Notes
to the Financial Statements (Unaudited)
1. Organization
The abrdn
Silver ETF Trust (known as Aberdeen Standard Silver ETF Trust prior to March 31, 2022) (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 (known as Aberdeen Standard Investments ETFs
Sponsor LLC prior to March 1, 2022) (the “Sponsor”) and The Bank of New York Mellon as Trustee (the “Trustee”).
The Trust holds silver bullion and issues abrdn Physical Silver Shares ETF (known as Aberdeen Standard Physical
Silver Shares ETF prior to March 31, 2022) (“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. (known as Aberdeen
Standard Investments Inc. prior to January 1, 2022). abrdn Inc. is a wholly-owned indirect subsidiary of abrdn (formerly known
as Standard Life Aberdeen) 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 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, 2022 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, 2021. The results of operations for the three months ended March 31, 2022 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, 2022, approximately 95.82% 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.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for
instruments categorized in level 3.
The
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the
lowest level input that is significant to the fair value measurement in its entirety.
The
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, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Level 1 | |
| | | |
| | |
| Investment in silver | |
$ | 1,206,577 | | |
$ | 995,405 | |
| | |
| | | |
| | |
| There were no transfers between levels during the three months ended March 31, 2022 or the year ended December 31, 2021. |
| | |
| | | |
| | |
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, 2022, the Trust had no silver receivable or
payable for the creation or redemption of Shares. At December 31, 2021, the Trust had no silver 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 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.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
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.
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, 2022 or December 31, 2021.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
2.6. Investment
in Silver
Changes
in ounces of silver and their respective values for the three months ended March 31, 2022 and 2021 are set
out below:
| | |
Three
Months
Ended
March
31, 2022 | | |
Three
Months
Ended
March
31, 2021 | |
| (Amounts in 000’s of US$, except for ounces data) | |
| | | |
| | |
| Ounces of silver | |
| | | |
| | |
| Opening balance | |
| 43,119,101.1 | | |
| 32,617,862.0 | |
| Creations | |
| 5,535,699.4 | | |
| 5,989,089.7 | |
| Redemptions | |
| — | | |
| (1,641,982.4 | ) |
| Transfers of silver to pay expenses | |
| (31,914.2 | ) | |
| (25,386.9 | ) |
| Closing balance | |
| 48,622,886.3 | | |
| 36,939,582.4 | |
| | |
| | | |
| | |
| Investment in silver | |
| | | |
| | |
| Opening balance | |
$ | 995,405 | | |
$ | 863,884 | |
| Creations | |
| 138,785 | | |
| 160,444 | |
| Redemptions | |
| — | | |
| (45,079 | ) |
| Realized gain on silver distributed for the redemption of Shares | |
| — | | |
| 13,011 | |
| Transfers of silver to pay expenses | |
| (740 | ) | |
| (674 | ) |
| Realized gain on silver transferred to pay expenses | |
| 77 | | |
| 184 | |
| Change in unrealized gain / (loss) on investment in silver | |
| 73,050 | | |
| (105,220 | ) |
| Closing balance | |
$ | 1,206,577 | | |
$ | 886,550 | |
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, 2022 and 2021, the Sponsor's Fee, net of fees waived by the Sponsor, was $ and $,
respectively.
At
March 31, 2022 and at December 31, 2021, the fees payable to the Sponsor were $291,013 and $252,819, respectively.
As
a result of the waiver, the Sponsor's Fee waived for the three months March 31, 2022 and 2021 was $ and $, 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, 2022 and 2021.
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.
abrdn
Silver ETF Trust
Notes
to the Financial Statements (Unaudited)
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.
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