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SLV > SEC Filings for SLV > Form 10-K on 24-Feb-2017All Recent SEC Filings

Show all filings for ISHARES SILVER TRUST

Form 10-K for ISHARES SILVER TRUST


24-Feb-2017

Annual Report


Item 7. 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 with this report. 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 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 Trustee acting as trustee pursuant to the Second Amended and Restated Depositary Trust Agreement (the "Trust Agreement") between the Trustee and the Sponsor. The Trust issues 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 the objective of the Trust is for the value of each Share to approximately reflect the price of silver. 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 Baskets of 50,000 Shares or integral multiples thereof, and only in transactions with Authorized Participants.

Shares of the Trust trade on NYSE Arca under the symbol "SLV."

Valuation of Silver; 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 of the Trust and the NAV. The Trustee values the silver held by the Trust on the basis of that day's announced LBMA Silver Price. 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. The result is the net asset value of the Trust. The Trustee computes the 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 August 15, 2014, the Trustee valued the silver held by the Trust using the London Fix.

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 accounting principles generally accepted 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 we describe the valuation of silver bullion, a critical accounting policy that we believe is important to understanding our 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.

Valuation of Silver Bullion

Fair value of the silver bullion is based on the LBMA Silver Price.


Table of Contents

There are other indicators of the value of silver bullion that are available that could be different than that chosen by the Trust. 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 in the Trust, and as such, could result in different lower of cost or market adjustments or in different redemption value adjustments of the outstanding redeemable capital Shares.

The following chart shows the daily London Fix or LBMA Silver Price, as applicable, for the period from December 2011 through December 2016(a):

[[Image Removed]]



(a) The London Fix was discontinued on August 15, 2014 and was subsequently replaced by the LBMA Silver Price from that date onward, as reflected in the chart.

Results of Operations

The Year Ended December 31, 2016

The Trust's net asset value grew from $4,391,943,604 at December 31, 2015 to $5,541,130,643 at December 31, 2016, a 26.17% increase for the year. The increase in the Trust's net asset value resulted primarily from increase in the price of silver, which rose 17.51% from $13.82 at December 31, 2015 to $16.24 (the LBMA Silver Price at December 31, 2016). The increase in the Trust's net asset value was also affected by an increase in the number of outstanding Shares, which rose from 333,550,000 Shares at December 31, 2015 to 359,900,000 Shares at December 31, 2016, a consequence of 102,750,000 Shares (2,055 Baskets) being created and 76,400,000 Shares (1,528 Baskets) being redeemed during the year.

The 16.93% increase in the Trust's NAV from $13.17 at December 31, 2015 to $15.40 at December 31, 2016 is directly related to the 17.51% increase in the price of silver.

The Trust's NAV increased slightly less than the price of silver on a percentage basis due to the Sponsor's fees, which were $29,148,568 for the year, or 0.50% of the Trust's average weighted assets of $5,832,956,742 during the year. The NAV of $19.68 on August 2, 2016 was the highest during the year, compared with a low during the year of $12.93 on January 28, 2016.


Table of Contents

Net increase in net assets resulting from operations for the year ended December 31, 2016 was $682,782,768, resulting from an unrealized gain on investment in silver bullion of $823,171,043, partially offset by a net investment loss of $29,148,568, a net realized loss of $2,513,184 from investment in silver bullion sold to pay expenses and a net realized loss of $108,726,523 on silver bullion distributed for the redemption of Shares. Other than the Sponsor's fees of $29,148,568, the Trust had no expenses during the year ended December 31, 2016.

The Year Ended December 31, 2015

The Trust's net asset value fell from $5,260,801,879 at December 31, 2014 to $4,391,943,604 at December 31, 2015, a 16.52% decrease for the year. The decrease in the Trust's net asset value resulted primarily from a decrease in the price of silver, which fell 13.46% from $15.97 at December 31, 2014 to $13.82 (the LBMA Silver Price at December 31, 2015). The decrease in the Trust's net asset value was also affected by a decrease in the number of outstanding Shares, which fell from 344,000,000 Shares at December 31, 2014 to 333,550,000 Shares at December 31, 2015, a consequence of 57,150,000 Shares (1,143 Baskets) being created and 67,600,000 Shares (1,352 Baskets) being redeemed during the year.

The 13.87% decline in the Trust's NAV from $15.29 at December 31, 2014 to $13.17 at December 31, 2015 is directly related to the 13.46% 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 $25,294,785 for the year, or 0.50% of the Trust's average weighted assets of $5,056,528,843 during the year. The NAV of $17.45 on January 23, 2015 was the highest during the year, compared with a low during the year of $13.07 on December 14, 2015.

Net decrease in net assets resulting from operations for the year ended December 31, 2015 was $699,232,160, resulting from a net investment loss of $25,294,785, a net realized loss of $5,703,341 from investment in silver bullion sold to pay expenses, a net realized loss of $206,452,543 on silver bullion distributed for the redemption of Shares and an unrealized loss on investment in silver bullion of $461,781,491. Other than the Sponsor's fees of $25,294,785, the Trust had no expenses during the year ended December 31, 2015.

The Year Ended December 31, 2014

The Trust's net asset value fell from $6,240,747,397 at December 31, 2013 to $5,260,801,879 at December 31, 2014, a 15.70% decrease for the year. The decrease in the Trust's net asset value resulted primarily from a decrease in the price of silver, which fell 18.10% from $19.50 (the London Fix at December 31, 2013) to $15.97 (the LBMA Silver Price at December 31, 2014). The decrease in the Trust's net asset value was partially offset by an increase in the number of outstanding Shares, which rose from 332,500,000 Shares at December 31, 2013 to 344,000,000 Shares at December 31, 2014, a consequence of 74,950,000 Shares (1,499 Baskets) being created and 63,450,000 Shares (1,269 Baskets) being redeemed during the year.

The 18.54% decline in the Trust's NAV from $18.77 at December 31, 2013 to $15.29 at December 31, 2014 is directly related to the 18.10% 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 $31,579,407 for the year, or 0.50% of the Trust's average weighted assets of $6,313,220,546 during the year. The NAV of $21.21 on February 24, 2014 was the highest during the year, compared with a low during the year of $14.64 on November 6, 2014.

Net decrease in net assets resulting from operations for the year ended December 31, 2014 was $1,233,639,459, resulting from a net investment loss of $31,579,407, a net realized loss of $1,055,702 from investment in silver bullion sold to pay expenses, a net realized loss of $77,394,400 on silver bullion distributed for the redemption of Shares and an unrealized loss on investment in silver bullion of $1,123,609,950. Other than the Sponsor's fees of $31,579,407, the Trust had no expenses during the year ended December 31, 2014.

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