8. Financial Highlights Per Share Performance
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
|
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net asset value, beginning of period |
| $ | 13.09 |
|
| $ | 11.60 |
|
| $ | 13.03 |
|
| $ | 3.88 |
|
| $ | 4.80 |
|
| $ | 13.86 |
|
| $ | 4.61 |
|
| $ | 13.03 |
|
Net (decrease) increase in net assets from investment operations: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net increase (decrease) in net assets from investment operations: |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Net investment loss |
|
| (0.07 | ) |
|
| (0.10 | ) |
|
| (0.27 | ) |
|
| (0.23 | ) |
|
| (0.04 | ) |
|
| (0.11 | ) |
|
| (0.07 | ) |
|
| (0.20 | ) |
Net realized and unrealized (loss) gain |
|
| (1.80 | ) |
|
| 6.39 |
|
|
| (1.54 | ) |
|
| 14.24 |
| ||||||||||||||||
Net (decrease) increase in net assets resulting from operations |
|
| (1.87 | ) |
|
| 6.29 |
|
|
| (1.81 | ) |
|
| 14.01 |
| ||||||||||||||||
Net realized and unrealized gain (loss) |
|
| 1.47 |
|
|
| (0.66 | ) |
|
| 1.69 |
|
|
| 0.26 |
| ||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
|
| 1.43 |
|
|
| (0.77 | ) |
|
| 1.62 |
|
|
| 0.06 |
| ||||||||||||||||
Net asset value, end of period |
| $ | 11.22 |
|
| $ | 17.89 |
|
| $ | 11.22 |
|
| $ | 17.89 |
|
| $ | 6.23 |
|
| $ | 13.09 |
|
| $ | 6.23 |
|
| $ | 13.09 |
|
Total return |
|
| -46.48 | % |
|
| 479.51 | % |
|
| -18.06 | % |
|
| 666.00 | % |
|
| 29.79 | % |
|
| -5.56 | % |
|
| 35.14 | % |
|
| 0.46 | % |
Ratios to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment loss |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
Expenses |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
|
| -2.50 | % |
Ratios of net investment loss and expenses to average net assets have been annualized.
An individual shareholder’s return, ratios, and per Share performance may vary from those presented above based on the timing of Share transactions. The amount shown for a Share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the number of Shares issued in Creations occurring at an operational value derived from an operating metric as defined in the Trust Agreement.
Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and assuming redemption on the last day of the period and has been annualized.period.
9. Indemnifications
In the normal course of business, the Trust enters into certain contracts that provide a variety of indemnities, including contracts with the Sponsor and affiliates of the Sponsor, DCG and its officers, directors, employees, subsidiaries and affiliates, and the Custodian as well as others relating to services provided to the Trust. The Trust’s maximum exposure under these and its other indemnities is unknown. However, no liabilities have arisen under these indemnities in the past and, while there can be no assurances in this regard, there is no expectation that any will occur in the future. Therefore, the Sponsor does not consider it necessary to record a liability in this regard.
14
10. Subsequent Events
As of the close of business on MayFebruary 2, 2022,2023, the fair value of LTC determined in accordance with the Trust’s accounting policy was $100.57100.27 per LTC.
There are no known events that have occurred that require disclosure other than that which has already been disclosed in these notes to the financial statements.
1415
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our unaudited financial statements and related notes included elsewhere in this Quarterly Report, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The following discussion may contain forward-looking statements based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those set forth under Part“Part II, Item 1A. Risk FactorsFactors” in this Quarterly Report, or in “Part I, Item 1A. Risk Factors” and under “Risk Factors”“Forward-Looking Statements” or the other sections of our Annual Report on Form 10-K for the Information Statement.year ended June 30, 2022.
Trust Overview
The Trust is a passive entity that is managed and administered by the Sponsor and does not have any officers, directors or employees. The Trust holds LTC and, from time to time on a periodic basis, issues Creation Baskets in exchange for deposits of LTC. As a passive investment vehicle, the Trust’s investment objective is for the value of the Shares (based on LTC per Share) to reflect the value of LTC held by the Trust, determined by reference to the index price (the “Index Price”) of an LTC in U.S. dollars calculated by applying a weighting algorithm to the price and trading volume data for the immediately preceding 24-hour period as of 4:00 p.m. New York time derived from the selected digital asset exchanges that are reflected in the Index on such trade date,Price, less the Trust’s expenses and other liabilities. To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of LTC held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, which at times have been substantial. The Trust is not managed like a business corporation or an active investment vehicle.
Critical Accounting Policies and Estimates
Investment Transactions and Revenue Recognition
The Trust considers investment transactions to be the receipt of LTC for Share creations and the delivery of LTC for Share redemptions or for payment of expenses in LTC. At this time, the Trust is not accepting redemption requests from shareholders. The Trust records its investment transactions on a trade date basis and changes in fair value are reflected as net change in unrealized appreciation or depreciation on investments. Realized gains and losses are calculated using the specific identification method. Realized gains and losses are recognized in connection with transactions including settling obligations for the Sponsor’s Fee in LTC.
Principal Market and Fair Value Determination
To determine which market is the Trust’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of calculating the Trust’s NAV,net asset value (“NAV”), the Trust follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, which outlines the application of fair value accounting. ASC 820-10 determines fair value to be the price that would be received for LTC in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Trust to assume that LTC is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
Effective October 3, 2022, the Sponsor entered into a Participant Agreement with Grayscale Securities, a wholly owned subsidiary of the Sponsor and an affiliate and related party of the Trust, pursuant to which Grayscale Securities has agreed to act as an Authorized Participant of the Trust. The Participant Agreement provides the procedures for the creation of Shares of the Trust through the Authorized Participant, which are substantially similar to the procedures for the creation of Shares set forth in the Trust’s prior participant agreement with Genesis, except that the Authorized Participant may engage a Liquidity Provider to source LTC on behalf of the Authorized Participant in connection with the creation of Shares. Since October 3, 2022, Grayscale Securities is the only acting Authorized Participant of the Trust. Grayscale Securities has engaged Genesis as a Liquidity Provider. Additional Authorized Participants may be added at any time, subject to the discretion of the Sponsor.
The Trust only receives LTC in connection with a creation order from the Authorized Participant (or its Liquidity Provider) and does not itself transact on any Digital Asset Markets. Therefore, the Trust looks to the Authorized Participant when assessing entity-specific and market-based volume and level of activity for Digital Asset Markets. The Trust, through its Authorized Participant transactsParticipant(s), or a Liquidity Provider on behalf of the Authorized Participant(s), may transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB ASC Master Glossary. The Authorized Participant, as a related party of the Sponsor, provides information about the Digital Asset Markets on which it transacts to the Trust. In determining which of the eligible Digital Asset Markets is the Trust’s principal market, the Trust reviews these criteria in the following order:
16
15
The Trust determines its principal market (or in the absence of a principal market the most advantageous market) annually and conducts a quarterly analysis to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume and level of activity in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Trust has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Trust’s determination of its principal market.
The cost basis of the investmentLTC received in LTCconnection with a creation order is recorded by the Trust for financial reporting purposes isat the fair value of LTC at 4:00 p.m., New York time, on the time of transfer.creation date for financial reporting purposes. The cost basis recorded by the Trust may differ from proceeds collected by the Authorized Participant from the sale of the corresponding Shares to investors.
Investment Company Considerations
The Trust is an investment company for GAAP purposes and follows accounting and reporting guidance in accordance with the FASB ASC Topic 946, Financial Services – Investment Companies. The Trust uses fair value as its method of accounting for LTC in accordance with its classification as an investment company for accounting purposes. The Trust is not a registered investment company under the Investment Company Act of 1940. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.
Review of Financial Results (unaudited)
Financial Highlights for the Three and NineSix Months Ended MarchDecember 31, 2022 and 2021
(All amounts in the following table and the subsequent paragraphs, except Share, and per Share, LTC and price of LTC amounts, are in thousands)
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net realized and unrealized (loss) gain on investment in Litecoin |
| $ | (31,031 | ) |
| $ | 89,844 |
|
| $ | (26,099 | ) |
| $ | 157,015 |
|
Net (decrease) increase in net assets resulting from operations |
| $ | (32,189 | ) |
| $ | 88,378 |
|
| $ | (30,678 | ) |
| $ | 155,069 |
|
Net assets |
| $ | 193,015 |
|
| $ | 290,569 |
|
| $ | 193,015 |
|
| $ | 290,569 |
|
|
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net realized and unrealized gain (loss) on investment in LTC |
| $ | 25,230 |
|
| $ | (11,407 | ) |
| $ | 28,993 |
|
| $ | 4,932 |
|
Net increase (decrease) in net assets resulting from operations |
| $ | 24,619 |
|
| $ | (13,267 | ) |
| $ | 27,833 |
|
| $ | 1,511 |
|
Net assets |
| $ | 107,230 |
|
| $ | 225,204 |
|
| $ | 107,230 |
|
| $ | 225,204 |
|
Net realized and unrealized gain on investment in LTC for the three months ended December 31, 2022 was $25,230, which includes a realized loss of ($290) on the transfer of LTC to pay the Sponsor’s Fee, and net change in unrealized appreciation on investment in LTC of $25,520. Net realized and unrealized gain on investment in LTC for the period was driven by LTC price appreciation from $53.85 per LTC as of September 30, 2022, to $70.34 per LTC as of December 31, 2022. Net increase in net assets resulting from operations was $24,619 for the three months ended December 31, 2022, which consisted of the net realized and unrealized gain on investment in LTC, less the Sponsor’s Fee of $611. Net assets increased to $107,230 at December 31, 2022, a 30% increase for the three-month period. The increase in net assets resulted from the aforementioned LTC price appreciation, partially offset by the withdrawal of approximately 9,637 LTC to pay the foregoing Sponsor’s Fee.
Net realized and unrealized loss on investment in LTC for the three months ended MarchDecember 31, 20222021 was ($31,031)11,407), which includes a realized gain of $260$937 on the transfer of LTC to pay the Sponsor’s Fee, and net change in unrealized depreciation on investment
17
in LTC of ($31,291)12,344). Net realized and unrealized loss on investment in LTC for the period was driven by LTC price depreciation from $151.61 per LTC as of September 30, 2021, to $144.08 per LTC as of December 31, 2021 to $124.25 per LTC as of March 31, 2022.2021. Net decrease in net assets resulting from operations was ($32,189)13,267) for the three months ended MarchDecember 31, 2022,2021, which consisted of the net realized and unrealized loss on investment in LTC, plus the Sponsor’s Fee of $1,158.$1,860. Net assets decreased to $193,015$225,204 at MarchDecember 31, 2022,2021, a 14%6% decrease for the three-month period. The decrease in net assets resulted from the aforementioned LTC price depreciation and the withdrawal of approximately 9,6069,881 LTC to pay the foregoing Sponsor’s Fee.
Net realized and unrealized gain on investment in LTC for the threesix months ended MarchDecember 31, 20212022 was $89,844$28,993, which includes a realized gainloss of $800($647) on the transfer of LTC to pay the Sponsor’s Fee, and net change in unrealized appreciation on investment in LTC of $89,044.$29,640. Net realized and unrealized gain on investment in LTC for the period was driven by LTC price appreciation from $124.49$51.43 per LTC as of June 30, 2022, to $70.34 per LTC as of December 31, 2022. Net increase in net assets resulting from operations was $27,833 for the six months ended December 31, 2022, which consisted of the net realized and unrealized gain on investment in LTC, less the Sponsor’s Fee of $1,160. Net assets increased to $107,230 at December 31, 2022, a 35% increase for the six-month period. The increase in net assets resulted from the aforementioned LTC price appreciation, partially offset by the withdrawal of approximately 19,335 LTC to pay the foregoing Sponsor’s Fee.
Net realized and unrealized gain on investment in LTC for the six months ended December 31, 2021 was $4,932, which includes a realized gain of $1,576 on the transfer of LTC to $193.22pay the Sponsor’s Fee, and net change in unrealized appreciation on investment in LTC of $3,356. Net realized and unrealized gain on investment in LTC for the period was driven by LTC price appreciation from $141.61 per LTC as of MarchJune 30, 2021, to $144.08 per LTC as of December 31, 2021. Net increase in net assets resulting from operations was $88,378$1,511 for the threesix months ended MarchDecember 31, 2021, which consisted of the net realized and unrealized gain on investment in LTC, less the Sponsor’s Fee of $1,466.$3,421. Net assets increased to $290,569$225,204 at MarchDecember 31, 2021, a 102%3% increase for the three-monthsix-month period. The increase in net assets resulted from the aforementioned LTC price appreciation and the contribution of approximately 357,788 LTC with a value of $58,486 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 8,311 LTC to pay the foregoing Sponsor’s Fee.
Net realized and unrealized loss on investment in LTC for the nine months ended March 31, 2022 was ($26,099) which includes a realized loss of $1,836 on the transfer of LTC to pay the Sponsor’s Fee and net change in unrealized depreciation on investment in LTC of ($27,935). Net realized and unrealized loss on investment in LTC for the period was driven by LTC price depreciation from $141.61 per LTC as of June 30, 2021 to $124.25 per LTC as of March 31, 2022. Net decrease in net assets resulting from operations
16
was ($30,678) for the nine months ended March 31, 2022, which consisted of the net realized and unrealized loss on investment in LTC, plus the Sponsor’s Fee of $4,579. Net assets decreased to $193,015 at March 31, 2022, a 12% decrease for the nine-month period. The decrease in net assets resulted from the aforementioned LTC price depreciation and and the withdrawal of approximately 29,371 LTC to pay the foregoing Sponsor’s Fee, partially offset by the contribution of approximately 36,070 LTC with a value of $4,659 to the Trust in connection with Share creations during the period.
Net realized and unrealized gain on investment in LTC for the nine months ended March 31, 2021 was $157,015 which includes a realized gain of $902 on the transfer of LTC to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in LTC of $156,113. Net realized and unrealized gain on investment in LTC for the period was driven by LTC price appreciation from $41.15 per LTC as of June 30, 2020 to $193.22 per LTC as of March 31, 2021. Net increase in net assets resulting from operations was $155,069 for the nine months ended March 31, 2021, which consisted of the net realized and unrealized gain on investment in LTC, less the Sponsor’s Fee of $1,946. Net assets increased to $290,569 at March 31, 2021, a 14595% increase for the nine-month period. The increase in net assets resulted from the LTC price appreciation and the contribution of approximately 1,470,824 LTC with a value of $133,523 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 15,05019,765 LTC to pay the foregoing Sponsor’s Fee.
Cash Resources and Liquidity
The Trust has not had a cash balance at any time since inception. When selling LTC, Incidental Rights and/or IR Virtual Currency in the Digital Asset Market to pay Additional Trust Expenses on behalf of the Trust, the Sponsor endeavors to sell the exact number of LTC, Incidental Rights and/or IR Virtual Currency needed to pay expenses in order to minimize the Trust’s holdings of assets other than LTC. As a consequence, the Sponsor expects that the Trust will not record any cash flow from its operations and that its cash balance will be zero at the end of each reporting period. Furthermore, the Trust is not a party to any off-balance sheet arrangements.
In exchange for the Sponsor’s Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the periods covered by this Quarterly Report was the Sponsor’s Fee. The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs.
Selected Operating Data
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| |||||||||||||||||||||||||||
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| (All LTC balances are rounded to the nearest whole LTC) |
| |||||||||||||||||
LTC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Opening balance |
|
| 1,563,044 |
|
|
| 1,154,349 |
|
|
| 1,546,739 |
|
|
| 48,052 |
|
|
| 1,534,088 |
|
|
| 1,572,925 |
|
|
| 1,543,786 |
|
|
| 1,546,739 |
|
Creations |
|
| - |
|
|
| 357,788 |
|
|
| 36,070 |
|
|
| 1,470,824 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 36,070 |
|
Sponsor's Fee, related party |
|
| (9,606 | ) |
|
| (8,311 | ) |
|
| (29,371 | ) |
|
| (15,050 | ) |
|
| (9,637 | ) |
|
| (9,881 | ) |
|
| (19,335 | ) |
|
| (19,765 | ) |
Closing balance |
|
| 1,553,438 |
|
|
| 1,503,826 |
|
|
| 1,553,438 |
|
|
| 1,503,826 |
|
|
| 1,524,451 |
|
|
| 1,563,044 |
|
|
| 1,524,451 |
|
|
| 1,563,044 |
|
Accrued but unpaid Sponsor's Fee, related party |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net closing balance |
|
| 1,553,438 |
|
|
| 1,503,826 |
|
|
| 1,553,438 |
|
|
| 1,503,826 |
|
|
| 1,524,451 |
|
|
| 1,563,044 |
|
|
| 1,524,451 |
|
|
| 1,563,044 |
|
Number of Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Opening balance |
|
| 17,204,700 |
|
|
| 12,392,400 |
|
|
| 16,812,000 |
|
|
| 509,400 |
|
|
| 17,204,700 |
|
|
| 17,204,700 |
|
|
| 17,204,700 |
|
|
| 16,812,000 |
|
Creations |
|
| - |
|
|
| 3,851,600 |
|
|
| 392,700 |
|
|
| 15,734,600 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 392,700 |
|
Closing balance |
|
| 17,204,700 |
|
|
| 16,244,000 |
|
|
| 17,204,700 |
|
|
| 16,244,000 |
|
|
| 17,204,700 |
|
|
| 17,204,700 |
|
|
| 17,204,700 |
|
|
| 17,204,700 |
|
|
| As of March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Price of LTC on principal market (1) |
| $ | 124.25 |
|
| $ | 193.22 |
|
NAV per Share (2) |
| $ | 11.22 |
|
| $ | 17.89 |
|
Index Price (3) |
| $ | 124.36 |
|
| $ | 193.39 |
|
Digital Asset Holdings per Share using Index Price (3) |
| $ | 11.23 |
|
| $ | 17.90 |
|
18
|
| As of December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Price of LTC on principal market(1) |
| $ | 70.34 |
|
| $ | 144.08 |
|
NAV per Share(2) |
| $ | 6.23 |
|
| $ | 13.09 |
|
Index Price |
| $ | 70.35 |
|
| $ | 144.08 |
|
Digital Asset Holdings per Share(3) |
| $ | 6.23 |
|
| $ | 13.09 |
|
17
For accounting purposes, the Trust reflects creations and the LTC receivable with respect to such creations on the date of receipt of a notification of a creation but does not issue Shares until the requisite number of LTC is received. At this time, the Trust is not accepting redemption requests from shareholders. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program. The Trust currently has no intention of seeking regulatory approval to operate an ongoing redemption program.
As of MarchDecember 31, 2022, the Trust had a net closing balance with a value of $193,185,586,$107,245,141, based on the Index Price (non-GAAP methodology). As of MarchDecember 31, 2022, the Trust had a total market value of $193,014,707,$107,229,896, based on the principal market (Coinbase Pro).
As of MarchDecember 31, 2021, the Trust had a net closing balance with a total value of $290,824,928,$225,203,406, based on the Index Price (non-GAAP methodology). As of MarchDecember 31, 2021, the Trust had a total market value of $290,569,278,$225,203,406, based on the principal market (Coinbase Pro).
Historical Digital Asset Holdings and LTC Prices
As movements in the price of LTC will directly affect the price of the Shares, investors should understand recent movements in the price of LTC. Investors, however, should also be aware that past movements in the LTC price are not indicators of future movements. Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world.
19
The following chart illustrates the movement in the Index Price, the Trust’s Digital Asset Holdings per Share based onversus the Index Price and the Trust’s NAV per Share as calculated in accordance with GAAP from March 1, 2018 (date of the first Creation Basket of the Trust) to March December 31, 2022.
The following table illustrates the movements in the Index Price from the beginning of the Trust’s operations on March 1, 2018 to MarchDecember 31, 2022. Since the beginning of the Trust’s operations, the Index Price has ranged from $22.48 to $371.71, with the straight average being $101.27.$95.91 through December 31, 2022. The Sponsor has not observed a material difference between the Index Price and average prices from the constituent Digital Asset Exchanges individually or as a group.
18
|
|
|
|
| High |
| Low |
|
|
|
|
|
| |||||||||||
Period |
| Average |
|
| Index Price |
|
| Date |
| Index Price |
|
| Date |
| End of period |
|
| Last business day |
| |||||
March 1, 2018 (the first Creation Basket of the Trust) to March 31, 2018 |
| $ | 168.40 |
|
| $ | 213.58 |
|
| 3/1/2018 |
| $ | 115.75 |
|
| 3/30/2018 |
| $ | 119.70 |
|
| $ | 118.16 |
|
Twelve months ended March 31, 2019 |
| $ | 69.47 |
|
| $ | 179.32 |
|
| 5/5/2018 |
| $ | 22.48 |
|
| 12/14/2018 |
| $ | 60.23 |
|
| $ | 60.95 |
|
Twelve months ended March 31, 2020 |
| $ | 72.28 |
|
| $ | 142.00 |
|
| 6/22/2019 |
| $ | 32.16 |
|
| 3/16/2020 |
| $ | 39.05 |
|
| $ | 39.05 |
|
Twelve months ended March 31, 2021 |
| $ | 85.26 |
|
| $ | 239.43 |
|
| 2/19/2021 |
| $ | 37.57 |
|
| 4/1/2020 |
| $ | 193.39 |
|
| $ | 193.39 |
|
Twelve months ended March 31, 2022 |
| $ | 172.47 |
|
| $ | 371.71 |
|
| 5/11/2021 |
| $ | 97.36 |
|
| 3/7/2022 |
| $ | 124.36 |
|
| $ | 124.36 |
|
March 1, 2018 (the first Creation Basket of the Trust) to March 31, 2022 | �� | $ | 101.27 |
|
| $ | 371.71 |
|
| 5/11/2021 |
| $ | 22.48 |
|
| 12/14/2018 |
| $ | 124.36 |
|
| $ | 124.36 |
|
|
|
|
|
| High |
| Low |
|
|
|
|
|
| |||||||||||
Period |
| Average |
|
| Index Price |
|
| Date |
| Index Price |
|
| Date |
| End of period |
|
| Last business day |
| |||||
March 1, 2018 (the inception of the Trust's operations) to December 31, 2018 |
| $ | 87.05 |
|
| $ | 213.58 |
|
| 3/1/2018 |
| $ | 22.48 |
|
| 12/14/2018 |
| $ | 29.87 |
|
| $ | 29.87 |
|
Twelve months ended December 31, 2019 |
| $ | 69.24 |
|
| $ | 142.00 |
|
| 6/22/2019 |
| $ | 29.96 |
|
| 1/13/2019 |
| $ | 40.99 |
|
| $ | 40.99 |
|
Twelve months ended December 31, 2020 |
| $ | 56.14 |
|
| $ | 133.63 |
|
| 12/26/2020 |
| $ | 32.16 |
|
| 3/16/2020 |
| $ | 124.33 |
|
| $ | 124.33 |
|
Twelve months ended December 31, 2021 |
| $ | 185.76 |
|
| $ | 371.71 |
|
| 5/11/2021 |
| $ | 108.80 |
|
| 7/20/2021 |
| $ | 144.08 |
|
| $ | 144.08 |
|
Twelve months ended December 31, 2022 |
| $ | 80.06 |
|
| $ | 151.26 |
|
| 1/2/2022 |
| $ | 42.68 |
|
| 6/18/2022 |
| $ | 70.35 |
|
| $ | 68.19 |
|
March 1, 2018 (the inception of the Trust's operations) to December 31, 2022 |
| $ | 95.91 |
|
| $ | 371.71 |
|
| 5/11/2021 |
| $ | 22.48 |
|
| 12/14/2018 |
| $ | 70.35 |
|
| $ | 68.19 |
|
The following table illustrates the movements in the Digital Asset Market price of LTC, as reported on the Trust’s principal market, from the beginning of the Trust’s operations on March 1, 2018 to MarchDecember 31, 2022. Since the beginning of the Trust’s operations, the price of LTC has ranged from $22.47 to $371.96, with the straight average being $101.29.$95.92 through December 31, 2022.
|
|
|
|
| High |
| Low |
|
|
|
|
|
| |||||||||||
Period |
| Average |
|
| Digital Asset Market Price |
|
| Date |
| Digital Asset Market Price |
|
| Date |
| End of period |
|
| Last business day |
| |||||
March 1, 2018 (the first Creation Basket of the Trust) to March 31, 2018 |
| $ | 168.55 |
|
| $ | 213.49 |
|
| 3/1/2018 |
| $ | 115.93 |
|
| 3/30/2018 |
| $ | 119.60 |
|
| $ | 118.18 |
|
Twelve months ended March 31, 2019 |
| $ | 69.48 |
|
| $ | 179.36 |
|
| 5/5/2018 |
| $ | 22.47 |
|
| 12/14/2018 |
| $ | 60.28 |
|
| $ | 60.94 |
|
Twelve months ended March 31, 2020 |
| $ | 72.29 |
|
| $ | 141.89 |
|
| 6/22/2019 |
| $ | 32.27 |
|
| 3/16/2020 |
| $ | 39.05 |
|
| $ | 39.05 |
|
Twelve months ended March 31, 2021 |
| $ | 85.26 |
|
| $ | 239.47 |
|
| 2/19/2021 |
| $ | 37.60 |
|
| 4/1/2020 |
| $ | 193.22 |
|
| $ | 193.22 |
|
Twelve months ended March 31, 2022 |
| $ | 172.48 |
|
| $ | 371.96 |
|
| 5/11/2021 |
| $ | 97.23 |
|
| 3/7/2022 |
| $ | 124.25 |
|
| $ | 124.25 |
|
March 1, 2018 (the first Creation Basket of the Trust) to March 31, 2022 |
| $ | 101.29 |
|
| $ | 371.96 |
|
| 5/11/2021 |
| $ | 22.47 |
|
| 12/14/2018 |
| $ | 124.25 |
|
| $ | 124.25 |
|
|
|
|
|
| High |
| Low |
|
|
|
|
|
| |||||||||||
Period |
| Average |
|
| Digital Asset Market Price |
|
| Date |
| Digital Asset Market Price |
|
| Date |
| End of period |
|
| Last business day |
| |||||
March 1, 2018 (the inception of the Trust's operations) to December 31, 2018 |
| $ | 87.08 |
|
| $ | 213.49 |
|
| 3/1/2018 |
| $ | 22.47 |
|
| 12/14/2018 |
| $ | 29.86 |
|
| $ | 29.86 |
|
Twelve months ended December 31, 2019 |
| $ | 69.24 |
|
| $ | 141.89 |
|
| 6/22/2019 |
| $ | 29.93 |
|
| 1/13/2019 |
| $ | 41.01 |
|
| $ | 41.01 |
|
Twelve months ended December 31, 2020 |
| $ | 56.14 |
|
| $ | 133.64 |
|
| 12/26/2020 |
| $ | 32.27 |
|
| 3/16/2020 |
| $ | 124.49 |
|
| $ | 124.49 |
|
Twelve months ended December 31, 2021 |
| $ | 185.77 |
|
| $ | 371.96 |
|
| 5/11/2021 |
| $ | 108.83 |
|
| 7/20/2021 |
| $ | 144.08 |
|
| $ | 144.08 |
|
Twelve months ended December 31, 2022 |
| $ | 80.06 |
|
| $ | 151.25 |
|
| 1/2/2022 |
| $ | 42.61 |
|
| 6/18/2022 |
| $ | 70.34 |
|
| $ | 68.20 |
|
March 1, 2018 (the inception of the Trust's operations) to December 31, 2022 |
| $ | 95.92 |
|
| $ | 371.96 |
|
| 5/11/2021 |
| $ | 22.47 |
|
| 12/14/2018 |
| $ | 70.34 |
|
| $ | 68.20 |
|
20
The following chart sets out the historical closing prices for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.
LTCN Premium/(Discount): LTCN Share Price vs. Digital Asset Holdings per Share ($)
19
The following chart sets out the historical premium and discount for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.
LTCN Premium/(Discount): LTCN Share Price vs. Digital Asset Holdings per Share (%)
2021
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Trust Agreement does not authorize the Trustee to borrow for payment of the Trust’s 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 does not invest in derivative financial instruments and has no foreign operations or long-term debt instruments.
Item 4. Controls and Procedures
The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Principal Executive Officer and Principal Financial and Accounting Officer of the Sponsor, and to the audit committee of the Board of Directors of the Sponsor, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor, the Sponsor conducted an evaluation of the Trusts disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor concluded that the Trust’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There was no change in the Trust’s internal controls over financial reporting that occurred during the Trust’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, these internal controls.
2122
PART II – OTHER INFORMATION:
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the Risk Factors last reported under “Risk“Part I, Item 1A. Risk Factors” of the registrant’s Information Statement.Annual Report on Form 10-K, except as set forth below.
Recent developments in the digital asset economy have led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity.
Beginning in the fourth quarter of 2021 and continuing throughout 2022, digital asset prices began falling precipitously, with the price of LTC falling by nearly 67% from November 30, 2021 to December 31, 2022. This has led to volatility and disruption in the digital asset markets and financial difficulties for several prominent industry participants, including digital asset exchanges, hedge funds and lending platforms. For example, in the first half of 2022, digital asset lenders Celsius Network LLC and Voyager Digital Ltd. and digital asset hedge fund Three Arrows Capital each declared bankruptcy. This resulted in a loss of confidence in participants in the digital asset ecosystem, negative publicity surrounding digital assets more broadly and market-wide declines in digital asset trading prices and liquidity.
Thereafter, in November 2022, FTX, the third largest Digital Asset Exchange by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency. Shortly thereafter, FTX’s CEO resigned and FTX and several affiliates of FTX filed for bankruptcy. The U.S. Department of Justice subsequently brought criminal charges, including charges of fraud, violations of federal securities laws, money laundering, and campaign finance offenses, against FTX’s former CEO and others. FTX is also under investigation by the SEC, the Justice Department, and the Commodity Futures Trading Commission, as well as by various regulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experienced extreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the SEC, the CFTC, the White House and Congress. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Holdco, LLC (“Genesis Holdco”), both of which are digital asset lenders. The SEC also brought charges against Genesis Global Capital, LLC, a subsidiary of Genesis Holdco, and Gemini Trust Company, LLC on January 12, 2023 for their alleged unregistered offer and sale of securities to retail investors.
Genesis Holdco, together with certain of its subsidiaries, filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 2023. While Genesis Holdco is not a service provider to the Trust, it is an affiliate of Genesis Global Trading, Inc., which acts as a Liquidity Provider to the Authorized Participant of the Trust, is a wholly owned subsidiary of DCG, and is an affiliate of the Trust and the Sponsor. The Liquidity Provider sources digital assets on behalf of the Authorized Participant in connection with the creation of Shares. As such, if Genesis Holdco’s bankruptcy, including the potential sale or transfer of the Liquidity Provider’s equity and/or assets as part of the bankruptcy negotiations, has a negative impact on the Liquidity Provider’s ability to act in such capacity, the Authorized Participant may be required to replace the Liquidity Provider, which could negatively impact the Trust’s ability to create new Shares.
These events have led to significant negative publicity around digital asset market participants including DCG, Genesis and DCG's other affiliated entities. This publicity could negatively impact the reputation of the Sponsor and have an adverse effect on the trading price and/or the value of the Shares. Moreover, sales of a significant number of Shares of the Trust as a result of these events could have a negative impact on the trading price of the Shares.
These events are continuing to develop at a rapid pace and it is not possible to predict at this time all of the risks that they may pose to the Sponsor, the Trust, their affiliates and/or the Trust’s third party service providers, or on the digital asset industry as a whole. Continued disruption and instability in the digital asset markets as these events develop, including further declines in the trading prices and liquidity of LTC, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value
23
The Trust relies on third party service providers to perform certain functions essential to the affairs of the Trust and the replacement of such service providers could pose a challenge to the safekeeping of the Trust’s LTC and to the operations of the Trust.
The Trust relies on the Custodian, the Authorized Participant and other third party service providers to perform certain functions essential to managing the affairs of the Trust. In addition, the Authorized Participant relies on the Liquidity Provider to source LTC in connection with the creation of Shares. Any disruptions to such service providers’ business operations, resulting from business failures, financial instability, security failures, government mandated regulation or operational problems could have an adverse impact on the Trust’s ability to access critical services and be disruptive to the operations of the Trust and require the Sponsor to replace such service provider. Moreover, the Sponsor could decide to replace a service provider to the Trust, or the Authorized Participant may decide to replace the Liquidity Provider for other reasons.
If the Sponsor decides, or is required, to replace Coinbase Custody Trust Company, LLC as the custodian of the Trust’s LTC, transferring maintenance responsibilities of the Digital Asset Account to another party will likely be complex and could subject the Trust’s LTC to the risk of loss during the transfer, which could have a negative impact on the performance of the Shares or result in loss of the Trust’s assets.
Moreover, the legal rights of customers with respect to digital assets held on their behalf by a third-party custodian, such as the Custodian, in insolvency proceedings are currently uncertain. The Custody Agreement contains an agreement by the parties to treat the digital assets credited to the Trust’s Digital Asset Account as financial assets under Article 8 of the Uniform Commercial Code (“Article 8”), in addition to stating that the Custodian will serve as fiduciary and custodian on the Trust’s behalf. The Custodian’s parent, Coinbase Global Inc., has stated in its most recent public securities filings that in light of the inclusion in its custody agreements of provisions relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event the Custodian were to experience insolvency. However, due to the novelty of digital asset custodial arrangements courts have not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how they would rule in such a scenario. If the Custodian became subject to insolvency proceedings and a court were to rule that the custodied digital assets were part of the Custodian’s general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor in the Custodian’s insolvency proceedings and the Trust would be subject to the loss of all or a significant portion of its assets.
To the extent that Sponsor is not able to find a suitable party willing to serve as the custodian, the Sponsor may be required to terminate the Trust and liquidate the Trust’s LTC. In addition, to the extent that the Sponsor finds a suitable party and must enter into a modified Custodian Agreement that is less favorable for the Trust or Sponsor and/or transfer the Trust’s assets in a relatively short time period, the safekeeping of the Trust’s LTC may be adversely affected, which may in turn adversely affect value of the Shares. Likewise, if the Sponsor and/or the Authorized Participant is required to replace any other service provider, they may not be able to find a party willing to serve in such capacity in a timely manner or at all. If the Sponsor decides, or is required, to replace the Authorized Participant and/or if the Authorized Participant decides, or is required, to replace the Liquidity Provider, this could negatively impact the Trust’s ability to create new Shares, which would impact the Shares’ liquidity and could have a negative impact on the value of the Shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of equity securities by the issuer and affiliated purchasers —The table below sets forth information regarding DCG’s, the parent company of the Sponsor, open market purchases of Shares of Grayscale Litecoin Trust (LTC) (OTCQX: LTCN) by DCG, the parent company of the Sponsor, on a monthly basis during the three months ended MarchDecember 31, 2022:
Period |
| (a) Total Number of Shares of LTCN Purchased |
|
| (b) Average Price Paid per Share of LTCN |
|
| (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1 |
|
| (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
|
|
|
|
|
|
|
|
|
|
| (in millions) |
| ||||
January 1, 2022 - January 31, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 30.0 |
|
February 1, 2022 - February 28, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 30.0 |
|
March 1, 2022 - March 31, 2022 |
|
| 303,900 |
|
|
| 5.78 |
|
|
| 303,900 |
|
|
| 28.2 |
|
Total |
|
| 303,900 |
|
| $ | 5.78 |
|
|
| 303,900 |
|
| $ | 28.2 |
|
Period |
| (a) Total Number of Shares of LTCN Purchased |
|
| (b) Average Price Paid per Share of LTCN |
|
| (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |
|
| (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
|
|
|
|
|
|
|
|
|
|
| (in millions) |
| ||||
October 1, 2022 - October 31, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 28.2 |
|
November 1, 2022 - November 30, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28.2 |
|
December 1, 2022 - December 31, 2022 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28.2 |
|
Total |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 28.2 |
|
|
|
24
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
2225
Item 6. Exhibits
Exhibit Number | Exhibit Description |
4.1 | |
| |
10.1 | |
31.1 | |
| |
| |
| |
|
|
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
104 | Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. |
* |
|
2326
Glossary of Defined Terms
“Actual Exchange Rate”—With respect to any particular asset, at any time, the price per single unit of such asset (determined net of any associated fees) at which the Trust is able to sell such asset for U.S. dollars (or other applicable fiat currency) at such time to enable the Trust to timely pay any Additional Trust Expenses, through use of the Sponsor’s commercially reasonable efforts to obtain the highest such price.
“Additional Trust Expenses”—Together, any expenses incurred by the Trust in addition to the Sponsor’s Fee that are not Sponsor-paid Expenses, including, but not limited to, (i) taxes and governmental charges, (ii) expenses and costs of any extraordinary services performed by the Sponsor (or any other service provider) on behalf of the Trust to protect the Trust or the interests of shareholders (including in connection with any Incidental Rights and any IR Virtual Currency), (iii) any indemnification of the Custodian or other agents, service providers or counterparties of the Trust, (iv) the fees and expenses related to the listing, quotation or trading of the Shares on any Secondary Market (including legal, marketing and audit fees and expenses) to the extent exceeding $600,000 in any given fiscal year and (v) extraordinary legal fees and expenses, including any legal fees and expenses incurred in connection with litigation, regulatory enforcement or investigation matters.
“Administrator Fee”—The fee payable to any administrator of the Trust for services it provides to the Trust, which the Sponsor will pay such administrator as a Sponsor-paid Expense.
“Agent”—A Person appointed by the Trust to act on behalf of the shareholders in connection with any distribution of Incidental Rights and/or IR Virtual Currency.
“Authorized Participant”—Certain eligible financial institutions that have entered into an agreement with the Trust and the Sponsor concerning the creation of Shares. Each Authorized Participant (i) is a registered broker-dealer, (ii) has entered into a Participant Agreement with the Sponsor and (iii) owns a digital wallet address that is known to the Custodian as belonging to the Authorized Participant,. or such Authorized Participant’s Liquidity Provider.
“Basket”—A block of 100 Shares.
“Basket Amount”—On any trade date, the number of LTC required as of such trade date for each Creation Basket, as determined by dividing (x) the number of LTC owned by the Trust at 4:00 p.m., New York time, on such trade date, after deducting the number of LTC representing the U.S. dollar value of accrued but unpaid fees and expenses of the Trust (converted using the Index Price andat such time, carried to the eighth decimal place), by (y) the number of Shares outstanding at such time (with the quotient so obtained calculated to one one-hundred-millionth of one LTC (i.e., carried to the eighth decimal place)), and multiplying such quotient by 100.
“Blockchain” or “Litecoin Blockchain”—The public transaction ledger of the Litecoin Network on which transactions in Litecoin are recorded.
“Creation Basket”—Basket of Shares issued by the Trust in exchange for deposits of the Basket Amount required for each such Creation Basket.
“Custodial Services”—theThe Custodian’s services that (i) allow LTC to be deposited from a public blockchain address to the Trust’s Digital Asset Account and (ii) allow the Trust and the Sponsor to withdraw LTC from the Trust’s Digital Asset Account to a public blockchain address the Trust or the Sponsor controls pursuant to instructions the Trust or the Sponsor provides to the Custodian.Custodian.
“Custodian”—Coinbase Custody Trust Company, LLC.
“Custodian Agreement”—The Amended and Restated Custodial Services Agreement, dated as of June 29, 2022, by and between the Trust and the Sponsor and Custodian that governs the Trust’s and the Sponsor’s use of the Custodial Services provided by the Custodian as a fiduciary with respect to the Trust’s assets.
“Custodian Fee”—Fee payable to the Custodian for services it provides to the Trust, which the Sponsor shall pay to the Custodian as a Sponsor-paid Expense.
“DCG”—Digital Currency Group, Inc.
“Digital Asset Account”Account —A”—A segregated custody account controlled and secured by the Custodian to store private keys, which allow for the transfer of ownership or control of the Trust’s LTC on the Trust’s behalf.
2427
“Digital Asset Exchange”—An electronic marketplace where exchange participants may trade, buy and sell LTC based on bid-ask trading. The largest Digital Asset Exchanges are online and typically trade on a 24-hour basis, publishing transaction price and volume data.
“Digital Asset Exchange Market”—The global exchange market for the trading of LTC, which consists of transactions on electronic Digital Asset Exchanges.
“Digital Asset Holdings”— The aggregate value, expressed in U.S. dollars, of the Trust’s assets (other than U.S. dollars or other fiat currency), less its liabilities (which include estimated accrued but unpaid fees and expenses) calculated in the manner set forth under ““Item 1. Business—Valuation of LTC and Determination of the Trust’s Digital Asset Holdings”Holdings” in our Information Statement.Annual Report. See also “Determination of NAV”“Item 1. Business—Investment Objective” in our Information StatementAnnual Report for a description of the Trust’s NAV, as calculated in accordance with GAAP.
“Digital Asset Holdings Fee Basis Amount”—The amount on which the Sponsor’s Fee for the Trust is based, as calculated in the manner set forth under “Valuation“Item 1. Business—Valuation of LTC and Determination of the Trust’s Digital Asset Holdings” in our Information Statement.Annual Report.
“Digital Asset Market”—A “Brokered Market,” “Dealer Market,” “Principal-to-Principal Market” or “Exchange Market,” as each such term is defined in the Financial Accounting Standards Board Accounting Standards Codification Master Glossary.Glossary.
“DSTA”—The Delaware Statutory Trust Act, as amended.
“DTC”—The Depository Trust Company. DTC is a limited purpose trust company organized under New York law, a member of the U.S. Federal Reserve System and a clearing agency registered with the SEC. DTC will act as the securities depository for the Shares.
“Exchange Act”—The Securities Exchange Act of 1934, as amended.
“FINRA”—The Financial Industry Regulatory Authority, Inc., which is the primary regulator in the United States for broker-dealers, including Authorized Participants.
“GAAP”—United States generally accepted accounting principles.
“Genesis”—Genesis Global Trading, Inc., a wholly owned subsidiary of Digital Currency Group, Inc., which as of the date of this Quarterly Report, is the only Liquidity Provider of the Authorized Participant.
“Grayscale Securities”—Grayscale Securities, LLC, a wholly owned subsidiary of the Sponsor, which as of the date of this Quarterly Report, is the only acting Authorized Participant.
“Incidental Rights”—Rights to acquire, or otherwise establish dominion and control over, any virtual currency or other asset or right, which rights are incident to the Trust’s ownership of LTC and arise without any action of the Trust, or of the Sponsor or Trustee on behalf of the Trust.
“Index”—The CoinDesk Litecoin Price Index (LTX).
“Index License Agreement”—The license agreement, dated as of February 1, 2022, between the Index Provider and the Sponsor governing the Sponsor’s use of the Index for calculation of the Index Price.
“Index Price”—The U.S. dollar value of an LTC derived from the Digital Asset Exchanges that are reflected in the Index, calculated at 4:00 p.m., New York time, on each business day. See “Overview“Item 1. Business—Overview of the Litecoin—LTC Industry and Market—LTC Value—The Index and the Index Price” in our Information StatementAnnual Report for a description of how the Index Price is calculated. For purposes of the Trust Agreement, the term LTC Index Price shall mean the Index Price as defined herein.
“Index Provider”—CoinDesk Indices, Inc., a Delaware corporation that publishes the Index. DCG is the indirect parent company of CoinDesk Indices, Inc. As a result, CoinDesk Indices, Inc. is an affiliate of the Sponsor and the Trust and is considered a related party of the Trust.
“Investment Advisers Act”—Investment Advisers Act of 1940, as amended.
“Investment Company Act���”—Investment Company Act of 1940, as amended.
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“Investor”—Any investor that has entered into a subscription agreement with an Authorized Participant, pursuant to which such Authorized Participant will act as agent for the investor.investor.
“IR Virtual Currency”—Any virtual currency tokens, or other asset or right, acquired by the Trust through the exercise (subject to the applicable provisions of the Trust Agreement) of any Incidental Right.
“IRSLiquidity Provider”— The U.S. Internal Revenue Service, a bureauA service provider engaged by an Authorized Participant to source LTC on behalf of the U.S. Department of the Treasury.Authorized Participant.
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“Litecoin Network”—The online, end-user-to-end-user network hosting the public transaction ledger, known as the Litecoin Blockchain, and the source code comprising the basis for the cryptographic and algorithmic protocols governing the Litecoin Network. See “Overview of Litecoin” in our Information Statement.
“LTC” or “Litecoin”—Litecoin tokens, which are a type of digital asset based on an open-source cryptographic protocol existing on the Litecoin Network, comprising units that constitute the assets underlying the Trust’s Shares.
“Marketing Fee”—Fee payable to the marketer for services it provides to the Trust, which the Sponsor will pay to the marketer as a Sponsor-paid Expense.Expense.
“NAV”—The net asset value of the Trust determined on a GAAP basis.
“OTCQX”—The OTCQX tier of OTC Markets Group Inc.
“Participant Agreement”—An agreement entered into by an Authorized Participant with the Sponsor that provides the procedures for the creation of Baskets and for the delivery of LTC required for Creation Baskets.
“SEC”—The U.S. Securities and Exchange Commission.
“Secondary Market”—Any marketplace or other alternative trading system, as determined by the Sponsor, on which the Shares may then be listed, quoted or traded, including but not limited to, the OTCQX tier of the OTC Markets Group Inc.
“Securities Act”—The Securities Act of 1933, as amended.
“Shares”—Common units of fractional undivided beneficial interest in, and ownership of, the Trust.
“Sponsor”—Grayscale Investments, LLC.
“Sponsor-paid Expenses”—The fees and expenses incurred by the Trust in the ordinary course of its affairs that the Sponsor is obligated to assume and pay, excluding taxes, but including: (i) the Marketing Fee, (ii) the Administrator Fee, (iii) the Custodian Fee and fees for any other security vendor engaged by the Trust, (iv) the Transfer Agent fee, (v) the Trustee fee, (vi) the fees and expenses related to the listing, quotation or trading of the Shares on any Secondary Market (including customary legal, marketing and audit fees and expenses) in an amount up to $600,000 in any given fiscal year, (vii) ordinary course, legal fees and expenses, (viii) audit fees, (ix) regulatory fees, including, if applicable, any fees relating to the registration of the Shares under the Securities Act or the Exchange Act, (x) printing and mailing costs, (xi) costs of maintaining the Trust’s website and (xii) applicable license fees.fees.
“Sponsor’s Fee”—A fee, payable in LTC, which accrues daily in U.S. dollars at an annual rate of 2.5% of the Digital Asset Holdings Fee Basis Amount of the Trust as of 4:00 p.m., New York time, on each day; provided that for a day that is not a business day, the calculation of the Sponsor’s Fee will be based on the Digital Asset Holdings Fee Basis Amount from the most recent business day, reduced by the accrued and unpaid Sponsor’s Fee for such most recent business day and for each day after such most recent business day and prior to the relevant calculation date.
“Transfer Agency and Service Agreement”—The agreement between the Sponsor and the Transfer Agent which sets forth the obligations and responsibilities of the Transfer Agent with respect to transfer agency services and related matters.date.
“Transfer Agent”—Continental Stock Transfer & Trust Company, a Delaware corporation.
“Transfer Agent Fee”—Fee payable to the Transfer Agent for services it provides to the Trust, which the Sponsor will pay to the Transfer Agent as a Sponsor-paid Expense.
“Trust”—Grayscale Litecoin Trust (LTC), a Delaware statutory trust, formed on January 26, 2018 under the DSTA and pursuant to the Trust AgreementAgreement..
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“Trust Agreement”—The Amended and Restated Declaration of Trust and Trust Agreement between the Trustee and the Sponsor establishing and governing the operations of the Trust, as amended by Amendments No. 1 and No. 2 thereto and as the same may be amended from time to time.
“Trustee”—Delaware Trust Company (formerly known as CSC Trust Company of Delaware), a Delaware trust company, is the Delaware trustee of the Trust.
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“U.S.”—United States.
“U.S. dollar” or “$”—United States dollar or dollars.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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* indicated, thereunto duly authorized.
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| Grayscale Investments, LLC as Sponsor of Grayscale Litecoin Trust (LTC) | ||
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| By: | /s/ Michael Sonnenshein | |
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| Name: | Michael Sonnenshein |
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| Title: | Member of the Board of Directors and Chief Executive Officer (Principal Executive Officer)* |
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| By: | /s/ Edward McGee | |
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| Name: | Edward McGee |
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| Title: | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)* |
Date: May 6, 2022February 8, 2023
* The Registrant is a trust and the persons are signing in their capacities as officers or directors of Grayscale Investments, LLC, the Sponsor of the Registrant.
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