Trust**
Notes
to the Financial Statements
The
Trusts investment in palladium is classified as a level 1 asset, as its value is calculated using unadjusted quoted prices
from primary market sources.
The categorization of the Trusts assets is as shown below:
|
(Amounts
in 000s of US$) | |
December 31, 2025 | | |
December 31, 2024 | | |
|
Level 1 | |
| | | |
| | | |
|
Investment in palladium | |
$ | 1,000,375 | | |
$ | 354,243 | | |
There were no transfers between levels during the years ended December 31, 2025 and 2024.
|
2.3. | Palladium
Receivable and Payable |
|
Palladium
receivable or payable represents the quantity of palladium covered by contractually binding orders for the creation or
redemption of Shares respectively, where the palladium has not yet been transferred to or from the Trusts account.
Generally, ownership of palladium is transferred within one business days of the trade date. At December 31, 2025, the Trust
had $35,582,903 of palladium receivable for the creation of Shares and no palladium payable for the redemption of
Shares. At December 31, 2024, the Trust had no palladium receivable or payable for the creation or redemption of Shares.
|
2.4. | Creations
and Redemptions of Shares | |
The
Trust expects to create and redeem Shares from time to time, but only in one or more Baskets (a Basket equals a block of 12,500 Shares). The Trust issues Shares in Baskets
to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with
the Trust. An Authorized Participant is a person who (1) is 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 Trusts Custodian or other
palladium 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
palladium required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated palladium
account established with the Custodian or a palladium 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 palladium 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.
Authorized
Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. Effective May
28, 2024, the settlement period for Shares is one business day. Prior to May 28, 2024, the standard settlement period for Shares
was two 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 palladium is exchanged in settlement of a redemption, it is considered a sale of palladium
for financial statement purposes.
F-11
abrdn
Palladium ETF Trust
Notes
to the Financial Statements
The
amount of palladium represented by the Baskets created or redeemed can only be settled to the nearest 1/1000th of an ounce. As
a result, the value attributed to the creation or redemption of Shares may differ from the value of palladium to be delivered
or distributed by the Trust. In order to ensure that the correct amount of palladium is available at all times to back the Shares,
the Sponsor accepts an adjustment to its Sponsors Fee in the event of any shortfall or excess on each transaction. For
each transaction, this amount is not more than 1/1000th of an ounce of palladium.
As
the Shares of the Trust are subject to redemption at the option of Authorized Participants, the Trust has classified the outstanding
Shares as Net Assets. Changes in the number of Shares outstanding are presented in the Statement of Changes in Net Assets.
|
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 Trusts income and expenses will flow through to the
Shareholders, and the Trustee will report the Trusts 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 December 31, 2025 or December 31, 2024.
|
2.6. | Investment
in Palladium |
|
Changes
in ounces of palladium and their respective values for the years ended December 31, 2025 and 2024 are set out below:
|
| |
Year Ended December 31, 2025 | | |
Year Ended December
31, 2024 | | |
|
(Amounts in 000s of US$, except for ounces data) | |
| | | |
| | | |
|
Ounces of palladium | |
| | | |
| | | |
|
Opening balance | |
| 389,706.3 | | |
| 193,152.2 | | |
|
Creations | |
| 425,582.2 | | |
| 369,832.6 | | |
|
Redemptions | |
| (174,310.0 | ) | |
| (171,620.1 | ) | |
|
Transfers of palladium to pay expenses | |
| (2,577.1 | ) | |
| (1,658.4 | ) | |
|
Closing balance | |
| 638,401.4 | | |
| 389,706.3 | | |
|
| |
| | | |
| | | |
|
Investment in palladium | |
| | | |
| | | |
|
Opening balance | |
$ | 354,243 | | |
$ | 219,421 | | |
|
Creations | |
| 522,096 | | |
| 372,697 | | |
|
Redemptions | |
| (198,224 | ) | |
| (170,302 | ) | |
|
Realized (loss) / gain on palladium distributed for the redemption of Shares | |
| (14,375 | ) | |
| (65,743 | ) | |
|
Transfers of palladium to pay expenses | |
| (2,892 | ) | |
| (1,665 | ) | |
|
Realized gain on palladium transferred to pay expenses | |
| (227 | ) | |
| (813 | ) | |
|
Change in unrealized gain/(loss) on investment in palladium | |
| 339,754 | | |
| 648 | | |
|
Closing balance | |
$ | 1,000,375 | | |
$ | 354,243 | | |
F-12
abrdn
Palladium ETF Trust
Notes
to the Financial Statements
|
2.7. | Expenses
/ Realized Gains / Losses |
|
The
primary expense of the Trust is the Sponsors Fee, which is paid by the Trust through in-kind transfers of palladium to
the Sponsor.
The
Trust will transfer palladium to the Sponsor to pay the Sponsors Fee that accrues daily at an annualized rate equal to
0.60% of the adjusted daily net asset value (ANAV) of the Trust, paid monthly in arrears.
The
Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustees monthly
fee and out of pocket expenses, the Custodians fee and the reimbursement of the Custodians expenses, exchange listing
fees, United States Securities and Exchange Commission (the SEC) registration fees, printing and mailing costs,
audit fees and up to $100,000 per annum in legal expenses.
For
the years ended December 31, 2025, 2024 and 2023, the Sponsors Fee was $3,203,228, $1,737,833 and $1,464,063, respectively.
At December 31, 2025 and at December 31, 2024, the fees payable to the Sponsor were $495,411 and $185,243, respectively.
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 Trusts palladium as necessary to pay these expenses. When selling palladium to pay expenses, the Trustee will
endeavor to sell the smallest amounts of palladium needed to pay these expenses in order to minimize the Trusts holdings
of assets other than palladium. Other than the Sponsors Fee, the Trust had no expenses during the years ended December
31, 2025 and 2024.
Unless
otherwise directed by the Sponsor, when selling palladium the Trustee will endeavor to sell at the price established by the LBMA
Palladium Price PM. 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 palladium only if the
sale transaction is made at the next LBMA Palladium Price PM or such other publicly available price that the Sponsor deems fair,
in each case as set following the sale order. A gain or loss is recognized based on the difference between the selling price and
the average cost of the palladium sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason
of any sale.
Realized
gains and losses result from the transfer of palladium for Share redemptions and / or to pay expenses and are recognized on a
trade date basis as the difference between the fair value and average cost of palladium transferred.
|
2.8. | Segment
Reporting |
|
Adoption of the new standard impacted disclosures only and did
not affect the Trusts financial position nor the results of its operations. Operating segments are components of a public entity
that engage in business activities from which it may recognize revenues and incur expenses, have discrete financial information
available, and have their operating results regularly reviewed by the public entitys chief operating decision maker (CODM)
when assessing segment performance and making decisions about segment resources. The Chief Financial Officer of the Sponsor acts
as the Trusts CODM. The CODM monitors the operating results of the Trust as a whole, and the Trusts asset allocation is managed
in accordance with its Prospectus. The Trust operates as a single operating and reporting segment pursuant to its investment objective
and principal investment strategy. The Trusts prospectus describes the Trusts fees, investment objective, principal investment
strategy and principal risks, among other items. The Trusts portfolio composition, total returns, expense ratios and changes in
net assets used by the CODM to assess segment performance and make resource allocations are consistent with the information presented
within the Trusts financial statements. The accompanying financial statements detail the Trusts segment assets, liabilities,
revenues, and expenses. Segment assets are reflected on the Trusts Statement of Assets and Liabilities as Total Assets
and significant segment expenses are listed on the Statement of Operations.
|
2.9. | Subsequent
Events |
|
In
accordance with the provisions set forth in FASB ASC 855-10, *Subsequent Events*, the Trusts management has evaluated
the possibility of subsequent events impacting the Trusts financial statements through the filing date. During this period,
no material subsequent events requiring adjustment to or disclosure in the financial statements were identified.
F-13
abrdn
Palladium ETF Trust
Notes
to the Financial Statements
|
3. | Related
Parties |
|
The
Sponsor and the Trustee are considered to be related parties to 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 palladium directly, for their own account, as agent for their customers and for accounts
over which they exercise investment discretion. The Trustees and Custodians fees are paid by the Sponsor and are
not separate expenses of the Trust.
|
4. | Concentration
of Risk |
|
The
Trusts sole business activity is the investment in palladium, and substantially all the Trusts assets are holdings
of palladium, which creates a concentration of risk associated with fluctuations in the price of palladium. Several factors could
affect the price of palladium, including: (i) global palladium supply and demand, which is influenced by factors such as production
and cost levels in major palladium-producing countries, recycling, autocatalyst demand, industrial demand, jewelry demand, investment
demand, and sales of existing stockpiles of palladium, which have been a key source of supply and are likely to be exhausted soon,
placing a higher burden on new mine supply; (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 palladium will maintain
its long-term value in terms of purchasing power in the future. In the event that the price of palladium 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 Trusts financial position and results of operations.
|
5. | Indemnification |
|
Under
the Trusts 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, willful misconduct or willful malfeasance on its part and without reckless disregard
on its part of its obligations and duties under the Trusts organizational documents. The Trusts 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.
F-14
ABRDN
PALLADIUM ETF TRUST
**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.
|
|
| |
|
|
abrdn ETFs Sponsor LLC | |
|
|
| |
|
Date:
March 2, 2026 |
/s/ Steven Dunn* | |
|
|
Steven Dunn ** | |
|
|
President and Chief Executive Officer
(Principal
Executive Officer) | |
|
|
| |
|
Date:
March 2, 2026 |
/s/ Sharon Ferrari* | |
|
|
Sharon Ferrari ** | |
|
|
Chief Financial Officer and Treasurer | |
|
|
(Principal Financial Officer and Principal Accounting
Officer) | |
|
* | The
originally executed copy of this Certification will be maintained at the Sponsors
offices and will be made available for inspection upon request. |
|
|
** | The
Registrant is a trust and the persons are signing in their capacities as officers of
abrdn ETFs Sponsor LLC, the Sponsor of the Registrant. |
|
**Exhibit Index**
|
Exhibit
No. |
|
Description | |
|
23.1 |
|
Consent of KPMG LLP, Independent Registered Public Accounting Firm |
|
|
31.1 |
|
Chief Executive Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
31.2 |
|
Chief Financial Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
32.1 |
|
Chief Executive Officers 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 Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
|
101 |
|
The following financial statements from the
Trusts Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL: (i) Statements of
Assets and Liabilities, (ii) Statements of Operations, (iii) Statements of Changes in Net Assets, and (iv) Notes to the Financial
Statements. | |
|
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 | |
|
104 |
|
The cover page from the Trusts Annual
Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL (included as Exhibit 101). | |