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SIVR > SEC Filings for SIVR > Form 10-Q on 9-Nov-2012All Recent SEC Filings

Show all filings for ETFS SILVER TRUST

Form 10-Q for ETFS SILVER TRUST


9-Nov-2012

Quarterly Report


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

This information should be read in conjunction with the unaudited condensed financial statements and notes to the unaudited condensed financial statements included in Item 1 of Part 1 of this Form 10-Q. The discussion and analysis that follows may contain forward-looking statements with respect to the Trust's financial conditions, operations, future performance and business. These statements can be identified by the use of the words "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or similar words and phrases. These statements are based upon certain assumptions and analyses the Sponsor has made based on its perception of historical trends, current conditions and expected future developments. 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 reflect a change in management's expectations or predictions.

Introduction

The Trust is a common law trust, formed under the laws of the state of New York on the July 20, 2009. The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors or employees and is administered by the Trustee pursuant to the Trust Agreement. 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. It will not hold or trade in commodity futures contracts, nor is it a commodity pool, subject to regulation as a commodity pool operator or a commodity trading adviser in connection with issuing Shares.

The Trust holds silver and is expected to issue Baskets in exchange for deposits of silver, and to distribute silver in connection with redemptions of Baskets. Shares issued by the Trust represent units of undivided beneficial interest in and ownership of the Trust. The investment objective of the Trust is for the Shares to reflect the performance of the price of silver, less the Trust's expenses. The Sponsor believes that, for many investors, the Shares will represent a cost effective investment relative to traditional means of investing in silver.

The Trust issues and redeems Shares only with Authorized Participants in exchange for silver, only in aggregations of 100,000 or integral multiples thereof. A list of current Authorized Participants is available from the Sponsor or the Trustee.

Shares of the Trust trade on the New York Stock Exchange (the "NYSE") Arca under the symbol "SIVR".

Valuation of Silver and Computation of Net Asset Value

As of the London Fix on each day that the NYSE Arca is open for regular trading or as soon as practicable after 4:00 p.m. New York time on such day (the "Evaluation Time"), the Trustee values the silver held by the Trust and determines both the ANAV and the NAV of the Trust.

At the Evaluation Time, the Trustee values the Trust's silver on the basis of that day's London Fix, or, if no London Fix is made on such day or has not been announced by the Evaluation Time, the next most recent London Fix determined prior to the Evaluation Time is used, unless the Sponsor determines that such price is inappropriate as a basis for valuation. In the case this determination is made, the Sponsor will identify an alternative basis for such evaluation to be used by the Trustee.

Once the value of the silver held by the Trust has been determined, the Trustee subtracts all estimated accrued but unpaid fees and other liabilities of the Trust from the total value of the silver and all other assets of the Trust. The resulting figure is the ANAV of the Trust. The ANAV is used to compute the Sponsor's Fee.

The Trustee then subtracts from the ANAV the amount of accrued Sponsor's Fees computed for such day to determine the net asset value ("NAV") of the Trust. The Trustee also determines the NAV per Share by dividing the NAV of the Trust by the number of Shares outstanding as of the close of trading on the NYSE Arca.


ETFS SILVER TRUST

The Quarter Ended September 30, 2012

The NAV of the Trust is obtained by subtracting the Trust's liabilities on any day from the value of the silver owned and receivable by the Trust on that day; the NAV per Share is obtained by dividing the NAV of the Trust on a given day by the number of Shares outstanding on that day.

The Trust's NAV increased from $477,787,257 at June 30, 2012 to $641,774,937 at September 30, 2012, a 34.32% increase for the quarter. The increase in the Trust's NAV resulted primarily from an increase in the price per ounce of silver, which rose 27.95% from $27.08 at June 30, 2012 to $34.65 at September 30, 2012 and an increase in outstanding Shares, which rose from 17,800,000 Shares at June 30, 2012 to 18,700,000 Shares at September 30, 2012, a result of 900,000 Shares (9 Baskets) being created. No Shares were redeemed during the quarter.

NAV per Share increased 27.87% from $26.84 at June 30, 2012 to $34.32 at September 30, 2012. The Trust's NAV per Share rose slightly less than the price per ounce of silver on a percentage basis due to Sponsor's Fees, which were $409,684 for the quarter, or 0.30% of the Trust's assets on an annualized basis.

The NAV per Share of $34.38 at September 14, 2012 was the highest during the quarter, compared with a low of $26.43 at July 12, 2012.

Net gain from operations for the quarter ended September 30, 2012 was $4,872,212, resulting from a net gain of $8,025 on the transfer of silver to pay expenses and an unrealized gain on silver of $5,273,871, offset by Sponsor's Fees of $409,684. Other than the Sponsor's Fee, the Trust had no expenses during the quarter ended September 30, 2012.

The Nine Months Ended September 30, 2012

The Trust's NAV increased from $534,304,845 at December 31, 2011 to $641,774,937 at September 30, 2012, a 20.11% increase for the period. The increase in the Trust's NAV resulted primarily from an increase in the price per ounce of silver, which rose 22.96% from $28.18 at December 31, 2011 to $34.65 at September 30, 2012.

There was a decrease in outstanding Shares from 19,100,000 Shares at December 31, 2011 to 18,700,000 Shares at September 30, 2012, a result of 1,700,000 Shares (17 Baskets) being created and 2,100,000 Shares (21 Baskets) being redeemed during the period.

NAV per Share increased 22.70% from $27.97 at December 31, 2011 to $34.32 at September 30, 2012. The Trust's NAV per Share rose slightly less than the price per ounce of silver on a percentage basis due to Sponsor's Fees, which were $1,258,446 for the period, or 0.30% of the Trust's assets on an annualized basis.

The NAV per Share of $36.94 at February 29, 2012 was the highest during the period, compared with a low of $26.43 at July 12, 2012.

Net gain from operations for the period ended September 30, 2012 was $3,667,938, resulting from a net gain of $111,980 on the transfer of silver to pay expenses and a net gain of $4,814,404 on silver distributed for the redemption of Shares, offset by Sponsor's Fees of $1,258,446. Other than the Sponsor's Fee, the Trust had no expenses during the period ended September 30, 2012.


ETFS SILVER TRUST

Liquidity & Capital Resources

The Trust is not aware of any trends, demands, commitments, events or uncertainties that are reasonably likely to result in material changes to its liquidity needs. 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 period covered by this report was the Sponsor's Fee.

The Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust's silver as necessary to pay the Trust's expenses not otherwise assumed by the Sponsor. The Trustee will not sell silver to pay the Sponsor's Fee but will pay the Sponsor's Fee through in-kind transfers of silver to the Sponsor. At September 30, 2012 the Trust did not have any cash balances.

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

Critical Accounting Policies

The unaudited condensed financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed 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. In addition, please refer to Note 2 to the unaudited condensed financial statements for further discussion of accounting policies.

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