Notes
to the Financial Statements (Unaudited)
1. Organization
The abrdn
Silver ETF Trust (the “Trust”) is a common law trust formed on July 20, 2009 (the “Date of Inception”) 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 silver and issues abrdn
Physical Silver Shares ETF (“Shares”) in minimum blocks of 50,000
Shares (also referred to as “Baskets”) in exchange for deposits of silver and distributes silver in connection
with the redemption of Baskets. Shares represent units of fractional undivided beneficial interest in and ownership of the Trust which
are issued by the Trust. The Sponsor is a Delaware limited liability company and a wholly-owned subsidiary of abrdn Inc. abrdn Inc. is
a wholly-owned indirect subsidiary of abrdn plc. The Trust is governed by the Trust Agreement.
Effective
February 28, 2023, Andrea Melia resigned as Treasurer and Chief Financial Officer of the Sponsor. Ms. Melia had served as Principal Financial
Officer of the Registrant. Effective February 28, 2023, Brian Kordeck was appointed Treasurer and Chief Financial Officer of the Sponsor.
Mr. Kordeck will serve as Principal Financial Officer of the Registrant.
The
investment objective of the Trust is for the Shares to reflect the performance of the price of silver, less the Trust’s expenses
and liabilities. The Trust is designed to provide an individual owner of beneficial interests in the Shares (a “Shareholder”)
an opportunity to participate in the silver market through an investment in securities. The fiscal year end for the Trust is December
31.
The
accompanying financial statements were prepared in accordance with the accounting principles generally accepted in the United States of
America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q. In the opinion of the Trust’s
management, all adjustments (which consist of normal recurring adjustments) necessary to present fairly the financial position and results
of operations as of and for the three months ended March 31, 2023, and for all periods presented have been made.
These
financial statements should be read in conjunction with the Trust’s Annual Report on Form 10-K for the fiscal year ended December
31, 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating
results for the full year.
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 Services—Investment 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 Silver
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.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
The
Trust’s silver is held by JPMorgan Chase Bank, N.A. (the “Custodian”). The Trust’s silver may also be held by
another firm selected by the Custodian to hold the Trust’s silver in the Trust’s allocated account in the firm’s vault
premises on a segregated basis and whose appointment has been approved by the Sponsor. At March 31, 2023, none of the Trust’s
silver was held by a sub-custodian.
The
Trust’s silver is recorded at fair value. The cost of silver is determined according to the average cost method and the fair value
is based on the London Bullion Market Association (“LBMA”) Silver Price. Realized gains and losses on transfers
of silver, or silver distributed for the redemption of Shares, are calculated on a trade date basis as the difference between the fair
value and average cost of silver transferred.
The
ICE Benchmark Administration (“IBA”) conducts an electronic, over-the-counter silver auction in London, England to establish
a fixing price for an ounce of silver once each trading day, which is disseminated by major market vendors (the “LBMA Silver Price”).
The LBMA Silver Price is established by the LBMA-authorized bullion banks and market makers participating in the auction.
Once
the value of silver has been determined, the net asset value (the “NAV”) is computed by the Trustee by deducting
all accrued fees, expenses and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s
Fee”), from the fair value of the silver and all other assets held by the Trust.
The
Trust recognizes changes in fair value of the investment in silver as changes in unrealized gains or losses on investment in silver
through the Statement of Operations.
The
per Share amount of silver exchanged for a purchase or redemption is calculated daily by the Trustee using the LBMA Silver Price
to calculate the silver amount in respect of any liabilities for which covering silver sales have not yet been made, and represents
the per Share amount of silver 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
Trust’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would
be based on the best information available.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair
value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized
in level 3.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
The
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest
level input that is significant to the fair value measurement in its entirety.
The
Trust’s investment in silver is classified as a level 1 asset, as its value is calculated using unadjusted quoted
prices from primary market sources.
The
categorization of the Trust’s assets is as shown below:
| (Amounts in 000’s of US$) |
|
March
31, 2023 |
|
|
December
31, 2022 |
|
| |
|
|
|
|
|
|
| Level 1 |
|
|
|
|
|
|
|
|
| Investment in silver |
|
$ |
1,110,883 |
|
|
$ |
1,113,348 |
|
| |
|
|
|
|
|
|
|
|
There were no transfers between levels during
the three months ended March 31, 2023 or the year ended December 31, 2022.
2.3. Silver
Receivable and Payable
Silver receivable
or payable represents the quantity of silver covered by contractually binding orders for the creation or redemption of Shares respectively,
where the silver has not yet been transferred to or from the Trust’s account. Generally, ownership of silver is transferred
within two business days of the trade date. At March 31, 2023, the Trust had no
silver receivable or payable for the creation or redemption of Shares. At December 31, 2022, the Trust had $5,749,366 of
silver receivable for the creation of Shares and no
silver payable for the 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 50,000 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 Trust’s Custodian or other silver
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 silver required
for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated silver account established with
the Custodian or a silver 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 silver 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.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
Authorized
Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. The typical settlement
period for Shares is 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 silver is exchanged in settlement of a redemption, it is considered a sale of silver
for financial statement purposes.
The
amount of silver 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 silver to be delivered or distributed
by the Trust. In order to ensure that the correct amount of silver is available at all times to back the Shares, the Sponsor accepts
an adjustment to its management fees in the event of any shortfall or excess on each transaction. For each transaction, this amount is
not more than 1/1000th of an ounce of silver.
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 Trust’s income and expenses will “flow through” to the Shareholders, and the
Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis.
The
Sponsor has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined
that no
reserves for uncertain tax positions are required as of March 31, 2023 or December 31, 2022.
2.6. Investment
in Silver
Changes
in ounces of silver and their respective values for the three months ended March 31, 2023 and 2022 are set out below:
| |
|
Three
Months
Ended
March 31, 2023 |
|
|
Three
Months
Ended
March 31, 2022 |
|
| (Amounts in 000’s of US$, except for ounces data) |
|
|
|
|
|
|
|
|
| Ounces of silver |
|
|
|
|
|
|
|
|
| Opening balance |
|
|
46,496,067.9 |
|
|
|
43,119,101.1 |
|
| Creations |
|
|
2,592,090.1 |
|
|
|
5,535,699.4 |
|
| Redemptions |
|
|
(2,544,361.5 |
) |
|
|
— |
|
| Transfers of silver to pay expenses |
|
|
(34,142.9 |
) |
|
|
(31,914.2 |
) |
| Closing balance |
|
|
46,509,653.6 |
|
|
|
48,622,886.3 |
|
| |
|
|
|
|
|
|
|
|
| Investment in silver |
|
|
|
|
|
|
|
|
| Opening balance |
|
$ |
1,113,348 |
|
|
$ |
995,405 |
|
| Creations |
|
|
58,448 |
|
|
|
138,785 |
|
| Redemptions |
|
|
(57,542 |
) |
|
|
— |
|
| Realized gain on silver distributed for the redemption of Shares |
|
|
2,811 |
|
|
|
— |
|
| Transfers of silver to pay expenses |
|
|
(795 |
) |
|
|
(740 |
) |
| Realized gain on silver transferred to pay expenses |
|
|
61 |
|
|
|
77 |
|
| Change in unrealized (loss) / gain on investment in silver |
|
|
(5,448 |
) |
|
|
73,050 |
|
| Closing balance |
|
$ |
1,110,883 |
|
|
$ |
1,206,577 |
|
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
2.7. Expenses
/ Realized Gains / Losses
The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of silver to the Sponsor.
The
Trust will transfer silver to the Sponsor to pay the Sponsor’s Fee that accrues daily at an annualized rate equal to %
of the adjusted daily net asset value (“ANAV”) of the Trust, paid monthly in arrears. Presently, the Sponsor is continuing
to voluntarily waive a portion of its fee and reduce the Sponsor’s Fee to %
(which it has done since the Date of Inception).
The
Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and
out of pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United
States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and up to
$
per annum in legal expenses.
For
the three months ended March 31, 2023 and 2022, the Sponsor’s Fee, net of fees waived by the Sponsor, was $ and $,
respectively.
At March
31, 2023 and at December 31, 2022, the fees payable to the Sponsor were $280,229
and $280,384,
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 Trust’s silver as necessary to pay these expenses. When selling silver to pay expenses, the Trustee will endeavor
to sell the smallest amounts of silver needed to pay these expenses in order to minimize the Trust’s holdings of assets other
than silver. Other than the Sponsor’s Fee, the Trust had no
expenses during the three months ended March 31, 2023 and 2022.
Unless
otherwise directed by the Sponsor, when selling silver the Trustee will endeavor to sell at the price established by the LBMA. 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 silver only if the sale transaction is made at the next
LBMA Silver Price 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 silver 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 silver 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 silver transferred.
2.8. Subsequent
Events
In
accordance with the provisions set forth in FASB ASC 855-10, Subsequent Events, the Trust’s management has evaluated the
possibility of subsequent events impacting the Trust’s financial statements through the filing date. During this period, no material
subsequent events requiring adjustment to or disclosure in the financial statements were identified.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
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 silver directly, for their own account, as agent for their customers and for accounts over which they exercise investment
discretion. The Trustee’s and Custodian’s fees are paid by the Sponsor and are not separate expenses of the Trust.
4. Concentration
of Risk
The
Trust’s sole business activity is the investment in silver, and substantially all the Trust’s assets are holdings of silver,
which creates a concentration of risk associated with fluctuations in the price of silver. Several factors could affect the price of silver,
including: (i) global silver supply and demand, which is influenced by factors such as forward selling by silver producers, purchases
made by silver producers to unwind silver hedge positions, central bank purchases and sales, and production and cost levels in major global
silver-producing countries; (ii) investors’ expectations with respect to the rate of inflation; (iii) currency exchange rates; (iv)
interest rates; (v) investment and trading activities of hedge funds and commodity funds; and (vi) global or regional political, economic
or financial events and situations. In addition, there is no assurance that silver will maintain its long-term value in terms of
purchasing power in the future. In the event that the price of silver declines, the Sponsor expects the value of an investment in
the Shares to decline proportionately. Each of these events could have a material effect on the Trust’s financial position and results
of operations.
5. Indemnification
Under
the Trust’s organizational documents, the Trustee (and its directors, employees and agents) and the Sponsor (and its members, managers,
directors, officers, employees and affiliates) are indemnified by the Trust against any liability, cost or expense it incurs without gross
negligence, bad faith, willful misconduct or willful malfeasance on its part and without reckless disregard on its part of its obligations
and duties under the Trust’s organizational documents. The Trust’s maximum exposure under these arrangements is unknown as
this would involve future claims that may be made against the Trust that have not yet occurred.
abrdn
Silver ETF Trust
