EXHIBIT 99.7




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS1




The following discussion of Sprott Physical Silver Trust's (the "Trust")  financial condition and results of operations should be read in conjunction with the Trust's financial statements and the related notes for the year ended December 31, 2011.  All references to currencies in this report are in United States Dollars, unless stated otherwise.




Investment Objective and Strategies




The Trust is a closed-end mutual fund trust organized under the laws of the Province of Ontario, Canada, created to invest and hold substantially all of its assets in physical silver bullion. The Trust seeks to provide a secure, convenient and exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that is typical of a direct investment in physical silver bullion. The Trust intends to achieve its objective by investing primarily in long-term holdings of unencumbered, fully allocated, physical silver bullion and does not speculate with regard to short-term changes in silver prices.




The units of the Trust are listed on NYSE Arca and the Toronto Stock Exchange ("TSX") under the symbols "PSLV" and "PHS.U", respectively.




Risks




The risks of investing in the Trust are detailed in the prospectus dated October 28, 2010 related to the initial public offering of units of the Trust. There have been no material changes to the Trust since inception that affected the overall level of risk. The principal risks associated with investing in the Trust are the price of silver, the net asset value and/or the market price of the units, the purchase, transport, insurance and storage of physical silver bullion, liabilities of the Trust, and redemption of units.




Results of Operations




During the period from January 1, 2011 to December 31, 2011, the trust redeemed 2,910 units for cash at a cost of $41,971. There were no unit issuances during this period.




The value of the net assets of the Trust as of December 31, 2011 was $621.4 million or $10.81 per unit, compared to $695.2 million or $12.09 per unit per unit as at December 31, 2010, the Trust's most recent fiscal year end. The Trust held 22,298,540 ounces of physical silver bullion as of December 31, 2011 and 2010. As at December 31, 2011, the spot price of silver was $27.84 an ounce compared to a price of $30.92 an ounce as at December 31, 2010.




For the period from January 1, 2011 to December 31, 2011, total unrealized losses on physical silver bullion amounted to $68.5 million.




The Trust's net asset value per unit on December 31, 2011 was $10.81. The units closed at $13.43 on the NYSE Arca and $13.55 on the TSX on December 30, 2011 (the last trading day of 2011) compared to closing prices of $14.07 on the NYSE Arca and $14.07 on the TSX on December 31, 2010. The units are denominated in U.S. dollars on both exchanges. During the period from January 1, 2011 to December 31, 2011, the Trust's units traded on the NYSE Arca at an average premium to net asset value of approximately 17.5%.




On November 25, 2011, the Trust filed a shelf registration statement on Form F-10 registering up to $1,500,000,000 of units of the Trust.




Related Party Transactions






________________________________________
 1 In this report, net asset value refers to the value of the Trust as calculated for transaction purposes, whereas net assets is used for financial statement purposes.  All references to currencies in this report are in United States Dollars, unless stated otherwise.









MANAGEMENT FEES




The Trust pays the Manager, Sprott Asset Management LP, a monthly management fee equal to 1/12 of 0.45% of the value of the net assets of the Trust (determined in accordance with the trust agreement), plus any applicable Canadian taxes. The management fee is calculated and accrued daily and payable monthly in arrears on the last day of each month. For the period from January 1, 2011 to December 31, 2011, the Trust incurred management fees of $3,551,302 (not including applicable Canadian taxes).




OPERATING EXPENSES




The Trust pays its own operating expenses, which include, but are not limited to, audit, legal, trustee fees, unitholder reporting expenses, general and administrative fees, filing and listing fees payable to applicable securities regulatory authorities and stock exchanges, storage fees for the physical silver bullion, costs incurred in connection with the Trust's continuous disclosure public filing requirements and investor relations and any expenses associated with the implementation and on-going operation of the Independent Review Committee of the Trust. Operating expenses for the period from January 1, 2011 to December 31, 2011 amounted to $1,106,524 (not including applicable Canadian taxes).




Financial Highlights




The following tables show selected key financial information about the Trust and are intended to help you understand the Trust's financial performance for the year ended December 31, 2011 and for the period from October 28, 2010 to December 31, 2010.




Net assets per unit1




For the year ended December 31,

2011

$


October 28,

2010 –

December 31,

2010

$Net assets per Unit, beginning of period


12.09



10.00Increase (decrease) from operations2:Total revenue


–



–Total expenses


(0.09
)


(0.01
)Realized gains (losses) for the period


–



–Unrealized gains (losses) for the period


(1.19
)


2.60Total increase (decrease) from operations


(1.28
)


2.59Net assets per Unit, end of period


10.81



12.09




1
This information is derived from the Trust's audited financial statements.




2
Net assets per unit is calculated based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the period shown. This table is not intended to be a reconciliation of the beginning to ending net assets per unit.




Ratios and Supplemental Data






December 31,

2011


December 31,

2010Total net asset value (000's)1

$
621,428


$
695,232Number of Units outstanding1


57,497,090



57,500,000Management expense ratio2


0.66
%


0.62
%Trading expense ratio3

nil


nilPortfolio turnover rate4

nil


nil
  
  Net asset value per Unit

$
10.81


$
12.09Closing market price – NYSE Arca

$
13.43
5

$
14.07Closing market price – TSX

$
13.55
5

$
14.07




1
This information is provided as at the date shown, as applicable.




2
Management expense ratio for the year is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period from January 1, 2011 to December 31, 2011.




3
The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period shown. Since there are no direct trading costs associated with physical bullion trades, the trading expense ratio is nil.




4
The Trust's portfolio turnover rate indicates how actively the Trust's portfolio adviser trades its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Trust buying and selling all of the securities in its portfolio once in the course of the year. The higher the Trust's portfolio turnover rate in a year, the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Trust.




5
The last trading day for Units during the fiscal year ended December 31, 2011 was December 30, 2011.


Past Performance




The indicated rates of return are the historical total returns including changes in unit values and assume reinvestment of all distributions in additional units of the Trust. These returns do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that may reduce returns. Please note that past performance is not indicative of future performance. All rates of returns are calculated based on the Net Asset Value of the units of the Trust.




Year-by-Year Returns




The bar chart below indicates the performance of the Trust units for each of the periods shown, and illustrates how the Trust's performance has changed from period to period. The chart shows, in percentage terms, how much an investment made on the first day of each period would have grown or decreased by the last day of each period.




















Summary of Investment Portfolio




As of December 31, 2011




Ounces


Fair Value

per ounce

$


Average

Cost

$


Fair

Value

$


% of

Net Assets

%Physical silver bullion


22,298,540



27.84



541,723,287



620,876,086



99.9Cash and Cash Equivalents














557,138



0.1Other Net Liabilities














(5,256
)


(0.0
)Total Net Assets














621,427,968



100.0




This summary of investment portfolio may change due to the ongoing portfolio transactions of the Trust.