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EX-32.2 - EX-32.2 - Invesco DB Multi-Sector Commodity Trustmst-ex322_73.htm
EX-32.1 - EX-32.1 - Invesco DB Multi-Sector Commodity Trustmst-ex321_74.htm
EX-31.2 - EX-31.2 - Invesco DB Multi-Sector Commodity Trustmst-ex312_75.htm
EX-31.1 - EX-31.1 - Invesco DB Multi-Sector Commodity Trustmst-ex311_76.htm

 

EXPLANATORY NOTE

 

PowerShares DB Multi-Sector Commodity Trust (the “Trust”) is a Delaware statutory trust organized in seven separate series - PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund, and PowerShares DB Agriculture Fund (each a “Fund” and collectively the “Funds”).  Since the Trust’s commencement of investment operations on January 3, 2007, the managing owner has filed separate quarterly reports on Form 10-Q for each of the Funds beginning with the Form 10-Q for the quarterly period ended March 31, 2007.  A duplicate version of the Forms 10-Q for each Fund have similarly been filed for the Trust.  As such, the Form 10-Q for each Fund could be located in the applicable Fund’s EDGAR Company Filings page and the Forms 10-Q for all seven Funds could be located in the Trust’s EDGAR Company Filings page. Although the Form 10-Qs have historically been filed in duplicate for both the Trust and the Funds, all details included therein, in particular the financial information, are Fund specific.

 

Due to an EDGAR tagging error, the quarterly reports on Form 10-Q for the quarterly period ended June 30, 2016 filed with the Securities Exchange Commission on August 9, 2016 (the “Q2 Forms 10-Q”) were tagged for each of the Funds but the Trust was not appropriately tagged.  As a result, the Q2 Forms 10-Q can be located in the EDGAR Company Filings page for each of the Funds, as applicable, but they are not located on the EDGAR Company Filings page for the Trust.

 

The sole purpose of filing these Q2 Forms 10-Q is to file the Quarterly Reports on behalf of the Trust, among other things, so that they may be reflected on the EDGAR Company Filings page for the Trust.  No changes have been made to any of the Q2 Form 10-Q. Each Q2 Form 10-Q speaks as of the original filing date of such Q2 Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Q2 Form 10-Q.

 

 

 

 


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

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:                    001-33234

 

POWERSHARES DB SILVER FUND

(A Series of PowerShares DB Multi-Sector Commodity Trust)

(Exact name of Registrant as specified in its charter)

 

 

Delaware

87-0778072

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

 

 

c/o Invesco PowerShares Capital Management LLC
3500 Lacey Road, Suite 700
Downers Grove, Illinois

60515

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (800) 983-0903

 

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, an 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, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-Accelerated Filer

  (Do not check if a smaller reporting company)

Smaller reporting company

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

Indicate the number of outstanding Shares as of June 30, 2016: 800,000 Shares.

 

 

 

 

 


 

POWERSHARES DB SILVER FUND

(A SERIES OF POWERSHARES DB MULTI-SECTOR COMMODITY TRUST)

QUARTER ENDED JUNE 30, 2016

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

 

 

 

 

 

ITEM 1.

 

FINANCIAL STATEMENTS

 

1

 

 

Notes to Unaudited Financial Statements

 

10

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

20

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

33

ITEM 4.

 

CONTROLS AND PROCEDURES

 

35

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

35

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

Item 1A.

 

Risk Factors

 

35

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

Item 3.

 

Defaults Upon Senior Securities

 

36

Item 4.

 

Mine Safety Disclosures

 

36

Item 5.

 

Other Information

 

36

Item 6.

 

Exhibits

 

37

 

 

 

 

 

SIGNATURES

 

38

 

 

 

i


 

PART I. FINANCIAL INFORMATION

ITEM  1.

FINANCIAL STATEMENTS.

PowerShares DB Silver Fund

Statements of Financial Condition

June 30, 2016 and December 31, 2015

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Assets

 

 

 

 

 

 

 

 

United States Treasury Obligations, at fair value (cost $21,491,222  and $17,296,411, respectively)

 

$

21,493,664

 

 

$

17,298,121

 

Cash held by custodian

 

 

1,742,212

 

 

 

285,679

 

Variation margin receivable

 

 

271,080

 

 

 

 

Total assets

 

$

23,506,956

 

 

$

17,583,800

 

Liabilities

 

 

 

 

 

 

 

 

Variation margin payable

 

$

 

 

$

49,491

 

Management fee payable

 

 

13,328

 

 

 

11,385

 

Brokerage fee payable

 

 

2,504

 

 

 

3,933

 

Total liabilities

 

 

15,832

 

 

 

64,809

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Shareholder's equity—General Shares

 

 

1,174

 

 

 

876

 

Shareholders' equity—Shares

 

 

23,489,950

 

 

 

17,518,115

 

Total shareholders' equity

 

 

23,491,124

 

 

 

17,518,991

 

Total liabilities and equity

 

$

23,506,956

 

 

$

17,583,800

 

General Shares outstanding

 

 

40

 

 

 

40

 

Shares outstanding

 

 

800,000

 

 

 

800,000

 

 

 

 

 

 

 

 

 

 

Net asset value per share

 

$

29.36

 

 

$

21.90

 

 

 

 

 

 

 

 

 

 

Market value per share

 

$

29.75

 

 

$

21.92

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

1


 

PowerShares DB Silver Fund

Schedule of Investments

June 30, 2016

(Unaudited)

 

Description

 

Percentage  of

Shareholders'

Equity

 

 

Fair Value

 

 

Face Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills, 0.190% due July 7, 2016

 

 

4.26

%

 

$

999,992

 

 

$

1,000,000

 

U.S. Treasury Bills, 0.250% due July 21, 2016

 

 

10.64

 

 

 

2,499,757

 

 

 

2,500,000

 

U.S. Treasury Bills, 0.260% due July 28, 2016

 

 

4.26

 

 

 

999,871

 

 

 

1,000,000

 

U.S. Treasury Bills, 0.275% due August 4, 2016

 

 

12.77

 

 

 

2,999,406

 

 

 

3,000,000

 

U.S. Treasury Bills, 0.340% due September 1, 2016(b)

 

 

59.57

 

 

 

13,994,638

 

 

 

14,000,000

 

Total United States Treasury Obligations (cost $21,491,222)

 

 

91.50

%

 

$

21,493,664

 

 

 

 

 

 

(a)

Security may be traded on a discount basis. The interest rate shown represents the discount rate at the most recent auction date of the security prior to period end.

(b)

United States Treasury Obligations of $ 3,998,400 are on deposit with the Commodity Broker and held as maintenance margin for open futures contracts.

 

Description

 

Type of

Contract

 

Unrealized

Appreciation/

(Depreciation) as

a Percentage of

Shareholders'

Equity

 

 

Unrealized

Appreciation/

(Depreciation) (c)

 

 

Notional

Market

Value

 

Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Silver (251 contracts, settlement date January 27, 2017)

 

Long

 

 

20.15

%

 

$

4,733,875

 

 

$

23,489,835

 

Total Commodity Futures Contracts

 

 

 

 

20.15

%

 

$

4,733,875

 

 

$

23,489,835

 

 

(c)

Unrealized appreciation/(depreciation) is presented above, net by contract.

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

2


 

PowerShares DB Silver Fund

Schedule of Investments

December 31, 2015

(Unaudited)

 

Description

 

Percentage  of

Shareholders’

Equity

 

 

Fair Value

 

 

Face Value

 

United States Treasury Obligations (a)

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills, 0.235% due January 7, 2016

 

 

4.57

%

 

$

799,997

 

 

$

800,000

 

U.S. Treasury Bills, 0.205% due January 14, 2016

 

 

2.85

 

 

 

499,986

 

 

 

500,000

 

U.S. Treasury Bills, 0.195% due January 21, 2016

 

 

5.71

 

 

 

999,959

 

 

 

1,000,000

 

U.S. Treasury Bills, 0.170% due January 28, 2016

 

 

2.85

 

 

 

499,959

 

 

 

500,000

 

U.S. Treasury Bills, 0.145% due February 18, 2016

 

 

19.98

 

 

 

3,499,538

 

 

 

3,500,000

 

U.S. Treasury Bills, 0.140% due February 25, 2016 (b)

 

 

39.95

 

 

 

6,999,314

 

 

 

7,000,000

 

U.S. Treasury Bills, 0.215% due March 3, 2016

 

 

22.83

 

 

 

3,999,368

 

 

 

4,000,000

 

Total United States Treasury Obligations (cost $17,296,411)

 

 

98.74

%

 

$

17,298,121

 

 

 

 

 

 

(a)

Security may be traded on a discount basis. The interest rate shown represents the discount rate at the most recent auction date of the security prior to year end.

(b)

United States Treasury Obligations of $6,998,600 are on deposit with the Commodity Broker and held as maintenance margin for open futures contracts.

 

Description

 

Type of

Contract

 

Unrealized

Appreciation/

(Depreciation) as

a Percentage of

Shareholders’

Equity

 

 

Unrealized

Appreciation/

(Depreciation) (c)

 

 

Notional

Market

Value

 

Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMEX Silver (254 contracts, settlement date March 29, 2016)

 

Long

 

 

(2.94

)%

 

$

(515,794

)

 

$

17,529,810

 

MET-ICE Mini Silver (1 contract, settlement date March 29, 2016)

 

Short

 

 

0.00

 

 

 

417

 

 

 

(13,803

)

Total Commodity Futures Contracts

 

 

 

 

(2.94

)%

 

$

(515,377

)

 

$

17,516,007

 

 

(c)

Unrealized appreciation/(depreciation) is presented above, net by contract.

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

3


 

PowerShares DB Silver Fund

Statements of Income and Expenses

For the Three and Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

$

13,893

 

 

$

593

 

 

$

23,297

 

 

$

1,534

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management Fee

 

 

39,574

 

 

 

39,444

 

 

 

74,745

 

 

 

79,260

 

Brokerage Commissions and Fees

 

 

 

 

 

29

 

 

 

 

 

 

53

 

Interest Expense (a)

 

 

141

 

 

 

 

 

 

298

 

 

 

 

Total Expenses

 

 

39,715

 

 

 

39,473

 

 

 

75,043

 

 

 

79,313

 

Net Investment Income (Loss)

 

 

(25,822

)

 

 

(38,880

)

 

 

(51,746

)

 

 

(77,779

)

Net Realized and Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury Obligations

 

 

38

 

 

 

21

 

 

 

38

 

 

 

21

 

Commodity Futures Contracts

 

 

3,885

 

 

 

(869

)

 

 

773,857

 

 

 

(14,494

)

Net Realized Gain (Loss)

 

 

3,923

 

 

 

(848

)

 

 

773,895

 

 

 

(14,473

)

Net Change in Unrealized Gain (Loss) on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States Treasury Obligations

 

 

(1,403

)

 

 

478

 

 

 

732

 

 

 

26

 

Commodity Futures Contracts

 

 

3,909,295

 

 

 

(1,371,888

)

 

 

5,249,252

 

 

 

(51,183

)

Net Change in Unrealized Gain (Loss)

 

 

3,907,892

 

 

 

(1,371,410

)

 

 

5,249,984

 

 

 

(51,157

)

Net Realized and Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

3,911,815

 

 

 

(1,372,258

)

 

 

6,023,879

 

 

 

(65,630

)

Net Income (Loss)

 

$

3,885,993

 

 

$

(1,411,138

)

 

$

5,972,133

 

 

$

(143,409

)

 

(a)

Interest Expense for the periods ended June 30, 2016 represent interest expense on overdraft balances.  These amounts are  included in Interest Income for the periods ended June 30, 2015.

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

4


 

PowerShares DB Silver Fund

Statement of Changes in Shareholders’ Equity

For the Three Months Ended June 30, 2016

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at April 1, 2016

 

 

40

 

 

$

980

 

 

 

800,000

 

 

$

19,604,151

 

 

$

19,605,131

 

Sale of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(25,820

)

 

 

(25,822

)

Net Realized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

1

 

 

 

 

 

 

 

3,922

 

 

 

3,923

 

Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

195

 

 

 

 

 

 

 

3,907,697

 

 

 

3,907,892

 

Net Income (Loss)

 

 

 

 

 

 

194

 

 

 

 

 

 

 

3,885,799

 

 

 

3,885,993

 

Net Change in Shareholders' Equity

 

 

 

 

 

194

 

 

 

 

 

 

3,885,799

 

 

 

3,885,993

 

Balance at June 30, 2016

 

 

40

 

 

$

1,174

 

 

 

800,000

 

 

$

23,489,950

 

 

$

23,491,124

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

 

5


 

PowerShares DB Silver Fund

Statement of Changes in Shareholders’ Equity

For the Three Months Ended June 30, 2015

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at April 1, 2015

 

 

40

 

 

$

1,069

 

 

 

800,000

 

 

$

21,372,005

 

 

$

21,373,074

 

Sale of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(38,878

)

 

 

(38,880

)

Net Realized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

(848

)

 

 

(848

)

Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

(69

)

 

 

 

 

 

 

(1,371,341

)

 

 

(1,371,410

)

Net Income (Loss)

 

 

 

 

 

 

(71

)

 

 

 

 

 

 

(1,411,067

)

 

 

(1,411,138

)

Net Change in Shareholders' Equity

 

 

 

 

 

(71

)

 

 

 

 

 

(1,411,067

)

 

 

(1,411,138

)

Balance at June 30, 2015

 

 

40

 

 

$

998

 

 

 

800,000

 

 

$

19,960,938

 

 

$

19,961,936

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

6


 

PowerShares DB Silver Fund

Statement of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 2016

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at January 1, 2016

 

 

40

 

 

$

876

 

 

 

800,000

 

 

$

17,518,115

 

 

$

17,518,991

 

Sale of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

(51,743

)

 

 

(51,746

)

Net Realized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

39

 

 

 

 

 

 

 

773,856

 

 

 

773,895

 

Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

262

 

 

 

 

 

 

 

5,249,722

 

 

 

5,249,984

 

Net Income (Loss)

 

 

 

 

 

 

298

 

 

 

 

 

 

 

5,971,835

 

 

 

5,972,133

 

Net Change in Shareholders' Equity

 

 

 

 

 

298

 

 

 

 

 

 

5,971,835

 

 

 

5,972,133

 

Balance at June 30, 2016

 

 

40

 

 

$

1,174

 

 

 

800,000

 

 

$

23,489,950

 

 

$

23,491,124

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

7


 

PowerShares DB Silver Fund

Statement of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 2015

(Unaudited)

 

 

 

General Shares

 

 

Shares

 

 

Total

 

 

 

Shares

 

 

Total

Equity

 

 

Shares

 

 

Total

Equity

 

 

Shareholders'

Equity

 

Balance at January 1, 2015

 

 

40

 

 

$

1,005

 

 

 

800,000

 

 

$

20,104,340

 

 

$

20,105,345

 

Sale of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) due to Share Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

(77,776

)

 

 

(77,779

)

Net Realized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(14,471

)

 

 

(14,473

)

Net Change in Unrealized Gain (Loss) on United States Treasury Obligations and Commodity Futures Contracts

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(51,155

)

 

 

(51,157

)

Net Income (Loss)

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

(143,402

)

 

 

(143,409

)

Net Change in Shareholders' Equity

 

 

 

 

 

(7

)

 

 

 

 

 

(143,402

)

 

 

(143,409

)

Balance at June 30, 2015

 

 

40

 

 

$

998

 

 

 

800,000

 

 

$

19,960,938

 

 

$

19,961,936

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

8


 

PowerShares DB Silver Fund

Statements of Cash Flows

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

5,972,133

 

 

$

(143,409

)

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

 

 

 

 

 

 

 

 

Cost of securities purchased

 

 

(39,471,398

)

 

 

(38,998,609

)

Proceeds from securities sold and matured

 

 

35,299,922

 

 

 

38,999,980

 

Net accretion of discount on United States Treasury Obligations

 

 

(23,297

)

 

 

(1,677

)

Net realized (gain) loss on United States Treasury Obligations

 

 

(38

)

 

 

(21

)

Net change in unrealized (gain) loss on United States Treasury Obligations and Commodity Futures Contracts

 

 

(732

)

 

 

51,157

 

Cash transfer to Commodity Broker to satisfy variation margin requirements (Note 4)

 

 

 

 

 

20,120

 

Cash received (paid) to Commodity Broker to satisfy open variation margin, net (Note 4)

 

 

 

 

 

(1,180,028

)

Change in operating receivables and liabilities:

 

 

 

 

 

 

 

 

Variation margin

 

 

(320,571

)

 

 

142,913

 

Management fee payable

 

 

1,943

 

 

 

2,104

 

Brokerage fee payable

 

 

(1,429

)

 

 

(5

)

Net cash provided by (used for) operating activities

 

 

1,456,533

 

 

 

(1,107,475

)

Cash at beginning of period

 

 

285,679

 

 

 

2,230,396

 

Cash at end of period

 

$

1,742,212

 

 

$

1,122,921

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

298

 

 

$

 

 

See accompanying Notes to Unaudited Financial Statements which are an integral part of the financial statements.

9


 

PowerShares DB Silver Fund

Notes to Unaudited Financial Statements

June 30, 2016

(1) Background

On October 24, 2014, DB Commodity Services LLC, a Delaware limited liability company (“DBCS”), DB U.S. Financial Markets Holding Corporation (“DBUSH”) and Invesco PowerShares Capital Management LLC (“Invesco”) entered into an Asset Purchase Agreement (the “Agreement”). DBCS is a wholly-owned subsidiary of DBUSH. DBCS agreed to transfer and sell to Invesco all of DBCS’ interest in the PowerShares DB Silver Fund (the “Fund”), a separate series of PowerShares DB Multi-Sector Commodity Trust (the “Trust”), a Delaware statutory trust organized in seven separate series, including the sole and exclusive power to direct the business and affairs of the Fund, as well as certain other assets pertaining to the management of the Trust and the Fund, pursuant to the terms and conditions of the Agreement (the “Transaction”).

The Transaction was consummated on February 23, 2015 (the “Closing Date”). Invesco now serves as the managing owner (the “Managing Owner”), commodity pool operator and commodity trading advisor of the Fund, in replacement of DBCS (the “Predecessor Managing Owner”).

(2) Organization

The Fund is a separate series of the Trust. The Trust is a Delaware statutory trust organized in seven separate series and was formed on August 3, 2006. The Predecessor Managing Owner seeded the Fund with a capital contribution of $1,000 in exchange for 40 General Shares of the Fund. The General Shares were sold to the Managing Owner by the Predecessor Managing Owner pursuant to the terms of the Agreement. The fiscal year end of the Fund is December 31st. The term of the Fund is perpetual (unless terminated earlier in certain circumstances) as provided for in the Fifth Amended and Restated Declaration of Trust, as amended, and Trust Agreement of the Trust (the “Trust Agreement”). The Fund has an unlimited number of shares authorized for issuance.

The Fund offers common units of beneficial interest (the “Shares”) only to certain eligible financial institutions (the “Authorized Participants”) in one or more blocks of 200,000 Shares, called a Basket. The Fund commenced investment operations on January 3, 2007. The Fund commenced trading on the American Stock Exchange (which became the NYSE Alternext US LLC (the “NYSE Alternext”)) on January 5, 2007 and, as of November 25, 2008, is listed on the NYSE Arca, Inc. (the “NYSE Arca”).

This Quarterly Report (the “Report”) covers the three months ended June 30, 2016 and 2015 (hereinafter referred to as the “Three Months Ended June 30, 2016” and the “Three Months Ended June 30, 2015”, respectively) and the six months ended June 30, 2016 and 2015(hereinafter referred to as the "Six Months Ended June 30, 2016" and the "Six Months Ended June 30, 2015", respectively).  The Fund’s performance information from inception up to and excluding the Closing Date is a reflection of the performance associated with the Predecessor Managing Owner. The Managing Owner has served as managing owner of the Fund since the Closing Date, and the Fund’s performance information since the Closing Date is a reflection of the performance associated with the Managing Owner. Past performance of the Fund is not necessarily indicative of future performance.

The accompanying unaudited financial statements were prepared in accordance with 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 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 Fund’s financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on February 29, 2016.

(3) Fund Investment Overview

The Fund seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Silver Index Excess Return™ (“DBIQ-OY SI ER™”, or the “Index”) over time, plus the excess, if any, of the Fund’s interest income from its holdings of United States Treasury Obligations and dividends from its holdings in money market mutual funds (affiliated or otherwise) over the expenses of the Fund.  For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track the Index.  The Fund may hold United States Treasury Obligations and money market mutual funds (affiliated or otherwise) for margin and/or cash management purposes.

10


 

The Commodity Futures Trading Commission (the “CFTC”) or commodity exchanges, as applicable, impose position limits on market participants trading in the commodity futures contract included in the Index. The Index is comprised of futures contracts on the Index Commodity that expire in a specific month and trade on a specific exchange (the “Index Contracts”). If the Managing Owner determines in its commercially reasonable judgment that it has become impracticable or inefficient for any reason for the Fund to gain full or partial exposure to the Index Commodity by investing in the Index Contract, the Fund may invest in a futures contract referencing the Index Commodity other than the Index Contract or, in the alternative, invest in other futures contracts not based on the Index Commodity if, in the commercially reasonable judgment of the Managing Owner, such futures contracts tend to exhibit trading prices that correlate with the Index Commodity.

(4) Service Providers and Related Party Agreements

The Trustee

Under the Trust Agreement, Wilmington Trust Company, the trustee of the Trust and the Fund (the “Trustee”), has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Trust and the Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing Owner.

The Managing Owner

The Managing Owner serves as the Fund’s commodity pool operator, commodity trading advisor and managing owner. The Fund pays the Managing Owner a management fee, monthly in arrears, in an amount equal to 0.75% per annum of the daily net asset value of the Fund (the “Management Fee”). From inception up to and excluding the Closing Date, all Management Fees were payable to the Predecessor Managing Owner. The Managing Owner has served as managing owner of the Fund since the Closing Date and all Management Fee accruals since the Closing Date have been paid to the Managing Owner.

The Fund may, for cash management purposes, invest in money market mutual funds that are managed by an affiliate of the Managing Owner.  Through June 20, 2017, the Managing Owner has contractually agreed to waive a portion of the Fund’s management fee in an amount equal to 100% of the net advisory fees an affiliate of the Managing Owner receives that are attributable to the Fund’s investments in money market mutual funds managed by that affiliate.   The Managing Owner cannot discontinue this waiver prior to its expiration.

The Commodity Broker

Effective as of the Closing Date, Morgan Stanley & Co. LLC, a Delaware limited liability company, serves as the Fund’s futures clearing broker (the “Commodity Broker”). Deutsche Bank Securities Inc. (“DBSI”), a Delaware corporation, served as the Fund’s futures clearing broker up to and excluding the Closing Date (the “Predecessor Commodity Broker”). DBSI is an indirect wholly-owned subsidiary of Deutsche Bank AG and is an affiliate of the Predecessor Managing Owner.

A variety of executing brokers execute futures transactions on behalf of the Fund. Such executing brokers give-up all such transactions to the Commodity Broker. In its capacity as clearing broker, the Commodity Broker may execute or receive transactions executed by others and clears all of the Fund’s futures transactions and performs certain administrative and custodial services for the Fund. The Commodity Broker is responsible, among other things, for providing periodic accountings of all dealings and actions taken by the Trust on behalf of the Fund during the reporting period, together with an accounting of all securities, cash or other indebtedness or obligations held by it or its nominees for or on behalf of the Fund.

For the avoidance of doubt, from inception up to and excluding the Closing Date, commission payments were paid to the Predecessor Commodity Broker. The Commodity Broker has served as the Fund’s futures clearing broker since the Closing Date and all commission accruals since the Closing Date have been paid to the Commodity Broker.

The Administrator, Custodian and Transfer Agent

The Bank of New York Mellon (the “Administrator” and “Custodian”) is the administrator, custodian and transfer agent of the Fund. The Fund and the Administrator have entered into separate administrative, custodian, transfer agency and service agreements (collectively referred to as the “Administration Agreement”).

Pursuant to the Administration Agreement, the Administrator performs or supervises the performance of services necessary for the operation and administration of the Fund (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, net asset value calculations, accounting and other fund administrative

11


 

services. The Administrator maintains certain financial books and records, including: Basket creation and redemption books and records, fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details, and trading and related documents received from the Commodity Broker and other unaffiliated futures commission.  The Managing Owner pays the Administrator fees for its services out of the Management Fee.

As of December 31, 2014, the Fund held $2,230,396 of cash and $18,999,665 of United States Treasury Obligations at the Predecessor Commodity Broker. In conjunction with the Transaction, during the three-day period from February 24, 2015 to February 26, 2015, the Fund transferred $2,206,416 of cash and $19,999,251 of United States Treasury Obligations from the Predecessor Commodity Broker to the Custodian. Additionally, during that same three-day period, the Fund transferred all of its open positions of commodity futures contracts from the Predecessor Commodity Broker to the Commodity Broker and accordingly, $20,120 of futures variation margin was credited to the Commodity Broker account. $15,998,400 of United States Treasury Obligations was also transferred from the Custodian to the Commodity Broker to satisfy maintenance margin requirements. Effective February 26, 2015, the Managing Owner began transferring cash daily from the Custodian to the Commodity Broker to satisfy the previous day’s variation margin on open futures contracts.

The Distributor

Effective June 20, 2016, Invesco Distributors, Inc. (the “Distributor”) became distributor and began providing certain distribution services to the Fund. Pursuant to the Distribution Services Agreement among the Managing Owner, the Fund and the Distributor, the Distributor assists the Managing Owner and the Administrator with certain functions and duties relating to distribution and marketing services to the Fund including reviewing and approving marketing materials. Prior to June 20, 2016, ALPS Distributors, Inc. provided distribution services to the Fund.

The Managing Owner pays the Distributor a distribution fee out of the Management Fee.

Index Sponsor

Effective as of the Closing Date, the Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc. to serve as the index sponsor (the “Index Sponsor”). Prior to the Closing Date, the index sponsor was Deutsche Bank AG London. The Index Sponsor calculates and publishes the daily index levels and the indicative intraday index levels. Additionally, the Index Sponsor also calculates the indicative value per Share of the Fund throughout each business day.

The Managing Owner pays the Index Sponsor a licensing fee and an index services fee out of the Management Fee for performing its duties.

Marketing Agent

Effective as of the Closing Date, the Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc. as the marketing agent (the “Marketing Agent”) to assist the Managing Owner by providing support to educate institutional investors about the DBIQ indices and to complete governmental or institutional due diligence questionnaires or requests for proposals related to the DBIQ indices.

The Managing Owner pays the Marketing Agent a marketing services fee out of the Management Fee.

The Marketing Agent will not open or maintain customer accounts or handle orders for the Fund. The Marketing Agent has no responsibility for the performance of the Fund or the decisions made or actions taken by the Managing Owner.

(5) Summary of Significant Accounting Policies

(a) Basis of Presentation

The financial statements of the Fund have been prepared using U.S. generally accepted accounting principles (“U.S. GAAP”).

The Fund has determined that it meets the definition of an investment company and has prepared the financial statements in conformity with U.S. GAAP for investment companies in conformity with accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946—Investment Companies.

12


 

(b) Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. Actual results could differ from those estimates.

(c) Financial Instruments and Fair Value

Investment transactions are recorded in the Statements of Financial Condition on a trade date basis at fair value with changes in fair value recognized in earnings in each period. U.S. GAAP 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, under current market conditions.

U.S. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods or market conditions may result in transfers in or out of an investment’s assigned level:

Level 1—Prices are determined using quoted prices in an active market for identical assets.

Level 2—Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.

Level 3—Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.

United States Treasury Obligations are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as developments related to specific securities, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. All debt obligations involve some risk of default with respect to interest and/or principal payments.

Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded.

Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day NAV per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.

When market closing prices are not available, the Managing Owner may value an asset of the Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards.

The levels assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.

The following is a summary of the tiered valuation input levels as of June 30, 2016:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

United States Treasury Obligations

 

$

 

 

$

21,493,664

 

 

$

 

 

$

21,493,664

 

Commodity Futures Contracts (a)

 

$

4,733,875

 

 

$

 

 

$

 

 

$

4,733,875

 

 

(a)

Unrealized appreciation (depreciation).

13


 

The following is a summary of the tiered valuation input levels as of December 31, 2015:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

United States Treasury Obligations

 

$

 

 

$

17,298,121

 

 

$

 

 

$

17,298,121

 

Commodity Futures Contracts (a)

 

$

(515,377

)

 

$

 

 

$

 

 

$

(515,377

)