abrdn Silver ETF Trust - Quarter Report: 2010 September (Form 10-Q)

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 the 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 Date of Inception. 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 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.

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The Quarter Ended September 30, 2010

During the period the market value of the Trust’s assets increased from $161,838,703 on July 1, 2010 to $246,357,661 on September 30, 2010, representing a 52.22% increase. The number of Shares outstanding increased from 8,700,000 at July 1, 2010 to 11,200,000 at September 30, 2010, with 25 Baskets created and no Baskets redeemed, representing 2,500,000 Shares created.

The NAV per Share increased from $18.60 on July 1, 2010 to $21.99 on September 30, 2010. The NAV per Share increased proportionately slightly less than the price per ounce of Silver ($18.65 on July 1, 2010 to $22.07 on September 30, 2010) due to the Sponsor’s Fee, which was $136,759 for the quarter.

The NAV per Share of $21.99, on September 30, 2010, was the highest during the quarter, compared with a low of $17.50 on July 20, 2010.

Net loss for the quarter was $121,752, resulting from a net gain of $15,007 on the transfer of Silver to pay the Sponsor’s Fee, which was offset by the Sponsor’s Fees of $136,759. Other than the Sponsor’s Fee, the Trust had no other expenses during the period.

The Nine Months Ended September 30, 2010

During the period the market value of the Trust’s assets increased from $157,719,704 on January 4, 2010 (January 1-3, 2010 were not business days; the market value of the Trust’s assets on December 31, 2009 was $156,066,265) to $246,357,661 at September 30 2010, representing a 5.62% increase. The number of Shares outstanding increased from 9,200,000 at January 1, 2010 to 11,200,000 at September 30 2010, with 56 Baskets created and 36 Baskets redeemed, representing 2,000,000 net Shares created.

The NAV per Share increased from $17.15 on January 4, 2010 to $21.99 on September 30, 2010. The NAV per Share increased proportionately slightly less than the price per ounce of Silver ($17.17 on January 4, 2010 to $22.07 on September 30, 2010) due to Sponsor’s Fee, which was $308,023 for the nine months. Other than the Sponsor’s Fee, the Trust had no other expenses during the period.

The NAV per Share of $21.99, on September 30, 2010, was the highest during the period, compared with a low of $15.12 on February 8, 2010.

Net gain for the period was $7,342,288, resulting from a net gain of $28,988 on the transfer of Silver to pay the Sponsor’s Fee and a net gain of $7,621,323 on Silver distributed for the redemptions of Baskets, which was offset by the Sponsor’s Fees of $308,023. Other than the Sponsor’s Fee, the Trust had no other expenses during the period.

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 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 September 30, 2010 the Trust did not have any cash balances.

Critical Accounting Estimates

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. In addition, please refer to Note 2 to the financial statements for further discussion of accounting policies.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

The authorized officers of the Sponsor performing functions equivalent to those that a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, and 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 have been effective as of the end of the period covered by this Form 10-Q.

There have been changes in the Trust’s or Sponsor’s internal control over financial reporting that occurred during the Trust’s third fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s or Sponsor’s internal control over financial reporting; these changes have occurred as a result of the Sponsor’s review of the control processes; the changes made strengthen the review and reconciliation procedures over the financial statements.

Item 4T. Controls and Procedures

Not applicable.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors since last disclosed in the prospectus included in the registrant’s registration statement filed on Form S-1 on July 21, 2009.

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

Item 2(a).	None.
Item 2(b).	Not applicable.
Item 2(c).	For the three months ended September 30, 2010:
	25 Baskets were created.
	No Baskets were redeemed.

Period		Total Baskets Redeemed			Total Shares Redeemed			Average Ounces of Platinum Per Share
07/01/10-07/31/10			—			—			—
08/01/10-08/31/10			—			—			—
09/01/10-09/30/10			—			—			—
Total			—			—			—

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

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Item 6. Exhibits

(a) Exhibits

31.1	Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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 thereunto duly authorized.

	ETF SECURITIES USA LLC
	Sponsor of the ETFS Silver Trust
	(Registrant)
Date: November 12, 2010	/s/ Graham Tuckwell
	Graham Tuckwell
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: November 12, 2010	/s/ Thomas Quigley
	Thomas Quigley
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

* The Registrant is a trust and the persons are signing in their capacities as officers of ETF Securities USA LLC, the Sponsor of the Registrant.

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Exhibit Index

31.1	Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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