abrdn Silver ETF Trust 10-K

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 the 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,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Trust undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Introduction. The Aberdeen Standard Silver ETF Trust (the “Trust”) is a 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 Depositary Trust Agreement (the “Trust Agreement”) between the Trustee and, the sponsor of the Trust, Aberdeen Standard Investments ETFs Sponsor LLC (the “Sponsor”). The Trust issues Shares representing fractional undivided beneficial interests in its net assets. The assets of the Trust consist of silver bullion held by a custodian as an agent of the Trust and responsible only to the Trustee. 32 The Trust is a passive investment vehicle and the objective of the Trust is for the value of each Share to approximately reflect, at any given time, the price of the silver bullion owned by the Trust, less the Trust’s liabilities (anticipated to be principally for accrued operating expenses), divided by the number of outstanding Shares. 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 or integral multiples thereof (each, a “Basket”), and only in transactions with registered broker-dealers (or other securities market participants not required to register as broker-dealers such as banks or other financial institutions) who (1) are participants in the DTC and (2) have previously entered into an agreement with the Trust governing the terms and conditions of such issuance (such dealers, the “Authorized Participants”). As of the date of this annual report the Authorized Participants that have signed an Authorized Participant Agreement with the Trust are Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co. LLC, HSBC Securities (USA) Inc., J.P. Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Mizuho Securities USA LLC, Morgan Stanley & Co. Inc, Scotia Capital (USA) Inc., UBS Securities LLC and Virtu Financial BD, LLC. Shares of the Trust trade on the NYSE Arca under the symbol “SIVR”. Investing in the Shares does not insulate the investor from certain risks, including price volatility. The following table illustrates the movement in the NAV of the Shares against the corresponding silver price (per 1 oz. of silver) since inception: NAV per Share vs. Silver Price from July 20, 2009 (the Date of Inception) to December 31, 2020 The divergence of the NAV per Share from the silver price over time reflects the cumulative effect of the Trust expenses that arise if an investment had been held since inception. Critical Accounting Policy 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 the results of operations and financial position. In addition, please refer to Note 2 to the Financial Statements for further discussion of our accounting policies. Valuation of Silver Since August 15, 2014, an electronic, over-the-counter silver bullion auction has been conducted in London, England to establish a fixing price for an ounce of silver once each trading day (the “LBMA Silver Price”). As of the date of filing, the LBMA Silver Price is established by the 12 LBMA-authorized bullion banks and market makers participating in the auction and disseminated by major market vendors. The LBMA Silver Price was initially operated by CME Group, Inc. until October 2, 2017, at which time the ICE Benchmark Administration (“IBA”) commenced administration of the LBMA Silver Price. The “London Metal Price” for silver held by the Trust is the LBMA Silver Price. Realized gains and losses on transfers of silver, or silver distributed for the redemption of Shares, are calculated as the difference between the fair value and cost of silver transferred. 33 December 31, 2020 December 31, 2019 December 31, 2018 (Amounts in 000's of US$) Investment in silver - cost $ 608,877 $ 422,010 $ 402,801 Unrealized gain/(loss) on investment in silver 255,007 (3,072 ) (62,979 ) Investment in silver - fair value $ 863,884 $ 418,938 $ 339,822 Inspection of Silver Under the Custody Agreements, the Trustee, the Sponsor and the Sponsor’s auditors and inspectors may, only up to twice a year, visit the premises of the Custodian for the purpose of examining the Trust’s silver and certain related records maintained by the Custodian. In addition, under the Custody Agreements, the Custodian shall procure that any sub-custodian that it appoints allows access to its premises during normal business hours to examine the Trust's silver held there and such records as the Trustee, the Sponsor or the Sponsor's auditors and inspectors may reasonably require to perform their respective duties to Shareholders. The Sponsor has exercised its right to visit the Custodian in order to examine the silver and the records maintained by them. Inspections were conducted by Inspectorate International Limited, a leading commodity inspection and testing company retained by the Sponsor, as of August 14, 2020. Due to unprecedented social lock-down policies implemented in the UK and Switzerland to help prevent the spread of COVID-19, neither the Sponsor, nor Inspectorate, were able to perform a physical inspection of the Trust's silver at December 31, 2020. In lieu of a physical inspection, the Sponsor performed alternative procedures to verify the silver held by the Trust at December 31, 2020. These procedures included confirmation of the silver bar list and total ounces of silver held by the Custodian at December 31, 2020, and an independent recalculation of ounces of silver for each creation or redemption transaction from August 14, 2020, the date of the last physical inspection, through December 31, 2020. Liquidity The Trust is not aware of any trends, demands, conditions, 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 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 transfers and sales of silver. 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 December 31, 2020 and 2019, the Trust did not have any cash balances. Review of Financial Results Financial Highlights Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 (Amounts in 000's of US$) Total gain/(loss) on silver $ 262,999 $ 57,508 $ (27,179 ) Net change assets from operations $ 261,212 $ 56,421 $ (28,164 ) Net cash provided by operating activities $ — $ — $ — The year ended December 31, 2020 The net asset value (“NAV”) of the Trust is obtained by subtracting the Trust’s liabilities on any day from the value of the silver owned or 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 $407,463,630 at December 31, 2019 to $863,664,235 at December 31, 2020, a 111.96% increase for the year. The increase in the Trust’s NAV resulted primarily from an increase in outstanding Shares, which rose from 23,300,000 Shares at December 31, 2019 to 33,750,000 Shares at December 31, 2020, a result of 11,500,000 Shares (230 Baskets) being created and 1,050,000 Shares (21 Baskets) being redeemed during the year and an increase in the price per ounce of silver, which rose 46.77% from $18.05 at December 31, 2019 to $26.49 at December 31, 2020. 34 NAV per Share increased 46.31% from $17.49 at December 31, 2019 to $25.59 at December 31, 2020. The Trust’s NAV per Share rose slightly less than the price per ounce of silver on a percentage basis due to the Sponsor’s Fee, net of waiver, which was $1,787,310 for the year, or 0.30% of the Trust’s ANAV. The NAV per Share of $27.94 at September 1, 2020 was the highest during the year, compared with a low of $11.63 at March 19, 2020. The increase in net assets from operations for the year ended December 31, 2020 was $261,211,613, resulting from a change in unrealized gain on investment in silver of $258,078,973, a realized gain of $174,027 on the transfer of silver to pay expenses, and a realized gain of $4,745,923 on silver distributed for the redemption of Shares, offset by the Sponsor’s Fee, net of waiver, of $1,787,310. Other than the Sponsor’s Fee, the Trust had no expenses during the year ended December 31, 2020. The year ended December 31, 2019 The Trust’s NAV increased from $339,734,175 at December 31, 2018 to $407,463,630 at December 31, 2019, a 19.94% increase for the year. The increase in the Trust’s NAV resulted primarily from an increase in outstanding Shares, which rose from 22,600,000 Shares at December 31, 2018 to 23,300,000 Shares at December 31, 2019, a result of 2,250,000 Shares (45 Baskets) being created and 1,550,000 Shares (31 Baskets) being redeemed during the year and an increase in the price per ounce of silver, which rose 16.68% from $15.47 at December 31, 2018 to $18.05 at December 31, 2019. NAV per Share increased 16.37% from $15.03 at December 31, 2018 to $17.49 at December 31, 2019. The Trust’s NAV per Share rose slightly less than the price per ounce of silver on a percentage basis due to the Sponsor’s Fee, net of waiver, which was $1,087,303 for the year, or 0.30% of the Trust’s ANAV. The NAV per Share of $18.73 at September 4, 2019 was the highest during the year, compared with a low of $13.96 at May 29, 2019. The increase in net assets from operations for the year ended December 31, 2019 was $56,420,636, resulting from a change in unrealized gain on investment in silver of $59,906,512, a realized loss of $149,268 on the transfer of silver to pay expenses, a realized loss of $2,249,305 on silver distributed for the redemption of Shares, and the Sponsor’s Fee, net of waiver, of $1,087,303. Other than the Sponsor’s Fee, the Trust had no expenses during the year ended December 31, 2019. The year ended December 31, 2018 The Trust’s NAV decreased from $351,050,772 at December 31, 2017 to $339,734,175 at December 31, 2018, a 3.22% decrease for the year. The decrease in the Trust’s NAV resulted primarily from an increase in outstanding Shares, which rose from 21,350,000 Shares at December 31, 2017 to 22,600,000 Shares at December 31, 2018, a result of 3,000,000 Shares (60 Baskets) being created and 1,750,000 Shares (35 Baskets) being redeemed during the year and a decrease in the price per ounce of silver, which fell 8.30% from $16.87 at December 31, 2017 to $15.47 at December 31, 2018. NAV per Share decreased 8.58% from $16.44 at December 31, 2017 to $15.03 at December 31, 2018. The Trust’s NAV per Share fell slightly more than the price per ounce of silver on a percentage basis due to the Sponsor’s Fee, net of waiver, which was $984,811 for the year, or 0.30% of the Trust’s ANAV. The NAV per Share of $17.08 at January 25, 2018 was the highest during the year, compared with a low of $13.58 at November 14, 2018. 35 The decrease in net assets from operations for the year ended December 31, 2018 was $28,163,930, resulting from a change in unrealized loss on investment in silver of $22,626,118, a realized loss of $178,535 on the transfer of silver to pay expenses, a realized loss of $4,374,466 on silver distributed for the redemption of Shares, and the Sponsor’s Fee, net of waiver, of $984,811. Other than the Sponsor’s Fee, the Trust had no expenses during the year ended December 31, 2018. Off-Balance Sheet Arrangements The Trust is not a party to any off-balance sheet arrangements.