abrdn Silver ETF Trust - Quarter Report: 2011 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2011

	or

o	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: 001-34412

ETFS SILVER TRUST

(Exact name of registrant as specified in its charter)


New York	26-4586763
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

c/o ETF Securities USA LLC
48 Wall Street, 11^th Floor
New York, NY	10005
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:
(212) 918-4954

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every 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 o No x

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 the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)


Large accelerated filer	o	Accelerated filer x
Non accelerated filer	o	Smaller reporting company o


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

As of November 7, 2011, ETFS Silver Trust has 19,600,000 ETFS Physical Silver Shares outstanding.

ETFS SILVER TRUST

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2011

INDEX


PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	12
Item 4T.	Controls and Procedures	12

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	13
Item 1.A	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	(Removed and Reserved)	13
Item 5.	Other Information	13
Item 6.	Exhibits	14

SIGNATURES		15

ETFS SILVER TRUST

PART I. FINANCIAL INFORMATION]

Item 1. Financial Statements (Unaudited)

Condensed Statements of Financial Condition (Unaudited)
At September 30, 2011 and December 31, 2010

	September 30, 2011			December 31, 2010
ASSETS

Investment in silver (1)	$	515,572,136		$	329,357,195
Silver receivable		6,050,078			6,099,633

Total assets	$	521,622,214		$	335,456,828


LIABILITIES

Fees payable to Sponsor, net of waiver	$	145,961		$	124,332

Total liabilities	$	145,961		$	124,332


REDEEMABLE SHARES

Shares at redemption value to investors (2)	$	586,857,521		$	509,311,012
Shareholders’ deficit		(65,381,268	)		(173,978,516	)

Total liabilities, redeemable Shares & shareholders’ deficit	$	521,622,214		$	335,456,828


(1)	The market value of investment in silver at September 30, 2011 was $580,953,404 and at December 31, 2010 was $503,335,711.

(2)	Authorized share capital is unlimited and no par value per share. Shares issued and outstanding at September 30, 2011 were 19,400,000 and at December 31, 2010 were 16,700,000.

See Notes to the Unaudited Condensed Financial Statements

ETFS SILVER TRUST

Condensed Statements of Operations (Unaudited)
For the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2011 and 2010


	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010

REVENUES

Value of silver transferred to pay expenses	$	523,568		$	124,846		$	1,425,074		$	256,288
Cost of silver transferred to pay expenses		(349,622	)		(109,839	)		(923,129	)		(227,300	)

Gain on silver transferred to pay expenses	$	173,946		$	15,007		$	501,945		$	28,988

Gain on silver distributed for the redemption of Shares	$	27,766,318			—		$	78,032,045			7,621,323

Total gain on silver	$	27,940,264		$	15,007		$	78,533,990		$	7,650,311


EXPENSES

Sponsor’s Fee, net of waiver (Note 2.7)	$	516,410		$	136,759		$	1,446,703		$	308,023

Total expenses	$	516,410		$	136,759		$	1,446,703		$	308,023


Net gain / (loss) from operations	$	27,423,854		$	(121,752	)	$	77,087,287		$	7,342,288

Net gain / (loss) per Share	$	1.45		$	(0.01	)	$	4.25		$	0.87

Weighted average number of Shares		18,864,130			9,534,783			18,146,154			8,454,212

See Notes to the Unaudited Condensed Financial Statements

ETFS SILVER TRUST

Condensed Statements of Cash Flows (Unaudited)
For the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2011 and 2010


	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010

INCREASE / (DECREASE) IN CASH FROM OPERATIONS:

Cash proceeds received from transfer of silver	$	—		$	—		$	—		$	—
Cash expenses paid		—			—			—			—

Increase in cash resulting from operations	$	—		$	—		$	—		$	—

Cash and cash equivalents at beginning of period		—			—			—			—

Cash and cash equivalents at end of period	$	—		$	—		$	—		$	—


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

Value of silver received for creation of Shares	$	152,275,974		$	45,221,810		$	325,409,957		$	99,796,419

Value of silver distributed for redemption of Shares - at average cost	$	64,160,444		$	—		$	138,271,887		$	54,826,384


RECONCILIATION OF NET GAIN / (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

Net gain / (loss) from operations	$	27,423,854		$	(121,752	)	$	77,087,287		$	7,342,288
Adjustments to reconcile net gain / (loss) to net cash provided by operating activities:
Increase in silver assets		(87,765,908	)		(45,111,970	)		(186,214,941	)		(44,742,734	)
(Increase) / decrease in silver receivable		(6,050,078	)		(4,398,259	)		49,555			(4,398,259	)
(Decrease) / increase in amounts payable to Sponsor		(7,158	)		11,803			21,629			51,625
Increase / (decrease) in redeemable Shares:
Creations		158,326,052			49,620,178			325,360,402			104,194,787
Redemptions		(91,926,762	)		—			(216,303,932	)		(62,447,707	)

Net cash provided by operating activities	$	—		$	—		$	—		$	—


SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

Value of silver transferred to pay expenses	$	523,568		$	124,846		$	1,425,074		$	256,288

See Notes to the Unaudited Condensed Financial Statements

ETFS SILVER TRUST

Condensed Statement of Changes in Shareholders’ Deficit (Unaudited)
For the nine months ended September 30, 2011


	Nine months Ended September 30, 2011

Shareholders’ deficit - opening balance	$	(173,978,516	)
Net gain for the period		77,087,287
Adjustment of redeemable Shares to redemption value		31,509,961

Shareholders’ deficit - closing balance	$	(65,381,268	)

See Notes to the Unaudited Condensed Financial Statements

ETFS SILVER TRUST

Notes to the Unaudited Condensed Financial Statements

1. Organization

The ETFS Silver Trust (the “Trust”) is an investment trust formed on July 20, 2009 (the “Date of Inception”) under New York law pursuant to a depository trust agreement (the “Trust Agreement”) executed by ETF Securities USA LLC (the “Sponsor”) and the Bank of New York Mellon (the “Trustee”) at the time of the Trust’s organization. The Trust holds silver bullion and issues shares (“Shares”) (in minimum blocks of 100,000 Shares, also referred to as “Baskets”) in exchange for deposits of silver and distributes silver in connection with the redemption of Baskets. Shares represent units of fractional undivided beneficial interest in and ownership of the Trust which are issued by the Trust. The Sponsor is a Delaware limited liability company and a wholly-owned subsidiary of ETF Securities Limited, a Jersey, Channel Islands based company. The Trust is governed by the Trust Agreement.

The investment objective of the Trust is for the Shares to reflect the performance of the price of silver, less the Trust’s expenses and liabilities. The Trust is designed to provide an individual owner of beneficial interests in the Shares (a “Shareholder”) an opportunity to participate in the silver market through an investment in securities. The fiscal year end for the Trust is December 31.

The accompanying unaudited financial statements were prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and with the instructions for the Form 10-Q. In the opinion of management of the Sponsor, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the three and nine months ended September 30, 2011 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the operating results for the full year.

2. Significant Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires those responsible for preparing financial statements to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Trust.

2.1. Valuation of Silver

Silver is held by HSBC Bank USA, N.A. (the “Custodian”) on behalf of the Trust and is valued, for financial statement purposes, at the lower of cost or market. The cost of silver is determined according to the average cost method and the market value is based on the London Fix used to determine the net asset value (the “NAV”) of the Trust. Realized gains and losses on transfers of silver, or silver distributed for the redemption of Shares, are calculated on a trade date basis using average cost. The London Fix price for silver is set by three market making members of the London Bullion Market Association at approximately 12:00 noon London Time, on each working day.

Once the value of silver has been determined, the NAV is computed by the Trustee by deducting all accrued fees and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the silver and all other assets held by the Trust.

ETFS SILVER TRUST

2. Significant Accounting Policies (Continued)

2.1. Valuation of Silver (Continued)

The table below summarizes the unrealized gains or losses on the Trust’s silver holdings as of September 30, 2011 and December 31, 2010:

	September 30, 2011		December 31, 2010

Investment in silver - average cost	$	515,572,136	$	329,357,195
Unrealized gain on investment in silver		65,381,268		173,978,516

Investment in silver - market value	$	580,953,404	$	503,335,711

The Trust recognizes the diminution in value of the investment in silver which arises from market declines on an interim basis. Increases in the value of the investment in silver through market price recoveries in later interim periods of the same fiscal year are recognized in the later interim period. Increases in value recognized on an interim basis may not exceed the previously recognized diminution in value.

The per Share amount of silver exchanged for a purchase or redemption is calculated daily by the Trustee, using the London Fix to calculate the silver amount in respect of any liabilities for which covering silver sales have not yet been made, and represents the per Share amount of silver held by the Trust, after giving effect to its liabilities, to cover expenses and liabilities and any losses that may have occurred.

2.2. Silver Receivable and Payable

Silver receivable or payable represents the quantity of silver covered by contractually binding orders for the creation or redemption of Shares respectively, where the silver has not yet been transferred to or from the Trust’s account. Generally, ownership of the silver is transferred within three business days of the trade date. Silver receivable or payable at September 30, 2011 and December 31, 2010 is set out below:

	September 30, 2011		December 31, 2010

Silver receivable	$	6,050,078	$	6,099,633


Silver payable	$	—	$	—

2.3. Creations and Redemptions of Shares

The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets. The Trust issues Shares in Baskets to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. An Authorized Participant is a person who (1) is a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) is a participant in The Depository Trust Company, (3) has entered into an Authorized Participant Agreement with the Trustee, and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian. An Authorized Participant Agreement is an agreement entered into by each Authorized Participant, the Sponsor and the Trustee which provides the procedures for the creation and redemption of Baskets and for the delivery of the silver required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated silver account established with the Custodian or a silver clearing bank by an Authorized Participant.

ETFS SILVER TRUST

2. Significant Accounting Policies (Continued)

2.3. Creations and Redemptions of Shares (Continued)

The creation and redemption of Baskets is only made in exchange for the delivery to the Trust or the distribution by the Trust of the amount of silver represented by the Baskets being created or redeemed, the amount of which is based on the combined NAV of the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received.

The amount of bullion represented by the Baskets created or redeemed can only be settled to the nearest 1/1000th of an ounce. As a result, the value attributed to the creation or redemption of Shares may differ from the value of bullion to be delivered or distributed by the Trust. In order to ensure that the correct metal is available at all times to back the Shares, the Sponsor accepts an adjustment to its management fees in the event of any shortfall or excess. For each transaction, this amount is not more than 1/1000th of an ounce.

Authorized Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. The typical settlement period for Shares is three business days. In the event of a trade date at period end, where a settlement is pending, a respective account receivable and/or payable will be recorded. When silver is exchanged in settlement of a redemption, it is considered a sale of silver for financial statement purposes.

The Shares of the Trust are classified as “Redeemable Capital Shares” for financial statement purposes, since they are subject to redemption at the option of Authorized Participants. Outstanding Shares are reflected at redemption value, which represents the maximum obligation (based on NAV per Share), with the difference from historical cost recorded as an offsetting amount to retained earnings. Changes in the Shares for the nine months ended September 30, 2011 and for the year ended December 31, 2010 are set out below:


	Nine months Ended September 30, 2011			Year Ended December 31, 2010

Number of redeemable Shares
Opening balance		16,700,000			9,200,000
Creations		8,400,000			11,200,000
Redemptions		(5,700,000	)		(3,700,000	)

Closing balance		19,400,000			16,700,000


Redeemable Shares
Opening balance	$	509,311,012		$	156,066,265
Creations		325,360,402			253,323,773
Redemptions		(216,303,932	)		(65,395,525	)
Adjustment to redemption value		(31,509,961	)		165,316,499

Closing balance	$	586,857,521		$	509,311,012


Redemption value per Share at period end	$	30.25		$	30.50

ETFS SILVER TRUST

2. Significant Accounting Policies (Continued)

2.4. Revenue Recognition Policy

The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of silver to the Sponsor. With respect to expenses not otherwise assumed by the Sponsor, the Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s silver as necessary to pay these expenses. When selling silver to pay expenses, the Trustee will endeavor to sell the smallest amounts of silver needed to pay these expenses in order to minimize the Trust’s holdings of assets other than silver.

Unless otherwise directed by the Sponsor, when selling silver the Trustee will endeavor to sell at the price established by the London Fix. The Trustee will place orders with dealers (which may include the Custodian) through which the Trustee expects to receive the most favorable price and execution of orders. The Custodian may be the purchaser of such silver only if the sale transaction is made at the next London Fix, or such other publicly available price that the Sponsor deems fair, in each case as set following the sale order. A gain or loss is recognized based on the difference between the selling price and the average cost of the silver sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale.

2.5. Income Taxes

The Trust is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Trust itself will not be subject to U.S. federal income tax. Instead, the Trust’s income and expenses will “flow through” to the Shareholders, and the Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis.

The Trust has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. The Sponsor has evaluated the application of ASC 740 to the Trust, to determine whether or not there are uncertain tax positions that require financial statement recognition. Based on this evaluation, the Trust has determined no reserves for uncertain tax positions are required to be recorded as a result of the application of ASC 740. As a result, no income tax liability or expense has been recorded in the accompanying financial statements.

2.6. Investment in Silver

Changes in ounces of silver and the respective values for the nine months ended September 30, 2011 and for the year ended December 31, 2010 are set out below:

	Nine months			Year
	Ended			Ended
	September 30, 2011			December 31, 2010

Ounces of silver
Opening balance		16,432,768.8			9,185,771.9
Creations (excluding silver receivable at September 30, 2011 - 198,688.9 and at December 31, 2010 - 199,139.2)		8,353,684.9			10,964,004.5
Redemptions		(5,667,725.3	)		(3,693,621.5	)
Transfers of silver		(39,798.8	)		(23,386.1	)

Closing balance		19,078,929.6			16,432,768.8


Investment in silver (lower of cost or market)
Opening balance	$	329,357,195		$	139,223,967
Creations (excluding silver receivable at September 30, 2011 - $6,050,078 and at December 31, 2010 - $6,099,633, respectively)		325,409,957			247,261,376
Redemptions		(138,271,887	)		(56,738,458	)
Transfers of silver		(923,129	)		(389,690	)

Closing balance	$	515,572,136		$	329,357,195

ETFS SILVER TRUST

2.7. Expenses

The Trust will transfer silver to the Sponsor to pay the Sponsor’s Fee that will accrue daily at an annualized rate equal to 0.45% of the adjusted net asset value (“ANAV”) of the Trust, paid monthly in arrears. Presently, the Sponsor is continuing to waive a portion of its fee and reduce the Sponsor’s Fee to 0.30% (which it has done since the Date of Inception).

The Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and out-of-pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and certain legal expenses.

For the three months ended September 30, 2011 and September 30, 2010 the Sponsor’s Fee was $516,410 and $136,759 respectively. For the nine months ended September 30, 2011 and September 30, 2010 the Sponsor’s Fee was $1,446,703 and $308,023 respectively At September 30, 2011, and at December 31, 2010, the fees payable to the Sponsor were $145,961 and $124,332 respectively. As a result of the waiver, fees waived for the three months ending September 30, 2011 were $258,205 (quarter ending September 30, 2010: $54,816). Fees waived for the nine months ending September 30, 2011 were $723,352 (nine months ending September 30, 2010: $207,562).

3. Related Parties

The Sponsor and the Trustee are considered to be related parties to the Trust. The Trustee’s fee is paid by the Sponsor and is not a separate expense of the Trust. The Trustee and the Custodian and their affiliates may from time to time act as Authorized Participants or purchase or sell silver or Shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion.

4. Concentration of Risk

The Trust’s sole business activity is the investment in silver, and substantially all the Trust’s assets are holdings of silver which creates a concentration of risk associated with fluctuations in the price of silver. Several factors could affect the price of silver, including: (i) global silver supply and demand, which is influenced by factors such as forward selling by silver producers, purchases made by silver producers to unwind silver hedge positions, central bank purchases and sales, and production and cost levels in major silver-producing countries; (ii) investors’ expectations with respect to the rate of inflation; (iii) currency exchange rates; (iv) interest rates; (v) investment and trading activities of hedge funds and commodity funds; and (vi) global or regional political, economic or financial events and situations. In addition, there is no assurance that silver will maintain its long-term value in terms of purchasing power in the future. In the event that the price of silver declines, the Sponsor expects the value of an investment in the Shares to decline proportionately. Each of these events could have a material effect on the Trust’s financial position and results of operations.

5. Indemnification

Under the Trust’s organizational documents, the Trustee (and its directors, employees and agents) and the Sponsor (and its members, managers, directors, officers, employees and affiliates) are indemnified by the Trust against any liability, cost or expense it incurs without gross negligence, bad faith or willful misconduct on its part and without reckless disregard on its part of its obligations and duties under the Trust’s organizational documents. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.

6. Subsequent Events

In accordance with the provisions set forth in FASB ASC 855-10, Subsequent Events, the Trust’s management has evaluated the possibility of subsequent events existing in the Trust’s financial statements through the filing date. During this period, no material subsequent events were identified.

ETFS SILVER TRUST

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 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, 2011

The 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 decreased from $623,220,473 at June 30, 2011 to $586,857,521 at September 30, 2011, a 5.83% decrease for the quarter. The decrease in the Trust’s NAV resulted primarily from a decrease in the price per ounce of silver, which fell 13.05% from $35.02 at June 30, 2011 to $30.45 at September 30, 201.

Outstanding Shares rose from 17,900,000 Shares at June 30, 2011 to 19,400,000 Shares at September 30, 2011, a result of 4,000,000 Shares (40 Baskets) being created and 2,500,000 Shares (25 Baskets) being redeemed during the quarter.

NAV per Share decreased 13.12% from $34.82 at June 30, 2011 to $30.25 at September 30, 2011. The Trust’s NAV per Share fell slightly more than the price per ounce of silver on a percentage basis due to Sponsor’s Fees, which were $516,410 for the quarter, or 0.30% of the Trust’s assets on an annualized basis.

The NAV per Share of $43.22 at August 22, 2011 was the highest during the quarter, compared with a low of $27.98 at September 26, 2011.

Net gain from operations for the quarter ended September 30, 2011 was $27,423,854, resulting from a net gain of $173,946 on the transfer of silver to pay expenses and a net gain of $27,766,318 on silver distributed for the redemption of Shares, offset by Sponsor’s Fees of $516,410. Other than the Sponsor’s Fee, the Trust had no expenses during the quarter ended September 30, 2011.

The Nine Months Ended September 30, 2011

The Trust’s NAV increased from $509,311,012 at December 31, 2010 to $586,857,521 at September 30, 2011, a 15.23% increase for the period. The increase in the Trust’s NAV resulted primarily from an increase in outstanding Shares, which rose from 16,700,000 Shares at December 31, 2010 to 19,400,000 Shares at September 30, 2011, a result of 8,400,000 Shares (84 Baskets) being created and 5,700,000 Shares (57 Baskets) being redeemed during the period.

There was a decrease in the price per ounce of silver, which fell 0.59% from $30.63 at December 31, 2010 to $30.45 at September 30, 2011. NAV per Share decreased 0.82% from $30.50 at December 31, 2010 to $30.25 at September 30, 2011. The Trust’s NAV per Share fell slightly more than the price per ounce of silver on a percentage basis due to Sponsor’s Fees, which were $1,446,703 for the period, or 0.30% of the Trust’s assets on an annualized basis.

The NAV per Share of $48.44 at April 28, 2011 was the highest during the period, compared with a low of $26.56 at January 28, 2011.

Net gain from operations for the nine-month period ended September 30, 2011 was $77,087,287, resulting from a net gain of $501,945 on the transfer of silver to pay expenses and a net gain of $78,032,045 on silver distributed for the redemption of Shares, offset by Sponsor’s Fees of $1,446,703. Other than the Sponsor’s Fee, the Trust had no expenses during the period ended September 30, 2011.

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, 2011 the Trust did not have any cash balances.

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

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.

ETFS SILVER TRUSTS

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 19034, as amended (the ‘Exchange Act’) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer of the Sponsor, and to the audit committee, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer of the Sponsor, the Sponsor conducted an evaluation of the Trusts disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15(d)-15(e). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer of the Sponsor concluded that, as of September 30, 2011, the Trust’s disclosure controls and procedures were effective.

There have been no changes in the Trust’s or Sponsor’s internal control over financial reporting that occurred during the Trust’s fiscal quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Trust’s or Sponsor’s internal control over financial reporting.

Item 4T. Controls and Procedures

Not applicable.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

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, 2011:


	40 Baskets were created.

	25 Baskets were redeemed.


Period	Total Baskets Redeemed		Total Shares Redeemed		Average Ounces of Silver Per Share


July 2011		9		900,000		0.994
August 2011		8		800,000		0.994
September 2011		8		800,000		0.994

Total		25		2,500,000		0.994

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

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.

101.INS	XBRL Instance Document*

101.SCH	XBRL Taxonomy Extension Schema Document*

101.CAL	XBRL Taxonomy Extension Calculation Document*

101.DEF	XBRL Taxonomy Extension Definitions Document*

101.LAB	XBRL Taxonomy Extension Labels Document*

101.PRE	XBRL Taxonomy Extension Presentation Document*


*	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

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 9, 2011	/s/ Graham Tuckwell

	Graham Tuckwell
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: November 9, 2011	/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.