iShares Silver Trust ETF (SLV)

FORM 10-Q | Quarterly Report
Aug. 6, 2018 1:24 PM
|
About: iShares Silver Trust ETF (SLV)View as PDF
iShares Silver Trust (Form: 10-Q, Received: 08/06/2018 13:27:06)
 

Table of Contents

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q



 

Quarterly report pursuant to Section 13 or 15( d ) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2018

or

 

Transition report pursuant to Section 13 or 15( d ) of the Securities Exchange Act of 1934

 

For the transition period from ________ to ________

 

Commission File Number: 001-32863

 


iShares ® Silver Trust

(Exact name of registrant as specified in its charter)


 

New York

 

13-7474456

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

c/o iShares Delaware Trust Sponsor LLC

400 Howard Street

San Francisco, California 94105

Attn: Product Management Team

iShares Product Research & Development

(Address of principal executive offices)(Zip Code)

 

(415) 670-2000

(Registrant’s telephone number, including area code)

 

 


N/A

(Former name, former address and former fiscal year, if changed since last report)


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☒  Accelerated filer ☐  
     
Non-accelerated filer ☐     Smaller reporting company ☐  Emerging growth company ☐

(Do not check if a smaller reporting company)

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 



 

 

 

Table of Contents

 

  Page

PART I – FINANCIAL INFORMATION

 

     

Item 1.

Financial Statements (Unaudited)

1

     
 

Statements of Assets and Liabilities at June 30, 2018 and December 31, 2017

1

     
 

Statements of Operations for the three and six months ended June 30, 2018 and 2017

2

     
 

Statements of Changes in Net Assets for the six months ended June 30, 2018 and the year ended December 31, 2017

3

     
 

Statements of Cash Flows for the six months ended June 30, 2018 and 2017

4

     
 

Schedules of Investments at June 30, 2018 and December 31, 2017

5

     
 

Notes to Financial Statements

6

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

11

     

Item 4.

Controls and Procedures

11

   

PART II – OTHER INFORMATION

 
   

Item 1.

Legal Proceedings

12

     

Item 1A.

Risk Factors

12

     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

12

     

Item 3.

Defaults Upon Senior Securities

12

     

Item 4.

Mine Safety Disclosures

12

     

Item 5.

Other Information

12

     

Item 6.

Exhibits

13

   

SIGNATURES

14

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 
 

iShares Silver Trust

Statements of Assets and Liabilities (Unaudited)

At June 30, 2018 and December 31, 2017

 

   

June 30,

   

December 31,

 
   

2018

   

2017

 

Assets

               

Investment in silver bullion, at fair value (a)

  $ 5,169,125,403     $ 5,407,419,250  

Total Assets

    5,169,125,403       5,407,419,250  
                 

Liabilities

               

Sponsor’s fees payable

    2,171,796       2,225,399  

Total Liabilities

    2,171,796       2,225,399  
                 

Commitments and contingent liabilities (Note 6)

           
                 

Net Assets

  $ 5,166,953,607     $ 5,405,193,851  
                 

Shares issued and outstanding (b)

    342,550,000       339,750,000  

Net asset value per Share (Note 2C)

  $ 15.08     $ 15.91  

 


(a)

Cost of investment in silver bullion: $5,806,008,238 and $5,831,748,196, respectively.

(b)

No par value, unlimited amount authorized.

 

 

See notes to financial statements.

 

 

 

iShares Silver Trust

Statements of Operations (Unaudited)

For the three and six months ended June 30, 2018 and 2017

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2018

   

2017

   

2018

   

2017

 

Expenses

 

Sponsor’s fees

  $ 6,592,413     $ 7,228,475     $ 13,136,281     $ 14,394,071  

Total expenses

    6,592,413       7,228,475       13,136,281       14,394,071  

Net investment loss

    (6,592,413 )     (7,228,475 )     (13,136,281 )     (14,394,071 )
                                 

Net Realized and Unrealized Gain (Loss)

 

Net realized gain (loss) from:

 

Silver bullion sold to pay expenses

    (688,243 )     (431,111 )     (1,194,705 )     (941,188 )

Silver bullion distributed for the redemption of Shares

    (27,518,074 )     (11,635,841 )     (41,297,877 )     (27,169,500 )

Net realized loss

    (28,206,317 )     (12,066,952 )     (42,492,582 )     (28,110,688 )

Net change in unrealized appreciation/depreciation

    (43,957,463 )     (510,278,966 )     (212,553,889 )     120,516,804  

Net realized and unrealized gain (loss)

    (72,163,780 )     (522,345,918 )     (255,046,471 )     92,406,116  
                                 

Net increase (decrease) in net assets resulting from operations

  $ (78,756,193 )   $ (529,574,393 )   $ (268,182,752 )   $ 78,012,045  
                                 

Net increase (decrease) in net assets per Share

  $ (0.23 )   $ (1.49 )   $ (0.79 )   $ 0.22  

 

 

See notes to financial statements.

 

 

 

iShares Silver Trust

Statements of Changes in Net Assets (Unaudited)

For the six months ended June 30, 2018 and the year ended December 31, 2017

 

   

Six Months Ended

   

Year Ended

 
   

June 30, 2018

   

December 31, 2017

 

Net Assets, Beginning of Period

  $ 5,405,193,851     $ 5,541,130,643  
                 

Operations:

 

Net investment loss

    (13,136,281 )     (28,299,587 )

Net realized loss

    (42,492,582 )     (92,120,817 )

Net change in unrealized appreciation/depreciation

    (212,553,889 )     337,891,452  

Net increase (decrease) in net assets resulting from operations

    (268,182,752 )     217,471,048  
                 
                 

Capital Share Transactions:

 

Contributions for Shares issued

    587,710,858       873,170,446  

Distributions for Shares redeemed

    (557,768,350 )     (1,226,578,286 )

Net increase (decrease) in net assets from capital share transactions

    29,942,508       (353,407,840 )
                 

Decrease in net assets

    (238,240,244 )     (135,936,792 )
                 

Net Assets, End of Period

  $ 5,166,953,607     $ 5,405,193,851  
                 

Shares issued and redeemed

 

Shares issued

    37,900,000       55,800,000  

Shares redeemed

    (35,100,000 )     (75,950,000 )

Net increase (decrease) in Shares issued and outstanding

    2,800,000       (20,150,000 )

 

 

See notes to financial statements.

 

 

 

iShares Silver Trust

Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2018 and 2017

 

   

Six Months Ended
June 30,

 
   

2018

   

2017

 

Cash Flows from Operating Activities

               

Proceeds from silver bullion sold to pay expenses

  $ 13,189,884     $ 14,391,316  

Expenses – Sponsor’s fees paid

    (13,189,884 )     (14,391,316 )

Net cash provided by operating activities

           

Increase (decrease) in cash

           

Cash, beginning of period

           

Cash, end of period

  $     $  
                 

Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Operations to Net Cash Provided by (Used in) Operating Activities

               

Net increase (decrease) in net assets resulting from operations

  $ (268,182,752 )   $ 78,012,045  

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

               

Proceeds from silver bullion sold to pay expenses

    13,189,884       14,391,316  

Net realized (gain) loss

    42,492,582       28,110,688  

Net change in unrealized appreciation/depreciation

    212,553,889       (120,516,804 )

Change in operating assets and liabilities:

 

Sponsor’s fees payable

    (53,603 )     2,755  

Net cash provided by (used in) operating activities

  $     $  
                 

Supplemental disclosure of non-cash information:

               

Silver bullion contributed for Shares issued

  $ 587,710,858     $ 468,480,450  

Silver bullion distributed for Shares redeemed

  $ (557,768,350 )   $ (496,692,867 )

 

 

See notes to financial statements.

 

 

 

iShares Silver Trust

Schedules of Investments (Unaudited)

At June 30, 2018 and December 31, 2017

 

June 30, 2018

 

Description

 

Ounces

   

Cost

   

Fair Value

 

Silver bullion

    322,465,714     $ 5,806,008,238     $ 5,169,125,403  
                         

Total Investment – 100.04%

                    5,169,125,403  

Less Liabilities – (0.04)%

                    (2,171,796 )

Net Assets – 100.00%

                  $ 5,166,953,607  

 

December 31, 2017

 

Description

 

Ounces

   

Cost

   

Fair Value

 

Silver bullion

    320,629,662     $ 5,831,748,196     $ 5,407,419,250  
                         

Total Investment – 100.04%

                    5,407,419,250  

Less Liabilities – (0.04)%

                    (2,225,399 )

Net Assets – 100.00%

                  $ 5,405,193,851  

 

 

See notes to financial statements.

 

 

iShares Silver Trust

Notes to Financial Statements (Unaudited)

June 30, 2018

 

 

1 - Organization

 

The iShares Silver Trust (the “Trust”) was organized on April 21, 2006 as a New York trust. The trustee is The Bank of New York Mellon (the “Trustee”), which is responsible for the day-to-day administration of the Trust. The Trust’s sponsor is iShares Delaware Trust Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The Trust is governed by the provisions of the Second Amended and Restated Depositary Trust Agreement (the “Trust Agreement”) executed by the Trustee and the Sponsor as of December 22, 2016. The Trust issues units of beneficial interest (“Shares”) representing fractional undivided beneficial interests in its net assets.

 

The Trust seeks to reflect generally the performance of the price of silver. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. The Trust is designed to provide a vehicle for investors to make an investment similar to an investment in silver.

 

The accompanying unaudited financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions for Form 10 -Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments considered necessary for a fair statement of the interim period financial statements, have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trust’s financial statements included in its Annual Report on Form  10‑K for the year ended December 31, 2017, as filed with the SEC on February 28, 2018.

 

The Trust qualifies as an investment company solely for accounting purposes and not for any other purpose and follows the accounting and reporting guidance under the Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services - Investment Companies , but is not registered, and is not required to be registered, as an investment company under the Investment Company Act of 1940, as amended.

 

 

2 - Significant Accounting Policies

 

A.

Basis of Accounting

 

The following significant accounting policies are consistently followed by the Trust in the preparation of its financial statements in conformity with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

B.

Silver Bullion

 

JPMorgan Chase Bank N.A., London branch (the “Custodian”), is responsible for the safekeeping of silver bullion owned by the Trust.

 

Fair value of the silver bullion held by the Trust is based on the price per ounce of silver determined in an electronic auction hosted by ICE Benchmark Administration (“IBA”) that begins at 12:00 p.m. (London time) and published shortly thereafter on each day that the London silver market is open for business (such price, the “LBMA Silver Price”). If there is no announced LBMA Silver Price on any day, the Trustee is authorized to use the most recently announced LBMA Silver Price unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate as a basis for evaluation. Prior to October 2, 2017, the LBMA Silver Price was determined using an electronic auction administered by CME Group Inc. (“CME Group”) and published by Thomson Reuters. Effective as of October 2, 2017, IBA replaced CME Group and Thomson Reuters as the administrator for the LBMA Silver Price and began administering the electronic auction for the LBMA Silver Price.

 

Gain or loss on sales of silver bullion is calculated on a trade date basis using the average cost method.

 

 

The following tables summarize activity in silver bullion for the three months ended June 30, 2018 and 2017:

 

Three Months Ended June 30, 2018

 

Ounces

   


Cost

   

Fair
Value

   

Realized
Gain (Loss)

 

Beginning balance

    319,012,097     $ 5,786,442,301     $ 5,193,516,929     $  

Silver bullion contributed

    24,760,653       404,809,725       404,809,725        

Silver bullion distributed

    (20,901,664 )     (377,908,569 )     (350,390,495 )     (27,518,074 )

Silver bullion sold to pay expenses

    (405,372 )     (7,335,219 )     (6,646,976 )     (688,243 )

Net realized loss

                (28,206,317 )      

Net change in unrealized appreciation/depreciation

                (43,957,463 )      

Ending balance

    322,465,714     $ 5,806,008,238     $ 5,169,125,403     $ (28,206,317 )

 

Three Months Ended June 30, 2017

 

Ounces

   


Cost

   

Fair
Value

   

Realized
Gain (Loss)

 

Beginning balance

    330,326,197     $ 6,097,115,732     $ 5,965,691,104     $  

Silver bullion contributed

    22,664,845       384,309,070       384,309,070        

Silver bullion distributed

    (12,964,321 )     (238,657,456 )     (227,021,615 )     (11,635,841 )

Silver bullion sold to pay expenses

    (421,510 )     (7,765,928 )     (7,334,817 )     (431,111 )

Net realized loss

                (12,066,952 )      

Net change in unrealized appreciation/depreciation

                (510,278,966 )      

Ending balance

    339,605,211     $ 6,235,001,418     $ 5,593,297,824     $ (12,066,952 )

 

The following tables summarize activity in silver bullion for the six months ended June 30, 2018 and 2017:

 

Six Months Ended June 30, 2018

 

Ounces

   


Cost

   

Fair
Value

   

Realized
Gain (Loss)

 

Beginning balance

    320,629,662     $ 5,831,748,196     $ 5,407,419,250     $  

Silver bullion contributed

    35,696,104       587,710,858       587,710,858        

Silver bullion distributed

    (33,066,784 )     (599,066,227 )     (557,768,350 )     (41,297,877 )

Silver bullion sold to pay expenses

    (793,268 )     (14,384,589 )     (13,189,884 )     (1,194,705 )

Net realized loss

                (42,492,582 )      

Net change in unrealized appreciation/depreciation

                (212,553,889 )      

Ending balance

    322,465,714     $ 5,806,008,238     $ 5,169,125,403     $ (42,492,582 )

 

Six Months Ended June 30, 2017

 

Ounces

   


Cost

   

Fair
Value

   

Realized
Gain (Loss)

 

Beginning balance

    341,348,242     $ 6,305,715,839     $ 5,543,495,441     $  

Silver bullion contributed

    27,495,599       468,480,450       468,480,450        

Silver bullion distributed

    (28,407,461 )     (523,862,367 )     (496,692,867 )     (27,169,500 )

Silver bullion sold to pay expenses

    (831,169 )     (15,332,504 )     (14,391,316 )     (941,188 )

Net realized loss

                (28,110,688 )      

Net change in unrealized appreciation/depreciation

                120,516,804        

Ending balance

    339,605,211     $ 6,235,001,418     $ 5,593,297,824     $ (28,110,688 )

 

C.

Calculation of Net Asset Value

 

On each business day, as soon as practicable after 4:00 p.m. (New York time), the net asset value of the Trust is obtained by subtracting all accrued fees, expenses and other liabilities of the Trust from the fair value of the silver and other assets held by the Trust. The Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made.

 

 

D.

Offering of the Shares

 

Trust Shares are issued and redeemed continuously in aggregations of 50,000 Shares in exchange for silver bullion rather than cash. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. The Trust only transacts with registered broker-dealers that are eligible to settle securities transactions through the book-entry facilities of the Depository Trust Company and that have entered into a contractual arrangement with the Trustee and the Sponsor governing, among other matters, the creation and redemption of Shares (such broker-dealers, the “Authorized Participants”). Holders of Shares of the Trust may redeem their Shares at any time acting through an Authorized Participant and in the prescribed aggregations of 50,000 Shares; provided , that redemptions of Shares may be suspended during any period while regular trading on NYSE Arca, Inc. (“NYSE Arca”) is suspended or restricted, or in which an emergency exists as a result of which delivery, disposal or evaluation of silver is not reasonably practicable.

 

The per Share amount of silver exchanged for a purchase or redemption represents the per Share amount of silver held by the Trust, after giving effect to its liabilities.

 

When silver bullion is exchanged in settlement of a redemption, it is considered a sale of silver bullion for accounting purposes.

 

E.

Federal Income Taxes

 

The Trust is treated as a grantor trust for federal income tax purposes and, therefore, no provision for federal income taxes is required. Any interest, expenses, gains and losses are passed through to the holders of Shares of the Trust.

 

The Sponsor has reviewed the tax positions as of June 30, 2018 and has determined that no provision for income tax is required in the Trust’s financial statements.

 

 

3 - Trust Expenses

 

The Trust pays to the Sponsor a Sponsor’s fee that accrues daily at an annualized rate equal to 0.50% of the net asset value of the Trust, paid monthly in arrears. The Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustee’s fee, the Custodian’s fee, NYSE Arca listing fees, SEC registration fees, printing and mailing costs, audit fees and expenses, and up to $100,000 per annum in legal fees and expenses.

 

 

4 - Related Parties

 

The Sponsor and the Trustee are considered to be related parties to the Trust. The Trustee’s fee is paid by the Sponsor and is not a separate expense of the Trust.

 

 

5 - Indemnification

 

The Trust Agreement provides that the Sponsor and its shareholders, directors, officers, employees, affiliates and subsidiaries shall be indemnified by the Trust for any loss, liability or expense incurred by any such person that arises out of or in connection with the performance of obligations under the Trust Agreement or any actions taken in accordance with the provisions of the Trust Agreement, absent such person’s negligence, bad faith, willful misconduct, willful malfeasance or reckless disregard of such person’s duties and obligations.

 

The Trust has agreed that the Custodian will only be responsible for any loss or damage suffered by the Trust as a direct result of the Custodian’s negligence, fraud or willful default in the performance of its duties.

 

 

6 - Commitments and Contingent Liabilities

 

In the normal course of business, the Trust may enter into contracts with service providers that contain general indemnification clauses. 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.

 

 

7 - Concentration Risk

 

Substantially all of the Trust’s assets are holdings of silver bullion, which creates a concentration risk associated with fluctuations in the price of silver. Accordingly, a decline in the price of silver will have an adverse effect on the value of the Shares of the Trust. Factors that may have the effect of causing a decline in the price of silver include a change in economic conditions (such as a recession), an increase in the hedging activities of silver producers, and changes in the attitude of speculators, investors and other market participants towards silver.

 

 

 

8 - Financial Highlights

 

The following financial highlights relate to investment performance and operations for a Share outstanding for the three and six months ended June 30, 2018 and 2017.

 

   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

 
   

2018

   

2017

   

2018

   

2017

 

Net asset value per Share, beginning of period

  $ 15.34     $ 17.10     $ 15.91     $ 15.40  
                                 

Net investment loss (a)

    (0.02 )     (0.02 )     (0.04 )     (0.04 )

Net realized and unrealized gain (loss) (b)

    (0.24 )     (1.50 )     (0.79 )     0.22  

Net increase (decrease) in net assets from operations

    (0.26 )     (1.52 )     (0.83 )     0.18  

Net asset value per Share, end of period

  $ 15.08     $ 15.58     $ 15.08     $ 15.58  
                                 

Total return, at net asset value (c)(d)

    (1.69

)%

    (8.89

)%

    (5.22

)%

    1.17

%

                                 

Ratio to average net assets:

                               

Net investment loss (e)

    (0.50

)%

    (0.50

)%

    (0.50

)%

    (0.50

)%

Expenses (e)

    0.50

%

    0.50

%

    0.50

%

    0.50

%

 


(a)

Based on average Shares outstanding during the period.

(b)

The amounts reported for a Share outstanding may not accord with the change in aggregate gains and losses on investment for the period due to the timing of Trust Share transactions in relation to the fluctuating fair values of the Trust’s underlying investment.

(c)

Based on the change in net asset value of a Share during the period.

(d)

Percentage is not annualized.

(e)

Percentage is annualized.

 

 

9 - Investment Valuation

 

U.S. GAAP defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trust’s policy is to value its investment at fair value.

 

Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

 

 

Level 1

Unadjusted quoted prices in active markets for identical assets or liabilities;

 

 

Level 2

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

 

 

Level 3

Unobservable inputs that are unobservable for the asset or liability, including the Trust’s assumptions used in determining the fair value of investments.

 

At June 30, 2018 and December 31, 2017, the value of the silver bullion held by the Trust is categorized as Level 1.

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This information should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of Part I of this Form 10‑Q. The discussion and analysis that follows may contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified by terminology such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. Except as required by applicable disclosure laws, neither the Sponsor, nor any other person assumes responsibility for the accuracy or completeness of any forward-looking statements. Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in the Sponsor’s expectations or predictions.

 

Introduction

 

The iShares Silver Trust (the “Trust”) is a grantor trust formed under the laws of the State of New York. The Trust does not have any officers, directors, or employees, and is administered by The Bank of New York Mellon (the “Trustee”) acting as trustee pursuant to the Second Amended and Restated Depositary Trust Agreement (the “Trust Agreement”) between the Trustee and iShares Delaware Trust Sponsor LLC, the sponsor of the Trust (the “Sponsor”). The Trust issues units of beneficial interest (“Shares”) representing fractional undivided beneficial interests in its net assets. The assets of the Trust consist primarily of silver bullion held by a custodian as an agent of the Trust responsible only to the Trustee.

 

The Trust is a passive investment vehicle and seeks to reflect generally the performance of the price of silver. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. The Trust does not engage in any activities designed to obtain a profit from, or ameliorate losses caused by, changes in the price of silver.

 

The Trust issues and redeems Shares only in exchange for silver, only in aggregations of 50,000 Shares (a “Basket”) or integral multiples thereof, and only in transactions with registered broker-dealers that have previously entered into an agreement with the Sponsor and the Trustee governing the terms and conditions of such issuance (such broker-dealers, the “Authorized Participants”). A list of the current Authorized Participants is available from the Sponsor or the Trustee.

 

Shares of the Trust trade on NYSE Arca, Inc. under the ticker symbol SLV.

 

Valuation of Silver Bullion; Computation of Net Asset Value

 

On each business day, as soon as practicable after 4:00 p.m. (New York time), the Trustee evaluates the silver held by the Trust and determines the net asset value and net asset value per Share (“NAV”) of the Trust. The Trustee values the silver held by the Trust using the price per ounce of silver determined in an electronic auction hosted by ICE Benchmark Administration (“IBA”) that begins at 12:00 p.m. (London time) and published shortly thereafter, on the day the valuation takes place (such price, the “LBMA Silver Price”). If there is no announced LBMA Silver Price on any day, the Trustee is authorized to use the most recently announced LBMA Silver Price unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate as a basis for evaluation. The LBMA Silver Price is used by the Trust because it is commonly used by the U.S. silver market as an indicator of the value of silver and is permitted to be used under the Trust Agreement. The use of an indicator of the value of silver bullion other than the LBMA Silver Price could result in materially different fair value pricing of the silver held by the Trust, and as such, could result in different cost or market adjustments or in different redemption value adjustments of the outstanding redeemable capital Shares. Having valued the silver held by the Trust, the Trustee adds other assets of the Trust then subtracts all accrued fees, expenses and other liabilities of the Trust from the fair value of the silver and other assets held by the Trust. The result is the net asset value of the Trust. The Trustee computes NAV by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made. Prior to October 2, 2017, the LBMA Silver Price was determined using an electronic auction administered by CME Group and published by Thomson Reuters. Effective as of October 2, 2017, IBA replaced CME Group and Thomson Reuters as the administrator for the LBMA Silver Price and began administering the electronic auction for the LBMA Silver Price.

 

Liquidity

 

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. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s fee. The Trust’s only source of liquidity is its sales of silver.

 

Critical Accounting Policies

 

The financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. Below is a description of the valuation of silver bullion, a critical accounting policy that the Trust believes is important to understanding its results of operations and financial position. In addition, please refer to Note 2 to the financial statements included in this report for further discussion of the Trust’s accounting policies.

 

 

Results of Operations

 

The Quarter Ended June 30, 2018

 

The Trust’s net asset value fell from $5,191,290,570 at March 31, 2018 to $5,166,953,607 at June 30, 2018, a 0.47% decrease. The decrease in the Trust’s net asset value resulted primarily from a decrease in the LBMA Silver Price, which fell 1.54% from $16.28 at March 31, 2018 to $16.03 at June 30, 2018. The decrease in the Trust’s net asset value was partially offset by an increase in the number of outstanding Shares, which rose from 338,450,000 Shares at March 31, 2018 to 342,550,000 Shares at June 30, 2018, a consequence of 26,300,000 Shares (526 Baskets) being created and 22,200,000 Shares (444 Baskets) being redeemed during the quarter.

 

The 1.69% decline in the Trust’s NAV from $15.34 at March 31, 2018 to $15.08 at June 30, 2018 is directly related to the 1.54% decrease in the price of silver.

 

The Trust’s NAV decreased slightly more than the price of silver on a percentage basis due to the Sponsor’s fees, which were $6,592,413 for the quarter, or 0.12% of the Trust’s average weighted assets of $5,288,081,767 during the quarter. The NAV of $16.21 on June 15, 2018 was the highest during the quarter, compared with a low during the quarter of $15.08 on June 29, 2018.

 

Net decrease in net assets resulting from operations for the quarter was $78,756,193, resulting from an unrealized loss on investment in silver bullion of $43,957,463, a net investment loss of $6,592,413, a net realized loss of $688,243 from silver bullion sold to pay expenses and a net realized loss of $27,518,074 on silver bullion distributed for the redemption of Shares. Other than the Sponsor’s fees of $6,592,413, the Trust had no expenses during the quarter.

 

The Six-Month Period Ended June 30, 2018

 

The Trust’s net asset value fell from $5,405,193,851 at December 31, 2017 to $5,166,953,607 at June 30, 2018, a 4.41% decrease. The decrease in the Trust’s net asset value resulted primarily from a decrease in the LBMA Silver Price, which fell 4.98% from $16.87 at December 31, 2017 to $16.03 at June 30, 2018. The decrease in the Trust’s net asset value was partially offset by an increase in the number of outstanding Shares, which rose from 339,750,000 Shares at December 31, 2017 to 342,550,000 Shares at June 30, 2018, a consequence of 37,900,000 Shares (758 Baskets) being created and 35,100,000 Shares (702 Baskets) being redeemed during the period.

 

The 5.22% decline in the Trust’s NAV from $15.91 at December 31, 2017 to $15.08 at June 30, 2018 is directly related to the 4.98% decrease in the price of silver.

 

The Trust’s NAV decreased slightly more than the price of silver on a percentage basis due to the Sponsor’s fees, which were $13,136,281 for the period, or 0.25% of the Trust’s average weighted assets of $5,296,694,669 during the period. The NAV of $16.52 on January 25, 2018 was the highest during the period, compared with a low during the period of $15.08 on June 29, 2018.

 

Net decrease in net assets resulting from operations for the period was $268,182,752, resulting from an unrealized loss on investment in silver bullion of $212,553,889, a net investment loss of $13,136,281, a net realized loss of $1,194,705 from silver bullion sold to pay expenses and a net realized loss of $41,297,877 on silver bullion distributed for the redemption of Shares. Other than the Sponsor’s fees of $13,136,281, the Trust had no expenses during the period.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

The duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, with the participation of the Trustee, have evaluated the effectiveness of the Trust’s disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in the reports that the Trust files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, as appropriate to allow timely decisions regarding required disclosure.

 

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

 

There were no changes in the Trust’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

 

 

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 Part I, Item 1A of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on February 28, 2018 .

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

a) None.

 

b) Not applicable.

 

c) 22,200,000 Shares (444 Baskets) were redeemed during the quarter ended June 30, 2018.

 

Period

 

Total Number of Shares
Redeemed

   

Average Ounces of
Silver Paid Per Share

 

04/01/18 to 04/30/18

    5,200,000     $ 0.9419  

05/01/18 to 05/31/18

    7,000,000       0.9416  

06/01/18 to 06/30/18

    10,000,000       0.9412  

Total

    22,200,000     $ 0.9415  

 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

Exhibit No.

 

Description

4.1

 

Second Amended and Restated Depositary Trust Agreement is incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by the Registrant on December 22, 2016

     

4.2

 

Standard Terms for Authorized Participant Agreements is incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed by the Registrant on December 22, 2016

     

10.1

 

First Amended and Restated Custodian Agreement between The Bank of New York Mellon and JPMorgan Chase Bank N.A., London branch is incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the Registrant on December 22, 2016

     

10.2

 

Sub-license Agreement is incorporated by reference to Exhibit 10.2 of Registration Statement No. 333-156506 filed by the Registrant on December 30, 2008

     

31.1

 

Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     

31.2

 

Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     

32.1

 

Certification by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     

32.2

 

Certification by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     

101.INS

 

XBRL Instance Document

     

101.SCH

 

XBRL Taxonomy Extension Schema Document

     

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

     

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

     

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

     

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned in the capacities* indicated thereunto duly authorized.

 

iShares Delaware Trust Sponsor LLC,

Sponsor of the iShares Silver Trust (registrant)

 

/s/ Paul Lohrey

Paul Lohrey
Director, President and Chief Executive Officer
(Principal executive officer)

 

Date: August 6, 2018

 

 

/s/ Jack Gee

Jack Gee

Director and Chief Financial Officer

(Principal financial and accounting officer)

 

Date: August 6, 2018

 


*      The registrant is a trust and the persons are signing in their respective capacities as officers of iShares Delaware Trust Sponsor LLC, the Sponsor of the registrant.

 

14

Exhibit 31.1

 

CERTIFICATION

 

I, Paul Lohrey, certify that:

 

 

1.

I have reviewed this report on Form 10-Q of iShares Silver Trust;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 6, 2018

 

/s/ Paul Lohrey

Paul Lohrey

President and Chief Executive Officer

(Principal executive officer)

 

 

 

 


 

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Jack Gee, certify that:

 

 

1.

I have reviewed this report on Form 10-Q of iShares Silver Trust;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 6, 2018

 

/s/ Jack Gee

Jack Gee

Chief Financial Officer

(Principal financial officer)

 

 


 

 

 

 

Exhibit 32.1

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report of iShares Silver Trust (the “Trust”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Lohrey, Chief Executive Officer of iShares Delaware Trust Sponsor LLC, the Sponsor of the Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

 

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

 

Date: August 6, 2018

 

/s/ Paul Lohrey

Paul Lohrey*

President and Chief Executive Officer

(Principal executive officer)

 


*      The registrant is a trust and Mr. Lohrey is signing in his capacity as an officer of iShares Delaware Trust Sponsor LLC, the Sponsor of the registrant.

Exhibit 32.2

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Quarterly Report of iShares Silver Trust (the “Trust”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack Gee, Chief Financial Officer of iShares Delaware Trust Sponsor LLC, the Sponsor of the Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust.

 

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

 

Date: August 6, 2018

 

/s/ Jack Gee

Jack Gee*

Chief Financial Officer

(Principal financial officer)

 


*       The registrant is a trust and Mr. Gee is signing in his capacity as an officer of iShares Delaware Trust Sponsor LLC, the Sponsor of the registrant.