|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington,
 D.C. 20549           
|                                  
|Form 10-K                         
|                                  
|(Mark
 One)                       

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

For the fiscal year ended December 31, 2009

or

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

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          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                         |  |                    
|c/o ETF Securities USA LLC               |  |                    
|48 Wall Street, 11th Floor               |  |                    
|New York, NY                             |  | 10005              
|(Address of principal executive offices) |  | (Zip Code)         

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

Securities registered pursuant to Section 12(b) of the
Act:

|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Title of each class          |  | Name of each exchange on which registered
|                             |  |                                          
|ETFS
 Physical Silver Shares |  | NYSE
 Arca                               

Securities registered pursuant to Section 12(g) of the
Act: None

|                                                                                                                          |          
|------------------------------------------------------------------------------------------------------------------------- | ---------
|Indicate by check mark if
 the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
 Securities Act. | Yes oNo x
|                                                                                                                          |          
|Indicate by check mark if
 the registrant is not required to file reports pursuant to Section 13 or
 15(d) of the Act.    | Yes oNo x

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 xNo 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 during the preceding 12 months.

Yes xNo o


Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.

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

|                                                                                                          |          
|--------------------------------------------------------------------------------------------------------- | ---------
|Indicate by check mark
 whether the registrant is a shell company (as defined in Rule 12b-2 of the
 Act). | Yes oNo x

The registrant was formed on
July 20, 2009 and no shares were outstanding at June 30, 2009.

Number of the registrants
shares outstanding as of March 26, 2010:  7,200,000

DOCUMENTS INCORPORATED BY REFERENCE:None.

---



TABLE OF CONTENTS

|                                                                                                                      |  |   
|--------------------------------------------------------------------------------------------------------------------- |  | --
|PART I                                                                                                                |  | 3 
|Item 1. Business                                                                                                      |  | 3 
|Trust Objective                                                                                                       |  | 3 
|Strategy Behind the Shares                                                                                            |  | 4 
|Secondary Market Trading                                                                                              |  | 4 
|Valuation of Silver and
 Computation of Net Asset Value                                                               |  | 4 
|Trust Expenses                                                                                                        |  | 5 
|Silver and Share Pricing
 Information & Overview of London Silver Markets                                             |  | 5 
|Deposit of Silver and Issuance
 of Shares                                                                             |  | 7 
|Withdrawal of Silver and
 Redemption of Shares                                                                        |  | 7 
|Creation and Redemption
 Transaction Fee                                                                              |  | 8 
|The Sponsor                                                                                                           |  | 8 
|The Trustee                                                                                                           |  | 8 
|The Custodian                                                                                                         |  | 9 
|Description of The Shares                                                                                             |  | 10
|Custody of The Trusts Silver                                                                                         |  | 11
|United States Federal Income
 Tax Consequences                                                                        |  | 11
|ERISA and Related
 Considerations                                                                                     |  | 14
|Item 1A. Risk Factors                                                                                                 |  | 14
|Item 1B. Unresolved Staff Comments                                                                                    |  | 20
|Item 2. Properties                                                                                                    |  | 20
|Item 3. Legal Proceedings                                                                                             |  | 20
|Item 4. (Removed and Reserved)                                                                                        |  | 20
|                                                                                                                      |  |   
|PART II                                                                                                               |  | 21
|Item 5. Market for Registrants Common Equity,
 Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 21
|Item 6. Selected Financial Data                                                                                       |  | 21
|Item 7. Managements Discussion and Analysis of
 Financial Condition and Results of Operations                        |  | 22
|Item 7A. Quantitative and Qualitative
 Disclosures about Market Risk                                                  |  | 24
|Item 8. Financial Statements and Supplementary
 Data                                                                  |  | 24
|Item 9. Changes in and Disagreements with
 Accountants on Accounting and Financial Disclosure                         |  | 24
|Item 9A. Controls and Procedures                                                                                      |  | 25
|Item 9B. Other Information                                                                                            |  | 25
|                                                                                                                      |  |   
|PART III                                                                                                              |  | 26
|Item 10. Directors, Executive Officers and
 Corporate Governance                                                      |  | 26
|Item 11. Executive Compensation                                                                                       |  | 26
|Item 12. Security Ownership of Certain
 Beneficial Owners and Management and Related Stockholder Matters              |  | 26
|Item 13. Certain Relationships and Related
 Transactions, and Director Independence                                   |  | 26
|Item 14. Principal Accounting Fees and Services                                                                       |  | 26
|                                                                                                                      |  |   
|PART IV                                                                                                               |  | 27
|Item 15. Exhibits, Financial Statement Schedules                                                                      |  | 27

1

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FORWARD LOOKING STATEMENTS

This Annual
Report on Form 10-K contains various forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and within the Private
Securities Litigation Reform Act of 1995, as amended. Forward-looking
statements usually include the verbs, anticipates, believes, estimates,
expects, intends, plans, projects, understands and other verbs
suggesting uncertainty. We remind readers that forward-looking statements are
merely predictions and therefore inherently subject to uncertainties and other
factors and involve known and unknown risks that could cause the actual
results, performance, levels of activity, or our achievements, or industry
results, to be materially different from any future results, performance,
levels of activity, or our achievements expressed or implied by such
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date hereof.
The Trust undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

Additional
significant uncertainties and other factors affecting forward-looking
statements are presented in the Risk Factors section herein.

2

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PART I

Item 1. Business

ETFS Silver
Trust (the Trust) is a common law trust, formed on July 20, 2009 under New
York law pursuant to a depositary trust agreement (the Trust Agreement)
between ETF Securities USA LLC (the Sponsor) and the Bank of New York Mellon
(the Trustee). The assets of the Trust are anticipated to consist solely of
silver bullion. The Trust is expected from time to time to issue Baskets (a
Basket consists of a block of 100,000 shares issued by the Trust) in exchange
for deposits of silver and to distribute silver in connection with redemptions
of Baskets. ETFS Physical Silver Shares issued by the Trust (the Shares)
represent units of fractional undivided beneficial interest in and ownership of
the Trust and trade under the ticker symbol SIVR on the New York Stock Exchange
Arca (NYSE Arca or the Exchange).

The Trusts
Sponsor is ETF Securities USA LLC. The Sponsor is a Delaware limited liability
company formed on June 17, 2009, and is wholly-owned by ETF Securities Limited.
The Trustee of the Trust is Bank of New York Mellon. The custodian of the Trusts
silver is HSBC Bank USA, National Association (the Custodian), a national
banking association and a market maker, clearer and approved weigher under the
rules of the London Bullion Market Association (LBMA).

The Trust is
not managed like a corporation or an active investment vehicle. The Trust has
no directors, officers or employees. It does not engage in any activities
designed to obtain a profit from or to improve the losses caused by changes in
the price of silver. The silver held by the Trust will only be delivered to pay
the remuneration due to the Sponsor (the Sponsors Fee), distributed to
Authorized Participants1 in connection with the redemption of
Baskets or sold (1) on an as-needed basis to pay Trust expenses not assumed by
the Sponsor, (2) in the event the Trust terminates and liquidates its assets,
or (3) as otherwise required by law or regulation. The Trust has no fixed
termination date.

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. The Trust will not hold or
trade in commodities futures contracts regulated by the Commodity Exchange Act
(the CEA), as administered by the Commodity Futures Trading Commission (the
CFTC). The Trust is not a commodity pool for purposes of the CEA and neither
the Sponsor nor the Trustee is subject to regulation as a commodity pool
operator or a commodity trading advisor in connection with the Shares.

The Trusts
assets grew from $1,376,000 at its inception to $139,223,967 at December 31,
2009 (the Trusts fiscal year end). The number of Shares outstanding as at
December 31, 2009 was 9,200,000.

This Annual
Report is available free of charge upon request to the Investor Relations
Department of the Sponsor at c/o ETF Securities USA LLC, 48 Wall Street, 11th
Floor, New York, NY; (212) 918-4954. Additional information regarding the Trust
may also be found on the SECs EDGAR database at www.SEC.gov.

Trust Objective

The investment
objective of the Trust is for the Shares to reflect the performance of the
price of silver bullion, less the expenses of the Trusts operations. The
Shares are intended to constitute a simple and cost-effective means of making
an investment similar to an investment in silver. An investment in physical
silver requires expensive and sometimes complicated arrangements in connection
with the assay, transportation, warehousing and insurance of the metal.
Although the Shares will not be the exact equivalent of an investment in
silver, they provide investors with an alternative that allows a level of
participation in the silver market through the securities market.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1 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
 DTC, (3) has entered into an Authorized Participant Agreement with the Trustee
 and the Sponsor and (4) has established an Authorized Participant
 Unallocated Account with the Custodian or another silver bullion clearing
 bank to effect transactions in silver bullion. Only Authorized Participants
 may place orders to create or redeem one or more Baskets. DTC means The
 Depository Trust Company, which is a limited purpose trust company organized
 under New York law, a member of the US Federal Reserve System and a clearing
 agency registered with the United States Securities and Exchange Commission
 (the SEC).

3

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Strategy Behind
the Shares

The Shares are
intended to offer investors an opportunity to participate in the silver market
through an investment in securities. The logistics of storing and insuring
silver are dealt with by the Custodian and the related expenses are built into
the price of the Shares. Therefore, the investor does not have any additional
tasks or costs over and above those associated with dealing in any other
publicly traded security.

The Shares are
intended to provide institutional and retail investors with a simple and
cost-efficient means, with minimal credit risk, of gaining investment benefits
similar to those of holding silver bullion. The Shares offer the following
benefits:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ease and Flexibility of Investment. The
 Shares will trade on the NYSE Arca and will provide institutional and retail
 investors with indirect access to the silver bullion market. The Shares are
 expected to be bought and sold on the NYSE Arca like any other
 exchange-listed securities. The close of the NYSE Arca trading session is
 4:00 PM New York time.                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Expenses. The Sponsor expects that, for many
 investors, costs associated with buying and selling the Shares in the
 secondary market and the payment of the Trusts ongoing expenses will be
 lower than the costs associated with buying and selling silver bullion and
 storing and insuring silver bullion in a traditional allocated silver bullion
 account.                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Minimal Credit Risk. The Shares represent an
 interest in physical bullion owned by the Trust (other than an amount held in
 unallocated form which is not sufficient to make up a whole bar or which is
 held temporarily to effect a creation or redemption of Shares). Physical
 bullion of the Trust in the Custodians possession is not subject to
 borrowing arrangements with third parties. Other than the silver temporarily
 being held in an unallocated silver account with the Custodian, the physical
 bullion of the Trust is not subject to counterparty or credit risks.

Secondary Market
Trading

While the
Trusts investment objective is for the Shares to reflect the performance of
silver bullion, less the expenses of the Trust, the Shares may trade in the
secondary market on the NYSE Arca at prices that are lower or higher relative
to their net asset value, which is the value of the Trusts assets less its
liabilities (NAV), per Share. The amount of the discount or premium in the
trading price relative to the NAV per Share may be influenced by non-concurrent
trading hours between the NYSE Arca and the Commodity Exchange, Inc., a
subsidiary of New York Mercantile Exchange, Inc. (COMEX), and London. While
the Shares will trade on the NYSE Arca until 4:00 PM New York time, liquidity
in the global silver market will be reduced after the close of the COMEX at
1:30 PM New York time. As a result, during this time, trading spreads, and the
resulting premium or discount, on the Shares may widen.

Valuation of
Silver and Computation of Net Asset Value

On each day
that the NYSE Arca is open for regular trading, as promptly as practicable
after 4:00 p.m., New York time, on such day (the Evaluation Time), the
Trustee will evaluate the silver held by the Trust and determine the NAV of the
Trust.

At the
Evaluation Time, the Trustee will value the Trusts silver on the basis of that
days London Fix (the price for an ounce of silver set by three market making
members of the London Bullion Market Association (LBMA) at approximately
12:00 noon London time on each working day) 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 will be used, unless the
Sponsor determines that such price is inappropriate as a basis for evaluation.
In the event the Sponsor determine that the London Fix or last prior London Fix
is not an appropriate basis for evaluation of the Trusts silver, it shall
identify an alternative basis for such evaluation to be employed by the
Trustee. Neither the Trustee nor the Sponsor shall be liable to any person for
the determination that the London Fix or such other publicly available price as
the Sponsor may deem fairly represents the commercial value of the Trusts
silver is not appropriate as a basis for evaluation of the Trusts silver or
for any determination as to the alternative basis for such evaluation provided
that such determination is made in good faith.

Once the value
of the silver has been determined, the Trustee will subtract all estimated
accrued but unpaid fees (other than the fees accruing for such day on which the
valuation takes place computed by reference to the value of the Trust or its
assets), and other liabilities of the Trust from the total value of the silver
and all other assets of the

4

---



Trust (other
than any amounts credited to the Trusts reserve account, if established). The resulting
figure is the adjusted net asset value (the ANAV) of the Trust. The ANAV of
the Trust is used to compute the Sponsors Fee.

All fees
accruing for the day on which the valuation takes place computed by reference
to the value of the Trust or its assets shall be calculated using the ANAV
calculated for such day on which the valuation takes place. The Trustee shall
subtract from the ANAV the amount of accrued fees so computed for such day and
the resulting figure is the NAV of the Trust. The Trustee will also determine
the NAV per Share by dividing the NAV of the Trust by the number of the Shares
outstanding as of the close of trading on the NYSE Arca (which includes the net
number of any Shares created or redeemed on such evaluation day).

The Trustees
estimation of accrued but unpaid fees, expenses and liabilities will be
conclusive upon all persons interested in the Trust and no revision or
correction in any computation made under the Trust Agreement will be required
by reason of any difference in amounts estimated from those actually paid.

Trust Expenses

The Trusts
only ordinary recurring expense is expected to be the Sponsors Fee. In
exchange for the Sponsors Fee, the Sponsor has agreed to assume the following
administrative and marketing expenses incurred by the Trust: the Trustees
monthly fee and out-of-pocket expenses, the Custodians fee and reimbursement
of the Custodians expenses under the Custody Agreements (defined below),
Exchange listing fees, SEC registration fees, printing and mailing costs, audit
fees and up to $100,000 per annum in legal expenses. The Sponsor also paid the
costs of the Trusts organization and the initial sale of the Shares, including
the applicable SEC registration fees.

The Sponsors
Fee will accrue daily at an annualized rate equal to 0.45% of the ANAV of the
Trust and will be payable monthly in arrears. The Sponsor, from time to time,
may temporarily waive all or a portion of the Sponsors Fee at its discretion
for a stated period of time. Presently, the Sponsor intends to waive a portion
of its fee and reduce the Sponsors Fee to 0.30% for the first year of the
Trusts operations beginning on the Trusts inception date and ending on July
24, 2010. After July 24, 2010, the Sponsor may renew its fee waiver, waive a
larger or smaller portion of its fee or not renew its fee waiver. If the
Sponsor does not continue its partial fee waiver after July 24, 2010, the full
Sponsors Fee will accrue and be paid to the Sponsor for subsequent periods.
The Sponsor is under no obligation to continue to waive all or part of the
Sponsors Fee after the fixed end date of its waiver.

The Sponsors
Fee shall be paid by delivery of silver to an account maintained by the
Custodian for the Sponsor on an unallocated basis, monthly on the first
business day of the month in respect of fees payable for the prior month. The
delivery shall be of that number of ounces of silver which equals the daily
accrual of the Sponsors Fee for such prior month calculated at the London Fix.

The Trustee
will, when directed by the Sponsor, and, in the absence of such direction, may,
in its discretion, sell silver in such quantity and at such times as may be
necessary to permit payment in cash of Trust expenses not assumed by the
Sponsor. The Trustee is authorized to sell silver at such times and in the
smallest amounts required to permit such payments as they become due, it being
the intention to avoid or minimize the Trusts holdings of assets other than
silver. Accordingly, the amount of silver to be sold will vary from time to
time depending on the level of the Trusts expenses and the market price of
silver. The Custodian has agreed to purchase from the Trust, at the request of
the Trustee, silver needed to cover Trust expenses not assumed by the Sponsor
at a price at least equal to the price used by the Trustee to determine the
value of the silver held by the Trust on the date of the sale.

The Sponsor
was paid silver valued at $206,026 for the period covered by this report.

Silver and Share
Pricing Information & Overview of London Silver Markets

Investors may
obtain on a 24-hour basis silver pricing information based on the spot price
for an ounce of silver from various financial information service providers.
Current spot prices are also generally available with bid/ask spreads from
silver bullion dealers. In addition, the Trusts website
(www.etfsecurities.com) will provide ongoing pricing information for silver
spot prices and the Shares. Market prices for the Shares will be available from
a variety of sources including brokerage firms, information websites and other
information service providers. The NAV of the Trust will be published by the
Sponsor on each day that the NYSE Arca is open for regular trading and will be
posted on the Trusts website.

The following
provides a brief overview of the London silver markets.

5

---



The London Bullion Market

Although the
market for physical silver is distributed globally, most Over-the-Counter
(OTC) market trades are cleared through London. In addition to coordinating
market activities, the LBMA acts as the principal point of contact between the
market and its regulators. A primary function of the LBMA is its involvement in
the promotion of refining standards by maintenance of the London Good Delivery
Lists, which are the lists of LBMA accredited melters and assayers of silver.
The LBMA also coordinates market clearing and vaulting, promotes good trading
practices and develops standard documentation.

The term loco
London silver refers to silver physically held in London that meets the
specifications for weight, dimensions, fineness (or purity), identifying marks
(including the assay stamp of a LBMA acceptable refiner) and appearance set
forth in The Good Delivery Rules for Gold and Silver Bars published by the
LBMA. Silver bars meeting these requirements are described in this report from
time to time as London Good Delivery Bars. The unit of trade in London is the
troy ounce, whose conversion between grams is: 1,000 grams = 32.1507465 troy
ounces and 1 troy ounce = 31.1034768 grams. A London Good Delivery Bar is
acceptable for delivery in settlement of a transaction on the OTC market. A
London Good Delivery Bar must contain between 750 ounces and 1100 ounces of
silver with a minimum fineness (or purity) of 999.0 parts per 1000. A London
Good Delivery Bar must also bear the stamp of one of the refiners who are on
the LBMA-approved list. Unless otherwise specified, the silver spot price
always refers to that of a London Good Delivery Bar. Business is generally
conducted over the phone and through electronic dealing systems.

Once daily
during London trading hours there is a fix which provides reference silver
prices for that days trading. Many long-term contracts will be priced on the
basis of the London Fix, and market participants will usually refer to this
price when looking for a basis for valuations. The London Fix is the most
widely used benchmark for daily silver prices and is quoted by various
financial information sources.

Three Market
Making members of the LBMA conduct the Silver Fixing meeting under the
chairmanship of The Bank of Nova ScotiaScotiaMocatta by telephone at 12:00
noon London time each working day. The other two members of the Silver Fixing
are Deutsche Bank AG and HSBC Bank USA, National Association.

Orders are
placed either with one of the three fixing members or with another bullion
dealer who will then be in contact with a fixing member during the fixing. The
fixing members net-off all orders when communicating their net interest at the
fixing. The fix begins with the fixing chairman suggesting a trying price,
reflecting the market price prevailing at the opening of the fix. This is
relayed by the fixing members to their dealing rooms which have direct
communication with all interested parties. Any market participant may enter the
fixing process at any time, or adjust or withdraw his order. The silver price
is adjusted up or down until all the buy and sell orders are matched, at which
time the price is declared fixed. All fixing orders are transacted on the basis
of this fixed price, which is instantly relayed to the market through various
media. The London Fix is widely viewed as a full and fair representation of all
market interest at the time of the fix.

Futures Exchanges

The most
significant silver futures exchanges are the COMEX and the Tokyo Commodity
Exchange.

Future
exchanges seek to provide a neutral, regulated marketplace for the trading of
derivatives contracts for commodities. Future contracts are defined by the
exchange for each commodity. For each commodity traded, this contract specifies
the precise quality and quantity standards. The contracts terms and conditions
also define the location and timing of physical delivery.

An exchange
does not buy or sell those contracts, but seeks to offer a transparent forum
where members, on their own behalf or on the behalf of customers, can trade the
contracts in a safe, efficient and orderly manner. During regular trading hours
at the COMEX, the commodity contracts are traded through open outcry; a verbal
auction in which all bids, offers and trades must be publicly announced to all
members. Electronic trading is offered by the exchange after regular market
hours. Except for brief breaks to switch between open outcry and electronic
trading in the evening and the morning, silver futures trade almost 24 hours a
day, five business days a week.

6

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In addition to
the public nature of the pricing, futures exchanges in the United States are
regulated at two levels: internal and external governmental supervision. The
internal is performed through self-regulation and consists of regular
monitoring of the following: the open-outcry process to insure that it is
conducted in conformance with all exchange rules; the financial condition of
all exchange member firms to insure that they continuously meet financial
commitments; and the positions of commercial and non-commercial customers to
insure that physical delivery and other commercial commitments can be met, and
that pricing is not being improperly affected by the size of any particular
customer positions. External governmental oversight is performed by the CFTC,
which reviews all the rules and regulations of United States futures exchanges
and monitors their enforcement.

Deposit of Silver
and Issuance of Shares

The Trust will
create and redeem Shares from time to time, but only in one or more Baskets.
The creation and redemption of Baskets will only be 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 will
be 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. Authorized Participants are the only persons that
may place orders to create and redeem Baskets.

All silver
bullion deposited with the Custodian must be of at least a minimum fineness (or
purity) of 999.0 parts per 1,000 (99.9%) and otherwise conform to the rules,
regulations practices and customs of the LBMA, including the specifications for
a London Good Delivery Bar.

Creation and
redemption orders will be accepted on business days the NYSE Arca is open for
regular trading. Settlements of such orders requiring receipt or delivery, or
confirmation of receipt or delivery, of silver in the United Kingdom when (1)
banks in the United Kingdom, and (2) the London silver markets are regularly
open for business. If such banks or the London silver markets are not open for
regular business for a full day, such a day will only be a business day for
settlement purposes if the settlement procedures can be completed by the end of
such day.

On any
business day, an Authorized Participant may place an order with the Trustee to
purchase one or more Baskets. Purchase orders must be placed no later than
3:59:59 p.m. on each business day the NYSE Arca is open for regular trading. A
purchase order so received is effective on the date it is received in
satisfactory form by the Trustee. By placing a purchase order, an Authorized
Participant agrees to deposit silver with the Trust, as described below. Prior
to the delivery of Baskets for a purchase order, the Authorized Participant
must also have wired to the Trustee the non-refundable transaction fee due for
the purchase order (as explained under Creation
and Redemption Transaction Fee below).

An Authorized
Participant who places a purchase order is responsible for crediting its
Authorized Participant Unallocated Account with the required silver deposit
amount by the third business day in London following the purchase order date.
Upon receipt of the silver deposit amount, the Custodian, after receiving
appropriate instructions from the Authorized Participant and the Trustee, will
transfer on the third business day following the purchase order date the silver
deposit amount from the Authorized Participant Unallocated Account to the
unallocated silver account of the Trust established with the Custodian by the
Unallocated Account Agreement between the Trustee and the Custodian (the Trust
Unallocated Account) and the Trustee will direct DTC to credit the number of
Baskets ordered to the Authorized Participants DTC account.

Acting on
standing instructions given by the Trustee, the Custodian will transfer the
silver deposit amount from the Trust Unallocated Account to the allocated
silver account of the Trust established with the Custodian by the Allocated
Account Agreement between the Trustee and the Custodian (the Trust Allocated
Account) by transferring silver bars from its inventory to the Trust Allocated
Account. The Trusts Unallocated Account Agreement and Allocated Account
Agreement are referred to collectively as the Custody Agreements.

Withdrawal of
Silver and Redemption of Shares

The procedures
by which an Authorized Participant can redeem one or more Baskets will mirror
the procedures for the creation of Baskets. On any business day, an Authorized
Participant may place an order with the Trustee to redeem one or more Baskets.
Redemption orders must be placed no later than 3:59:59 p.m. on each business
day the NYSE Arca is open for regular trading. A redemption order so received
is effective on the date it is received in satisfactory form by the Trustee.
The redemption procedures allow Authorized Participants to redeem Baskets and

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do not entitle
an individual owner of beneficial interests in the Shares (a Shareholder) to
redeem any Shares in an amount less than a Basket, or to redeem Baskets other
than through an Authorized Participant.

By placing a
redemption order, an Authorized Participant agrees to deliver the Baskets to be
redeemed through DTCs book-entry system to the Trust not later than the third
business day following the effective date of the redemption order. Prior to the
delivery of the redemption distribution for a redemption order, the Authorized
Participant must also have wired to the Trustee the non-refundable transaction
fee due for the redemption order (as explained under Creation and Redemption Transaction Fee below).

The redemption
distribution from the Trust will consist of a credit to the redeeming
Authorized Participants Authorized Participant Unallocated Account
representing the amount of the silver held by the Trust evidenced by the Shares
being redeemed. Fractions of a fine ounce of silver included in the redemption
distribution smaller than 0.001 of a fine ounce are disregarded. Redemption
distributions are subject to the deduction of any applicable tax or other
governmental charges which may be due.

Creation and
Redemption Transaction Fee

To compensate
the Trustee for services in processing the creation and redemption of Baskets,
an Authorized Participant will be required to pay a transaction fee to the Trustee
of $500 per order to create or redeem Baskets. An order may include multiple
Baskets. The transaction fee may be reduced, increased or otherwise changed by
the Trustee with the consent of the Sponsor. The Trustee shall notify DTC of
any agreement to change the transaction fee and will not implement any increase
in the fee for the redemption of Baskets until 30 days after the date of the
notice.

The Sponsor

The Sponsor is
a Delaware limited liability company. The Sponsors office is located at Ordinance
House, 31 Pier Road, St. Helier, Jersey JE48PW, Channel Islands. Under the
Delaware Limited Liability Company Act and the governing documents of the
Sponsor, the sole member of the Sponsor, ETF Securities Limited, is not
responsible for the debts, obligations and liabilities of the Sponsor solely by
reason of being the sole member of the Sponsor.

The Sponsors Role

The Sponsor
arranged for the creation of the Trust, the registration of the Shares for
their public offering in the United States and the listing of the Shares on the
NYSE Arca. The Sponsor has agreed to assume the following administrative and
marketing expenses incurred by the Trust: the Trustees monthly fee and
out-of-pocket expenses, the Custodians fee and the reimbursement of the Custodians
expenses under the Custody Agreements, Exchange listing fees, SEC registration
fees, printing and mailing costs, audit fees and up to $100,000 per annum in
legal expenses. The Sponsor also paid the costs of the Trusts organization and
the initial sale of the Shares, including the applicable SEC registration fees.

The Sponsor
will not exercise day-to-day oversight over the Trustee or the Custodian. The
Sponsor may remove the Trustee and appoint a successor Trustee (i) if the
Trustee ceases to meet certain objective requirements (including the
requirement that it have capital, surplus and undivided profits of at least
$150 million), (ii) if, having received written notice of a material breach of
its obligations under the Trust Agreement, the Trustee has not cured the breach
within 30 days, or (iii) if the Trustee refuses to consent to the
implementation of an amendment to the Trusts initial Internal Control Over
Financial Reporting. The Sponsor also has the right to replace the Trustee
during the 90 days following any merger, consolidation or conversion in which
the Trustee is not the surviving entity or, in its discretion, on the fifth
anniversary of the creation of the Trust or on any subsequent third anniversary
thereafter. The Sponsor also has the right to approve any new or additional
custodian that the Trustee may wish to appoint.

The Sponsor or
one of its affiliates or agents (1) develops a marketing plan for the Trust on
an ongoing basis, (2) prepares marketing materials regarding the Shares, including
the content of the Trusts website and (3) executes the marketing plan for the
Trust.

The Trustee

The Bank of
New York Mellon, a banking corporation organized under the laws of the State of
New York with trust powers (BNYM), will serve as the Trustee. BNYM has a
trust office at 2 Hanson Place, Brooklyn, New York

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11217. BNYM is
subject to supervision by the New York State Banking Department and the Board
of Governors of the Federal Reserve System. Information regarding creation and
redemption Basket composition, NAV of the Trust, transaction fees and the names
of the parties that have each executed an Authorized Participant Agreement may
be obtained from BNYM. A copy of the Trust Agreement is available for
inspection at BNYMs trust office identified above. Under the Trust Agreement,
the Trustee is required to maintain capital, surplus and undivided profits of
$150 million.

The Trustees Role

The Trustee is
generally responsible for the day-to-day administration of the Trust, including
keeping the Trusts operational records. The Trustees principal
responsibilities include (1) transferring the Trusts silver as needed to pay
the Sponsors Fee in silver (silver transfers are expected to occur
approximately monthly in the ordinary course), (2) valuing the Trusts silver
and calculating the NAV of the Trust and the NAV per Share, (3) receiving and
processing orders from Authorized Participants to create and redeem Baskets and
coordinating the processing of such orders with the Custodian and DTC, (4)
selling the Trusts silver as needed to pay any extraordinary Trust expenses
that are not assumed by the Sponsor, (5) when appropriate, making distributions
of cash or other property to Shareholders, and (6) receiving and reviewing
reports from or on the Custodians custody of and transactions in the Trusts
silver. The Trustee shall, with respect to directing the Custodian, act in
accordance with the instructions of the Sponsor. If the Custodian resigns the
Trustee shall appoint an additional or replacement Custodian selected by the
Sponsor.

The ability of
the Trustee and the Sponsor to monitor the performance of the Custodian may be
limited because, under the Custody Agreements, the Trustee, the Sponsor and the
Sponsors auditors and inspectors may, only up to twice a year, visit the
premises of the Custodian for the purpose of examining the Trusts silver and
certain related records maintained by the Custodian. In addition, the Trustee
has no right to visit the premises of any subcustodian for the purposes of
examining the Trusts silver or any records maintained by the subcustodian, and
no subcustodian is obligated to cooperate in any review the Trustee may wish to
conduct of the facilities, procedures, records or creditworthiness of such
subcustodian.

The Trustee
intends to regularly communicate with the Sponsor to monitor the overall
performance of the Trust. The Trustee does not monitor the performance of the
Custodian or any subcustodian other than to review the reports provided by the
Custodian pursuant to the Custody Agreements. The Trustee, along with the
Sponsor, will liaise with the Trusts legal, accounting and other professional
service providers as needed. The Trustee will assist and support the Sponsor
with the preparation of all periodic reports required to be filed with the SEC
on behalf of the Trust.

The Trustees
monthly fees and out-of-pocket expenses are paid by the Sponsor.

Affiliates of
the Trustee 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.

The Custodian

HSBC Bank USA,
National Association will serve as the Custodian of the Trusts silver. HSBC is
a national banking association organized under the laws of the United States of
America. HSBC is subject to supervision by the Federal Reserve Bank of New York
and the Federal Deposit Insurance Corporation. HSBCs custodian office is
located at 8 Canada Square, London, E14 5HQ, United Kingdom. In addition to
supervision and examination by the US federal banking authorities, HSBCs
London custodian operations are subject to supervision by the Financial
Services Authority, an independent non-governmental which exercises statutory
regulatory power under the United Kingdom Financial Services and Markets Act
2000 and which regulates the major participating members of the LBMA in the
United Kingdom.

The Custodians Role

The Custodian
is responsible for safekeeping for the Trust silver deposited with it by
Authorized Participants in connection with the creation of Baskets. The
Custodian is also responsible for selecting its direct subcustodians, if any.
The Custodian facilitates the transfer of silver in and out of the Trust through
the unallocated silver accounts it will maintain for each Authorized
Participant and the unallocated and allocated silver accounts it will maintain
for the Trust. The Custodian is responsible for allocating specific bars of
silver bullion to the Trusts allocated silver account. The Custodian will
provide the Trustee with regular reports detailing the silver transfers in and
out of the

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Trusts
unallocated and allocated silver accounts and identifying the silver bars held
in the Trusts allocated silver account.

The
Custodians fees and expenses under the Custody Agreements are paid by the
Sponsor.

The Custodian
and its 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.

Description of
The Shares

General

The Trustee is
authorized under the Trust Agreement to create and issue an unlimited number of
Shares. The Trustee will create Shares only in Baskets (a Basket equals a block
of 100,000 Shares) and only upon the order of an Authorized Participant. The
Shares represent units of fractional undivided beneficial interest in and
ownership of the Trust and have no par value. Any creation and issuance of
Shares above the amount registered on the Trusts then-current and effective
registration statement with the SEC will require the registration of such
additional Shares.

Description of Limited Rights

The Shares do
not represent a traditional investment and you should not view them as similar
to shares of a corporation operating a business enterprise with management
and a board of directors. Shareholders do not have the statutory rights
normally associated with the ownership of shares of a corporation, including,
for example, the right to bring oppression or derivative actions. All
Shares are of the same class with equal rights and privileges. Each Share is
transferable, is fully paid and non-assessable and entitles the holder to vote
on the limited matters upon which Shareholders may vote under the Trust
Agreement. The Shares do not entitle their holders to any conversion or
pre-emptive rights, or, except as provided below, any redemption rights or
rights to distributions.

Distributions

If the Trust
is terminated and liquidated, the Trustee will distribute to the Shareholders
any amounts remaining after the satisfaction of all outstanding liabilities of
the Trust and the establishment of such reserves for applicable taxes, other
governmental charges and contingent or future liabilities as the Trustee shall
determine. Shareholders of record on the record date fixed by the Trustee for a
distribution will be entitled to receive their pro rata portion of any
distribution.

Voting and Approvals

Under the
Trust Agreement, Shareholders have no voting rights, except in limited
circumstances. The Trustee may terminate the Trust upon the agreement of
Shareholders owning at least 75% of the outstanding Shares. In addition,
certain amendments to the Trust Agreement require advance notice to the
Shareholders before the effectiveness of such amendments, but no Shareholder
vote or approval is required for any amendment to the Trust Agreement.

Redemption of the Shares

The Shares may
only be redeemed by or through an Authorized Participant and only in Baskets.

Book-Entry Form

Individual
certificates will not be issued for the Shares. Instead, one or more global
certificates will be deposited by the Trustee with DTC and registered in the
name of Cede & Co., as nominee for DTC. The global certificates will
evidence all of the Shares outstanding at any time. Under the Trust Agreement,
Shareholders are limited to (1) participants in DTC such as banks, brokers,
dealers and trust companies (DTC Participants), (2) those who maintain, either
directly or indirectly, a custodial relationship with a DTC Participant
(Indirect Participants), and (3) those banks, brokers, dealers, trust companies
and others who hold interests in the Shares through DTC Participants or Indirect
Participants. The Shares are only transferable through the book-entry system of
DTC. Shareholders who are not DTC Participants may transfer their Shares
through DTC by instructing the DTC Participant holding their Shares (or by
instructing the Indirect Participant or other entity through which their Shares
are held) to transfer the Shares. Transfers will be made in accordance with
standard securities industry practice.

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Custody of The
Trusts Silver

Custody of the
silver bullion deposited with and held by the Trust will be provided by the
Custodian at its London, England vaults, by subcustodians selected by the
Custodian and by others acting on behalf of the subcustodians. The Custodian is
a market maker, clearer and approved weigher under the rules of the LBMA.

The Custodian,
as instructed by the Trustee on behalf of the Trust, is authorized to accept,
on behalf of the Trust, deposits of silver in unallocated form. Acting on
standing instructions given by the Trustee specified in the Custody Agreements,
the Custodian will allocate silver deposited in unallocated form with the Trust
by selecting bars of silver bullion for deposit to the Trust Allocated Account.
All silver bullion allocated to the Trust must conform to the rules,
regulations, practices and customs of the LBMA.

The process of
withdrawing silver from the Trust for a redemption of a Basket will follow the
same general procedure as for depositing silver with the Trust for a creation
of a Basket, only in reverse. Each transfer of silver between the Trust
Allocated Account and the Trust Unallocated Account connected with a creation
or redemption of a Basket may result in a small amount of silver being held in
the Trust Unallocated Account after the completion of the transfer. In making deposits
and withdrawals between the Trust Allocated Account and the Trust Unallocated
Account, the Custodian will use commercially reasonable efforts to minimize the
amount of silver held in the Trust Unallocated Account as of the close of each
business day.

United States
Federal Income Tax Consequences

The following
discussion of the material US federal income tax consequences that
generally will apply to the purchase, ownership and disposition of Shares by
    a US Shareholder (as defined below), and certain US federal income tax
consequences that may apply to an investment in Shares by a Non-US Shareholder
(as defined below), represents, insofar as it describes conclusions as to US
    federal income tax law and subject to the limitations and qualifications
    described therein, the opinion of Katten Muchin Rosenman LLP, counsel to
    the Sponsor and special US tax counsel to the Trust. An opinion of counsel,
    however, is not binding on the Internal Revenue Service (the IRS)
    or on the courts, and does not preclude the IRS from taking a contrary position.
    The discussion below is based on the United States Internal Revenue Code
    of 1986, as amended (the Code),
    United States Treasury Regulations (Treasury Regulations) promulgated
    under the Code and judicial and administrative interpretations of the Code,
    all as in effect on the date of this annual report and all of which are subject
    to change either prospectively or retroactively. The tax treatment of Shareholders
    may vary depending upon their own particular circumstances. Certain Shareholders
    (including broker-dealers, traders, banks and other financial institutions,
    insurance companies, real estate investment trusts, tax-exempt entities,
    Shareholders whose functional currency is not the US dollar or other investors
    with special circumstances) may be subject to special rules not discussed
    below. In addition, the following discussion applies only to investors who
    will hold Shares as capital
    assets within
the meaning of Code section 1221 and not as part of a straddle, hedging transaction
or a conversion or constructive sale transaction. Moreover, the discussion
below does not address the effect of any state, local or foreign tax law or any
transfer tax on an owner of Shares. Purchasers of Shares are urged to consult
their own tax advisors with respect to all federal, state, local and foreign
tax law or any transfer tax considerations potentially applicable to their
investment in Shares.

For purposes
of this discussion, a US Shareholder is a Shareholder that is:

| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An
 individual who is treated as a citizen or resident of the United States for
 US federal income tax purposes;                                                                                                             
| |   |                                                                                                                                                                                                                              
| |  | A
 corporation (or other entity treated as a corporation for US federal tax
 purposes) created or organized in or under the laws of the United States or
 any political subdivision thereof;                                 
| |   |                                                                                                                                                                                                                              
| |  | An estate,
 the income of which is includible in gross income for US federal income tax
 purposes regardless of its source; or                                                                                               
| |   |                                                                                                                                                                                                                              
| |  | A trust, if
 a court within the United States is able to exercise primary supervision over
 the administration of the trust and one or more US persons have the authority
 to control all substantial decisions of the trust.

A Shareholder
that is not a US Shareholder as defined above (other than a partnership, or an
entity treated as a partnership for US federal tax purposes) is generally
considered a Non-US Shareholder for purposes of this discussion. For US
federal income tax purposes, the treatment of any beneficial owner of an
interest in a partnership, including any entity treated as a partnership for US
federal income tax purposes, will generally depend upon the status of the
partner and upon the activities of the partnership. Partnerships and partners
in partnerships should consult their tax advisors about the US federal income
tax consequences of purchasing, owning and disposing of Shares.

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Taxation of the Trust

The Trust will
be classified as a grantor trust for US federal income tax purposes. As a
result, the Trust itself will not be subject to US federal income tax. Instead,
the Trusts income and expenses will flow through to the Shareholders, and
the Trustee will report the Trusts income, gains, losses and deductions to the
IRS on that basis.

Taxation of US Shareholders

Shareholders
generally will be treated, for US federal income tax purposes, as if they
directly owned a pro rata share of the underlying assets held in the Trust.
Shareholders also will be treated as if they directly received their respective
pro rata shares of the Trusts income, if any, and as if they directly incurred
their respective pro rata shares of the Trusts expenses. In the case of a
Shareholder that purchases Shares for cash, its initial tax basis in its pro
rata share of the assets held in the Trust at the time it acquires its Shares
will be equal to its cost of acquiring the Shares. In the case of a Shareholder
that acquires its Shares as part of a creation, the delivery of silver to the
Trust in exchange for the underlying silver represented by the Shares will not
be a taxable event to the Shareholder, and the Shareholders tax basis and
holding period for the Shareholders pro rata share of the silver held in the
Trust will be the same as its tax basis and holding period for the silver
delivered in exchange therefor (except to the extent of any cash contributed
for such Shares). For purposes of this discussion, it is assumed that all of a
Shareholders Shares are acquired on the same date and at the same price per
Share. Shareholders that hold multiple lots of Shares, or that are
contemplating acquiring multiple lots of Shares, should consult their tax
advisors as to the determination of the tax basis and holding period for the
underlying silver related to such Shares.

When the Trust
sells silver, for example to pay expenses, a Shareholder generally will
recognize gain or loss in an amount equal to the difference between (1) the
Shareholders pro rata share of the amount realized by the Trust upon the sale
and (2) the Shareholders tax basis for its pro rata share of the silver that
was sold, which gain or loss will generally be long-term or short-term capital
gain or loss, depending upon whether the Shareholder has a holding period in
its Shares of longer than one year. A Shareholders tax basis for its share of
any silver sold by the Trust generally will be determined by multiplying the
Shareholders total basis for its share of all of the silver held in the Trust
immediately prior to the sale, by a fraction the numerator of which is the
amount of silver sold, and the denominator of which is the total amount of the
silver held in the Trust immediately prior to the sale. After any such sale, a
Shareholders tax basis for its pro rata share of the silver remaining in the
Trust will be equal to its tax basis for its share of the total amount of the
silver held in the Trust immediately prior to the sale, less the portion of
such basis allocable to its share of the silver that was sold.

Upon a
Shareholders sale of some or all of its Shares, the Shareholder will be
treated as having sold the portion of its pro rata share of the silver held in
the Trust at the time of the sale that is attributable to the Shares sold.
Accordingly, the Shareholder generally will recognize gain or loss on the sale
in an amount equal to the difference between (1) the amount realized pursuant
to the sale of the Shares, and (2) the Shareholders tax basis for the portion
of its pro rata share of the silver held in the Trust at the time of sale that
is attributable to the Shares sold, as determined in the manner described in
the preceding paragraph.

A redemption
of some or all of a Shareholders Shares in exchange for the underlying silver
represented by the Shares redeemed generally will not be a taxable event to the
Shareholder. The Shareholders tax basis for the silver received in the
redemption generally will be the same as the Shareholders tax basis for the
portion of its pro rata share of the silver held in the Trust immediately prior
to the redemption that is attributable to the Shares redeemed. The
Shareholders holding period with respect to the silver received should include
the period during which the Shareholder held the Shares redeemed. A subsequent
sale of the silver received by the Shareholder will be a taxable event.

After any sale
or redemption of less than all of a Shareholders Shares, the Shareholders tax
basis for its pro rata share of the silver held in the Trust immediately after
such sale or redemption generally will be equal to its tax basis for its share
of the total amount of the silver held in the Trust immediately prior to the
sale or redemption, less the portion of such basis which is taken into account
in determining the amount of gain or loss recognized by the Shareholder upon
such sale or, in the case of a redemption, which is treated as the basis of the
silver received by the Shareholder in the redemption.

An Authorized
Participant and other investors may be able to re-invest, on a tax-deferred
basis, in-kind redemption proceeds received from exchange-traded products that
are substantially similar to the Trust in the Trusts Shares. Authorized
Participants and other investors should consult their tax advisors as to
whether and under what circumstances the reinvestment in the Shares of proceeds
from substantially similar exchange-traded products can be accomplished on a
tax-deferred basis.

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Maximum 28% Long-Term Capital Gains Tax Rate
for US Shareholders Who Are Individuals

Under current
law, gains recognized by individuals from the sale of collectibles, including
silver bullion, held for more than one year are taxed at a maximum federal income
tax rate of 28%, rather than the 15% rate applicable to most other long-term
capital gains. For these purposes, gain recognized by an individual upon the
sale of an interest in a trust that holds collectibles is treated as gain
recognized on the sale of collectibles, to the extent that the gain is
attributable to unrealized appreciation in value of the collectibles held by
the trust. Therefore, any gain recognized by an individual US Shareholder
attributable to a sale of Shares held for more than one year, or attributable
to the Trusts sale of any silver bullion which the Shareholder is treated
(through its ownership of Shares) as having held for more than one year,
generally will be taxed at a maximum rate of 28%. The tax rates for capital
gains recognized upon the sale of assets held by an individual US Shareholder
for one year or less or by a taxpayer other than an individual US taxpayer are
generally the same as those at which ordinary income is taxed.

Brokerage Fees and Trust Expenses

Any brokerage
or other transaction fee incurred by a Shareholder in purchasing Shares will be
treated as part of the Shareholders tax basis in the underlying assets of the
Trust. Similarly, any brokerage fee incurred by a Shareholder in selling Shares
will reduce the amount realized by the Shareholder with respect to the sale.

Shareholders
will be required to recognize gain or loss upon a sale of silver by the Trust
(as discussed above), even though some or all of the proceeds of such sale are
used by the Trustee to pay Trust expenses. Shareholders may deduct their
respective pro rata shares of each expense incurred by the Trust to the same
extent as if they directly incurred the expense. Shareholders who are
individuals, estates or trusts, however, may be required to treat some or all
of the expenses of the Trust, to the extent that such expenses may be deducted,
as miscellaneous itemized deductions. Individuals may deduct certain
miscellaneous itemized deductions only to the extent they exceed 2% of adjusted
gross income. In addition, such deductions may be subject to further
limitations under applicable provisions of the Code, and may not be deductible
at all for alternative minimum tax purposes.

Investment by Regulated Investment Companies

Mutual funds
and other investment vehicles which are regulated investment companies within
the meaning of Code section 851 should consult with their tax advisors
concerning (1) the likelihood that an investment in Shares, although they are a
security within the meaning of the Investment Company Act of 1940, may be
considered an investment in the underlying silver for purposes of Code section
851(b), and (2) the extent to which an investment in Shares might nevertheless
be consistent with preservation of their qualification under Code section 851.

United States Information Reporting and
Backup Withholding for US and Non-US Shareholders

The Trustee or
the appropriate broker will file certain information returns with the IRS, and
provide certain tax-related information to Shareholders, in accordance with
applicable Treasury Regulations. Each Shareholder will be provided with
information regarding its allocable portion of the Trusts annual income (if
any) and expenses.

A US
Shareholder may be subject to US backup withholding tax in certain
circumstances unless it provides its taxpayer identification number and
complies with certain certification procedures. Non-US Shareholders may have to
comply with certification procedures to establish that they are not a US person
in order to avoid the information reporting and backup withholding tax
requirements.

The amount of
any backup withholding will be allowed as a credit against a Shareholders US
federal income tax liability and may entitle such a Shareholder to a refund,
provided that the required information is furnished to the IRS.

Income Taxation of Non-US Shareholders

The Trust does
not expect to generate taxable income except for gain (if any) upon the sale of
silver. A Non-US Shareholder generally will not be subject to US federal income
tax with respect to gain recognized upon the sale or other disposition of
Shares, or upon the sale of silver by the Trust, unless (1) the Non-US
Shareholder is an individual and is present in the United States for 183 days
or more during the taxable year of the sale or other disposition, and the gain
is treated as being from United States sources; or (2) the gain is effectively
connected with the conduct by the Non-US Shareholder of a trade or business in
the United States.

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Taxation in Jurisdictions other than the
United States

Prospective
purchasers of Shares that are based in or acting out of a jurisdiction other
than the United States are advised to consult their own tax advisers as to the
tax consequences, under the laws of such jurisdiction (or any other
jurisdiction not being the United States to which they are subject), of their
purchase, holding, sale and redemption of or any other dealing in Shares and,
in particular, as to whether any value added tax, other consumption tax or
transfer tax is payable in relation to such purchase, holding, sale, redemption
or other dealing.

ERISA and Related Considerations

The Employee
Retirement Income Security Act of 1974, as amended (ERISA), and/or Code
section 4975 impose certain requirements on employee benefit plans and certain
other plans and arrangements, including individual retirement accounts and
annuities, Keogh plans, and certain collective investment funds or insurance
company general or separate accounts in which such plans or arrangements are invested,
that are subject to ERISA and/or the Code (collectively, Plans), and on
persons who are fiduciaries with respect to the investment of assets treated as
plan assets of a Plan. Government plans and some church plans are not subject
to the fiduciary responsibility provisions of ERISA or the provisions of
section 4975 of the Code, but may be subject to substantially similar rules
under state or other federal law.

In
contemplating an investment of a portion of Plan assets in Shares, the Plan
fiduciary responsible for making such investment should carefully consider,
taking into account the facts and circumstances of the Plan, the Risk Factors
discussed above and whether such investment is consistent with its fiduciary
responsibilities, including, but not limited to (1) whether the fiduciary has
the authority to make the investment under the appropriate governing plan
instrument, (2) whether the investment would constitute a direct or indirect
non-exempt prohibited transaction with a party in interest, (3) the Plans
funding objectives, and (4) whether under the general fiduciary standards of
investment prudence and diversification such investment is appropriate for the
Plan, taking into account the overall investment policy of the Plan, the
composition of the Plans investment portfolio and the Plans need for
sufficient liquidity to pay benefits when due.

It is
anticipated that the Shares will constitute publicly-held offered securities
as defined in Department of Labor Regulations §2510.3-101(b)(2). Accordingly,
Shares purchased by a Plan, and not the Plans interest in the underlying
silver bullion held in the Trust represented by the Shares, should be treated
as assets of the Plan, for purposes of applying the fiduciary responsibility
and prohibited transaction rules of ERISA and the Code.

Investment by Certain Retirement Plans

Code section
408(m) provides that the acquisition of a collectible by an individual
retirement account (IRA) or a participant-directed account maintained under any
plan that is tax-qualified under Code section 401(a) is treated as a taxable
distribution from the account to the owner of the IRA, or to the participant
for whom the plan account is maintained, of an amount equal to the cost to the
account of acquiring the collectible. The IRS has issued private letter rulings
to the effect that a purchase of shares in a trust holding precious metals by
an IRA, or by a participant-directed account under a Code section 401(a) plan,
will not be treated as resulting in a taxable distribution to the IRA owner or
plan participant under Code section 408(m). However, if any of the Shares so
purchased are distributed from the IRA or plan account to the IRA owner or plan
participant, or if any silver received by such IRA or plan account upon the
redemption of any of the Shares purchased by it, the Shares or silver so
distributed will be subject to federal income tax in the year of distribution,
to the extent provided under the applicable provisions of Code sections 408(d),
408(m) or 402.

Item 1A. Risk
Factors

You should
consider carefully the risks described below before making an investment
decision. You should also refer to the other information included in this
report, including the Trusts financial statements and the related notes.

The value of the Shares relates directly to
the value of the silver held by the Trust and fluctuations in the price of
silver could materially adversely affect an investment in the Shares.

The Shares are
designed to mirror as closely as possible the performance of the price of
silver bullion, and the value of the Shares relates directly to the value of
the silver held by the Trust, less the Trusts liabilities (including estimated
accrued but unpaid expenses). The price of silver has fluctuated widely over the
past several years. Several factors may affect the price of silver, including:

14

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| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Ø                                                                                                                                                                                                                                                                                                        | A change in
 economic conditions, such as a recession, can adversely affect the price of
 silver. Silver is used in a wide range of industrial applications, and an economic
 downturn could have a negative impact on its demand and, consequently, its
 price and the price of the Shares;
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | Ø                                                                                                                                                                                                                                                                                                        | Investors
 expectations with respect to the rate of inflation;                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | Ø                                                                                                                                                                                                                                                                                                        | Currency
 exchange rates;                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | Ø                                                                                                                                                                                                                                                                                                        | Interest
 rates;                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | Ø                                                                                                                                                                                                                                                                                                        | Investment
 and trading activities of hedge funds and commodity funds; and                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | Ø                                                                                                                                                                                                                                                                                                        | Global or
 regional political, economic or financial events and situations.                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                             
| | In addition,
 investors should be aware that 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.

The Shares may trade at a price which is at,
above or below the NAV per Share and any discount or premium in the trading
price relative to the NAV per Share may widen as a result of non-concurrent
trading hours between the NYSE Arca and London and COMEX.

The Shares may
trade at, above or below the NAV per Share. The NAV per Share fluctuates with
changes in the market value of the Trusts assets. The trading price of the
Shares fluctuates in accordance with changes in the NAV per Share as well as
market supply and demand. The amount of the discount or premium in the trading
price relative to the NAV per Share may be influenced by non-concurrent trading
hours between the NYSE Arca and the major silver markets. While the Shares
trade on the NYSE Arca until 4:00 PM New York time, liquidity in the market for
silver is reduced after the close of the major world silver markets, including
London and the COMEX. As a result, during this time, trading spreads, and the
resulting premium or discount on the Shares, may widen.

Purchasing activity in the silver market
associated with the purchase of Baskets from the Trust may cause a temporary
increase in the price of silver. This increase may adversely affect an
investment in the Shares.

Purchasing
activity associated with acquiring the silver required for deposit into the
Trust in connection with the creation of Baskets may temporarily increase the
market price of silver, which will result in higher prices for the Shares.
Temporary increases in the market price of silver may also occur as a result of
the purchasing activity of other market participants. Other market participants
may attempt to benefit from an increase in the market price of silver that may
result from increased purchasing activity of silver connected with the issuance
of Baskets. Consequently, the market price of silver may decline immediately
after Baskets are created. If the price of silver declines, the trading price
of the Shares may also decline.

The Shares and their value could decrease if
unanticipated operational or trading problems arise.

There may be
unanticipated problems or issues with respect to the mechanics of the Trusts
operations and the trading of the Shares that could have a material adverse
effect on an investment in the Shares. In addition, although the Trust is not
actively managed by traditional methods, to the extent that unanticipated
operational or trading problems or issues arise, the Sponsors past experience
and qualifications may not be suitable for solving these problems or issues.

If the process of creation and redemption of
Baskets encounters any unanticipated difficulties, the possibility for
arbitrage transactions intended to keep the price of the Shares closely linked
to the price of silver may not exist and, as a result, the price of the Shares
may fall.

If the
processes of creation and redemption of Shares (which depend on timely
transfers of silver to and by the Custodian) encounter any unanticipated
difficulties, potential market participants who would otherwise be willing to
purchase or redeem Baskets to take advantage of any arbitrage opportunity
arising from discrepancies between the price of the Shares and the price of the
underlying silver may not take the risk that, as a result of those
difficulties, they may not be able to realize the profit they expect. If this
is the case, the liquidity of Shares may decline and the price of the Shares
may fluctuate independently of the price of silver and may fall.

15

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The liquidity of the Shares may be affected
by the withdrawal from participation of one or more Authorized Participants.

In the event
that one or more Authorized Participants having substantial interests in Shares
or otherwise responsible for a significant portion of the Shares daily trading
volume on the Exchange withdraw from participation, the liquidity of the Shares
will likely decrease which could adversely affect the market price of the
Shares and result in your incurring a loss on your investment.

Shareholders do not have the protections
associated with ownership of shares in an investment company registered under
the Investment Company Act of 1940 or the protections afforded by the CEA.

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. Consequently, Shareholders
do not have the regulatory protections provided to investors in investment
companies. The Trust does and will not hold or trade in commodity futures
contracts regulated by the CEA, as administered by the CFTC. Furthermore, the
Trust is not a commodity pool for purposes of the CEA, and neither the Sponsor
nor the Trustee is subject to regulation by the CFTC as a commodity pool
operator or a commodity trading advisor in connection with the Shares.
Consequently, Shareholders do not have the regulatory protections provided to investors
in CEA-regulated instruments or commodity pools.

The Trust may be required to terminate and
liquidate at a time that is disadvantageous to Shareholders.

If the Trust
is required to terminate and liquidate, such termination and liquidation could
occur at a time which is disadvantageous to Shareholders, such as when silver
prices are lower than the silver prices at the time when Shareholders purchased
their Shares. In such a case, when the Trusts silver is sold as part of the
Trusts liquidation, the resulting proceeds distributed to Shareholders will be
less than if silver prices were higher at the time of sale.

The lack of an active trading market for the
Shares may result in losses on investment at the time of disposition of the
Shares.

Although
Shares are listed for trading on the NYSE Arca, it cannot be assumed that an
active trading market for the Shares will develop or be maintained. If an
investor needs to sell Shares at a time when no active market for Shares
exists, such lack of an active market will most likely adversely affect the
price the investor receives for the Shares (assuming the investor is able to
sell them).

Shareholders do not have the rights enjoyed
by investors in certain other vehicles.

As interests
in an investment trust, the Shares have none of the statutory rights normally
associated with the ownership of shares of a corporation (including, for
example, the right to bring oppression or derivative actions). In addition,
the Shares have limited voting and distribution rights (for example,
Shareholders do not have the right to elect directors and do not receive
dividends).

An investment in the Shares may be adversely
affected by competition from other methods of investing in silver.

The Trust
competes with other financial vehicles, including traditional debt and equity
securities issued by companies in the silver industry and other securities
backed by or linked to silver, direct investments in silver and investment
vehicles similar to the Trust. Market and financial conditions, and other
conditions beyond the Sponsors control, may make it more attractive to invest
in other financial vehicles or to invest in silver directly, which could limit
the market for the Shares and reduce the liquidity of the Shares.

The price of silver may be affected by the
sale of ETVs tracking silver markets.

To the extent
existing exchange traded vehicles (ETVs) tracking silver markets represent a
significant proportion of demand for physical silver bullion, large redemptions
of the securities of these ETVs could negatively affect physical silver bullion
prices and the price and NAV of the Shares.

Crises may motivate large-scale sales of
silver which could decrease the price of silver and adversely affect an
investment in the Shares.

16

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The possibility
of large-scale distress sales of silver in times of crisis may have a
short-term negative impact on the price of silver and adversely affect an
investment in the Shares. For example, the 2008 financial credit crisis
resulted in significantly depressed prices of silver largely due to a slowdown
in demand in silver for industrial use and forced sales and deleveraging from
institutional investors. Crises in the future may impair silvers price
performance which would, in turn, adversely affect an investment in the Shares.

Several factors may have the effect of
causing a decline in the prices of silver and a corresponding decline in the
price of Shares. Among them:

A significant
increase in silver hedging activity by silver producers. Should there be an
increase in the level of hedge activity of silver producing companies, it could
cause a decline in world silver prices, adversely affecting the price of the
Shares.

A significant
change in the attitude of speculators and investors towards silver. Should the
speculative community take a negative view towards silver, it could cause a
decline in world silver prices, negatively impacting the price of the Shares.

A widening of
interest rate differentials between the cost of money and the cost of silver
could negatively affect the price of silver which, in turn, could negatively
affect the price of the Shares.

A combination
of rising money interest rates and a continuation of the current low cost of
borrowing silver could improve the economics of selling silver forward. This
could result in an increase in hedging by silver mining companies and short
selling by speculative interests, which would negatively affect the price of
silver. Under such circumstances, the price of the Shares would be similarly
affected.

The Trusts silver may be subject to loss,
damage, theft or restriction on access.

There is a
risk that part or all of the Trusts silver could be lost, damaged or stolen.
Access to the Trusts silver could also be restricted by natural events (such
as an earthquake) or human actions (such as a terrorist attack). Any of these
events may adversely affect the operations of the Trust and, consequently, an
investment in the Shares.

The Trusts lack of insurance protection and
the Shareholders limited rights of legal recourse against the Trust, the
Trustee, the Sponsor, the Custodian and any subcustodian exposes the Trust and
its Shareholders to the risk of loss of the Trusts silver for which no person
is liable.

The Trust does
not insure its silver. The Custodian maintains insurance with regard to its
business on such terms and conditions as it considers appropriate in connection
with its custodial obligations and is responsible for all costs, fees and
expenses arising from the insurance policy or policies. The Trust is not a
beneficiary of any such insurance and does not have the ability to dictate the
existence, nature or amount of coverage. Therefore, Shareholders cannot be
assured that the Custodian maintains adequate insurance or any insurance with
respect to the silver held by the Custodian on behalf of the Trust. In
addition, the Custodian and the Trustee do not require any direct or indirect
subcustodians to be insured or bonded with respect to their custodial
activities or in respect of the silver held by them on behalf of the Trust.
Further, Shareholders recourse against the Trust, the Trustee and the Sponsor,
under New York law, the Custodian, under English law, and any subcustodians
under the law governing their custody operations is limited. Consequently, a
loss may be suffered with respect to the Trusts silver which is not covered by
insurance and for which no person is liable in damages.

The Custodians limited liability under the
Custody Agreements and English law may impair the ability of the Trust to
recover losses concerning its silver and any recovery may be limited, even in
the event of fraud, to the market value of the silver at the time the fraud is
discovered.

The liability
of the Custodian is limited under the Custody Agreements. Under the Custody
Agreements between the Trustee and the Custodian which establish the Trust
Unallocated Account and the Trust Allocated Account, the Custodian is only
liable for losses that are the direct result of its own negligence, fraud or
willful default in the performance of its duties. Any such liability is further
limited, in the case of the Allocated Account Agreement, to the market value of
the silver held in the Trust Allocated Account at the time such negligence,
fraud or willful

17

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default is
discovered by the Custodian and, in the case of the Unallocated Account
Agreement, to the amount of silver credited to the Trust Unallocated Account at
the time such negligence, fraud or willful default is discovered by the
Custodian. Under each Authorized Participant Unallocated Bullion Account
Agreement (between the Custodian and an Authorized Participant), the Custodian
is not contractually or otherwise liable for any losses suffered by any
Authorized Participant or Shareholder that are not the direct result of its own
gross negligence, fraud or willful default in the performance of its duties
under such agreement, and in no event will its liability exceed the market
value of the balance in the Authorized Participant Unallocated Account at the
time such gross negligence, fraud or willful default is discovered by the
Custodian. In addition, the Custodian will not be liable for any delay in
performance or any non-performance of any of its obligations under the
Allocated Account Agreement, the Unallocated Account Agreement or the
Authorized Participant Unallocated Bullion Account Agreement by reason of any
cause beyond its reasonable control, including acts of God, war or terrorism.
As a result, the recourse of the Trustee or the investor, under English law, is
limited. Furthermore, under English common law, the Custodian or any
subcustodian will not be liable for any delay in the performance or any
non-performance of its custodial obligations by reason of any cause beyond its
reasonable control.

The obligations of the Custodian and English
subcustodians are governed by English law, which may frustrate the Trust in
attempting to receive legal redress against the Custodian or any subcustodian
concerning its silver.

The
obligations of the Custodian under the Custody Agreements and the Authorized
Participant Unallocated Bullion Account Agreement are governed by English law.
The Custodian may enter into arrangements with English subcustodians, which
arrangements may also be governed by English law. The Trust is a New York common
law trust. Any United States, New York or other court situated in the United
States may have difficulty interpreting English law (which, insofar as it
relates to custody arrangements, is largely derived from court rulings rather
than statute), LBMA rules or the customs and practices in the London custody
market. It may be difficult or impossible for the Trust to sue a subcustodian
in a United States, New York or other court situated in the United States. In
addition, it may be difficult, time consuming and/or expensive for the Trust to
enforce in a foreign court a judgment rendered by a United States, New York or
other court situated in the United States.

The Trust may not have adequate sources of
recovery if its silver is lost, damaged, stolen or destroyed.

If the Trusts
silver is lost, damaged, stolen or destroyed under circumstances rendering a
party liable to the Trust, the responsible party may not have the financial
resources sufficient to satisfy the Trusts claim. For example, as to a
particular event of loss, the only source of recovery for the Trust might be
limited to the Custodian or one or more subcustodians or, to the extent
identifiable, other responsible third parties (e.g., a thief or terrorist), any
of which may not have the financial resources (including liability insurance
coverage) to satisfy a valid claim of the Trust.

Shareholders and Authorized Participants lack
the right under the Custody Agreements to assert claims directly against the
Custodian and any subcustodian.

Neither the Shareholders
nor any Authorized Participant have a right under the Custody Agreements to
assert a claim of the Trustee against the Custodian or any subcustodian. Claims
under the Custody Agreements may only be asserted by the Trustee on behalf of
the Trust.

Because neither the Trustee nor the Custodian
oversees or monitors the activities of subcustodians who may hold the Trusts
silver, failure by the subcustodians to exercise due care in the safekeeping of
the Trusts silver could result in a loss to the Trust.

Under the
Allocated Account Agreement, the Custodian may appoint from time to time one or
more subcustodians to hold the Trusts silver on a temporary basis pending
delivery to the Custodian. The subcustodians which the Custodian currently uses
are LBMA market-making members that provide bullion vaulting and clearing
services to third parties. The Custodian is required under the Allocated
Account Agreement to use reasonable care in appointing its subcustodians,
making the Custodian liable only for negligence or bad faith in the selection
of such subcustodians, and has an obligation to use commercially reasonable
efforts to obtain delivery of the Trusts silver from any subcustodians
appointed by the Custodian. Otherwise, the Custodian is not liable for the acts
or omissions of its subcustodians. These subcustodians may in turn appoint
further subcustodians, but the Custodian is not responsible for the appointment
of these further subcustodians. The Custodian does not undertake to monitor the
performance by subcustodians of their custody functions or their selection of
further subcustodians. The Trustee

18

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does not
monitor the performance of the Custodian other than to review the reports
provided by the Custodian pursuant to the Custody Agreements and does not
undertake to monitor the performance of any subcustodian. Furthermore, the
Trustee may have no right to visit the premises of any subcustodian for the
purposes of examining the Trusts silver or any records maintained by the
subcustodian, and no subcustodian will be obligated to cooperate in any review
the Trustee may wish to conduct of the facilities, procedures, records or
creditworthiness of such subcustodian. In addition, the ability of the Trustee
to monitor the performance of the Custodian may be limited because under the
Allocated Account Agreement and the Unallocated Account Agreement the Trustee
has only limited rights to visit the premises of the Custodian for the purpose
of examining the Trusts silver and certain related records maintained by the
Custodian.

The obligations of any subcustodian of the
Trusts silver are not determined by contractual arrangements but by LBMA rules
and London bullion market customs and practices, which may prevent the Trusts
recovery of damages for losses on its silver custodied with subcustodians.

There are
expected to be no written contractual arrangements between subcustodians that
hold the Trusts silver and the Trustee or the Custodian because traditionally
such arrangements are based on the LBMAs rules and on the customs and
practices of the London bullion market. In the event of a legal dispute with
respect to or arising from such arrangements, it may be difficult to define
such customs and practices. The LBMAs rules may be subject to change outside the
control of the Trust. Under English law, neither the Trustee nor the Custodian
would have a supportable breach of contract claim against a subcustodian for
losses relating to the safekeeping of silver. If the Trusts silver is lost or
damaged while in the custody of a subcustodian, the Trust may not be able to
recover damages from the Custodian or the subcustodian. Whether a subcustodian
will be liable for the failure of subcustodians appointed by it to exercise due
care in the safekeeping of the Trusts silver will depend on the facts and
circumstances of the particular situation. Shareholders cannot be assured that
the Trustee will be able to recover damages from subcustodians whether
appointed by the Custodian or by another subcustodian for any losses relating
to the safekeeping of silver by such subcustodian.

Silver bullion allocated to the Trust in
connection with the creation of a Basket may not meet the London Good Delivery
Standards and, if a Basket is issued against such silver, the Trust may suffer
a loss.

Neither the
Trustee nor the Custodian independently confirms the fineness of the silver
allocated to the Trust in connection with the creation of a Basket. The silver
bullion allocated to the Trust by the Custodian may be different from the
reported fineness or weight required by the LBMAs standards for silver bars
delivered in settlement of a silver trade (London Good Delivery Standards), the
standards required by the Trust. If the Trustee nevertheless issues a Basket
against such silver, and if the Custodian fails to satisfy its obligation to
credit the Trust the amount of any deficiency, the Trust may suffer a loss.

Silver held in the Trusts unallocated silver
account and any Authorized Participants unallocated silver account is not
segregated from the Custodians assets. If the Custodian becomes insolvent, its
assets may not be adequate to satisfy a claim by the Trust or any Authorized
Participant. In addition, in the event of the Custodians insolvency, there may
be a delay and costs incurred in identifying the bullion held in the Trusts
allocated silver account.

Silver which
is part of a deposit for a purchase order or part of a redemption distribution
will be held for a time in the Trusts Unallocated Account and, previously or
subsequently in, the Authorized Participant Unallocated Account of the
purchasing or redeeming Authorized Participant. During those times, the Trust
and the Authorized Participant, as the case may be, will have no proprietary
rights to any specific bars of silver held by the Custodian and will each be an
unsecured creditor of the Custodian with respect to the amount of silver held
in such unallocated accounts. In addition, if the Custodian fails to allocate
the Trusts silver in a timely manner, in the proper amounts or otherwise in
accordance with the terms of the Unallocated Account Agreement, or if a
subcustodian fails to so segregate silver held by it on behalf of the Trust,
unallocated silver will not be segregated from the Custodians assets, and the
Trust will be an unsecured creditor of the Custodian with respect to the amount
so held in the event of the insolvency of the Custodian. In the event the
Custodian becomes insolvent, the Custodians assets might not be adequate to
satisfy a claim by the Trust or the Authorized Participant for the amount of
silver held in their respective unallocated silver accounts.

In the case of
the insolvency of the Custodian, a liquidator may seek to freeze access to the
silver held in all of the accounts held by the Custodian, including the Trusts
Allocated Account. Although the Trust would be able to

19

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claim
ownership of properly allocated silver, the Trust could incur expenses in
connection with asserting such claims, and the assertion of such a claim by the
liquidator could delay creations and redemptions of Baskets.

In issuing Baskets, the Trustee relies on
certain information received from the Custodian which is subject to
confirmation after the Trustee has relied on the information. If such
information turns out to be incorrect, Baskets may be issued in exchange for an
amount of silver which is more or less than the amount of silver which is
required to be deposited with the Trust.

The
Custodians definitive records are prepared after the close of its business
day. However, when issuing Baskets, the Trustee relies on information reporting
the amount of silver credited to the Trusts accounts which it receives from
the Custodian during the business day and which is subject to correction during
the preparation of the Custodians definitive records after the close of
business. If the information relied upon by the Trustee is incorrect, the
amount of silver actually received by the Trust may be more or less than the
amount required to be deposited for the issuance of Baskets.

The sale of the Trusts silver to pay
expenses not assumed by the Sponsor at a time of low silver prices could
adversely affect the value of the Shares.

The Trustee
sells silver held by the Trust to pay Trust expenses not assumed by the Sponsor
on an as-needed basis irrespective of then-current silver prices. The Trust is
not actively managed and no attempt will be made to buy or sell silver to
protect against or to take advantage of fluctuations in the price of silver.
Consequently, the Trusts silver may be sold at a time when the silver price is
low, resulting in a negative effect on the value of the Shares.

The value of the Shares will be adversely
affected if the Trust is required to indemnify the Sponsor or the Trustee under
the Trust Agreement.

Under the Trust
Agreement, each of the Sponsor and the Trustee has a right to be indemnified
from the Trust for any liability or expense it incurs without gross negligence,
bad faith or willful misconduct on its part. That means the Sponsor or the
Trustee may require the assets of the Trust to be sold in order to cover losses
or liability suffered by it. Any sale of that kind would reduce the NAV of the
Trust and the value of the Shares.

Item 1B.
Unresolved Staff Comments

None.

Item 2.
Properties

Not
applicable.

Item 3. Legal
Proceedings

None.

Item 4. (Removed
and Reserved)

20

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PART II

Item 5. Market
for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.

a) On July 24,
2009, the Trusts Shares commenced trading on the NYSE Arca under the symbol
SIVR, and the Trust commenced operations, began accruing expenses and began the
calculation of NAV. For each of the quarters during the fiscal period
commencing July 24, 2009 and ending December 31, 2009 (the Reporting Period,
the high and low sale prices of the Shares as reported for NYSE Arca
transactions were as follows:

|                                          |  |                                |       |     |   |       | 
|----------------------------------------- |  | ------------------------------ | ----- | --- | - | ----- | 
|                                          |  | Period ended December 31, 2009 |      
|                                          |  | High                           |       | Low |  
|Third
 Quarter (commencing July 24, 2009) |  | $                              | 17.37 |     | $ | 13.40 | 
|Fourth
 Quarter                           |  | $                              | 19.15 |     | $ | 16.20 | 

The
number of Shareholders of record of the Trust as of March 26, 2010 was
approximately nine.

b) Not
applicable.

c) 15 Baskets
(1,500,000 Shares) were redeemed during the fourth quarter of the year ended
December 31, 2009.

|                      |  |                                  |           |                                     |  |        | 
|--------------------- |  | -------------------------------- | --------- | ----------------------------------- |  | ------ | 
|Period                |  | Total Number of Shares
 Redeemed |           | Average Ounces of Silver
 Per Share | 
|                      |  |                                  |           |                                     |  |        | 
|10/01/09 to
 10/31/09 |  |                                  | 0         |                                     |  | 0      | 
|11/01/09 to
 11/30/09 |  |                                  | 0         |                                     |  | 0      | 
|12/01/09 to
 12/31/09 |  |                                  | 1,500,000 |                                     |  | .99932 | 
|                      |  |                                  |           |                                     |  |        | 
|Total                 |  |                                  | 1,500,000 |                                     |  | .99932 | 

Item 6. Selected
Financial Data.

The following
selected financial data for the Reporting Period should be read in conjunction
with the Trusts financial statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of Operations.

|                                                 |  |                     |             | 
|------------------------------------------------ |  | ------------------- | ----------- | 
|                                                 |  | December 31,
 2009* |            
|Total assets                                     |  | $                   | 139,223,967 | 
|Total gain
 on sales and distributions of silver |  | $                   | 3,870,417   | 
|Net gain
 (loss)                                 |  | $                   | 3,664,391   | 
|Weighted-average
 shares outstanding             |  |                     | 7,648,171   | 
|Net gain
 (loss) per share                       |  | $                   | 0.48        | 
|Net cash
 flows                                  |  | $                   | 0           | 

|  |                                                         
|- | --------------------------------------------------------
|  |                                                         
|* | For the
 period from July 24, 2009 to December 31, 2009.

21

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Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

This information should be read in
conjunction with the financial statements and notes to the financial statements
included with this report. The discussion and analysis that follows may contain
statements that relate to future events or future performance. In some cases,
such forward-looking statements can be identified by terminology such as may,
should, expect, plan, anticipate, believe, estimate, predict,
potential or the negative of these terms or other comparable terminology.
Neither the Sponsor, nor any other person assumes responsibility for the
accuracy or completeness of forward-looking statements. 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 a change in the Sponsors
expectations or predictions.

Introduction.

The Trust is a
common law trust, formed under the laws of the state of New York on the
completion of the initial deposit of silver on July 20, 2009 (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 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, if
there is no London Fix on such day or the London Fix has not been announced by 12:00
noon New York time on such day, as of 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.

The following
chart shows the daily London Fix price of silver for the Reporting Period:



22

---



Liquidity & Capital Resources

The Trust is
not aware of any trends, demands, conditions, events or uncertainties that are
reasonably likely to result in material changes to its liquidity needs. In
exchange for the Sponsors Fee, the Sponsor has agreed to assume most of the
expenses incurred by the Trust. As a result, the only expense of the Trust during
the period covered by this report was the Sponsors Fee. The Trusts only
source of liquidity is its transfers and sales of silver.

The Trustee
will, at the direction of the Sponsor or in its own discretion, sell the
Trusts silver as necessary to pay the Trusts expenses not otherwise assumed
by the Sponsor. The Trustee will not sell silver to pay the Sponsors Fee but
will pay the Sponsors Fee through in-kind transfers of silver to the Sponsor.
At December 31, 2009 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.

The Trusts Cost of Silver Realization of
Gains and Losses

The Trusts
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 NAV of the Trust.
Realized gains and losses on sales of silver, or silver distributed for the
redemption of Shares, are calculated on a trade date basis using average cost.

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.

Redeemable Capital Shares

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.

The Period Ended December 31, 2009

On July 20,
2009, the Trust was formed as a legal entity with an initial deposit of silver.
On July 24, 2009, the Trusts Shares commenced trading on the NYSE Arca
under the symbol SIVR, and the Trust commenced operations, began accruing expenses
and began the calculation of NAV (the Commencement of Operations).
The assets of the Trust were $1,378,000 and the redemption value per Share was
$13.78 as of close of business on July 24, 2009.

The assets of the Trust at market value at December 31, 2009
    were $156,066,265 representing a 1,122.80% increase from the asset level
    as of close of business on the Commencement of Operations. The redemption
    value per Share increased from $13.78 on July 24, 2009 to $16.97 on December
    31, 2009 representing a 23.15% increase from the NAV as of close of business
    on the Commencement of Operations.

The price of silver per ounce increased
from $13.78 on July 24, 2009 to $16.99 on December 31, 2009, representing
a 23.29% increase during the Reporting Period. The Trusts redemption value
per Share rose slightly less than the silver spot price per ounce on a percentage
basis due to the Sponsors Fees, a portion of which are presently being
waived to reduce the Sponsors Fees to 0.30% for the first year of the Trusts
operations. This waiver will be in place until July 20, 2010.

23

---



The Sponsor
received $260,026 in fees during the Reporting Period, or 0.30% of the Trusts
assets on an annualized basis.

The redemption
value per Share of $19.15 on December 2, 2009, was the highest during the
Reporting Period, compared with a low of $13.40 on July 30, 2009.
The number of
Baskets created from the Date of Inception to December 31, 2009 was 107
(representing 10,700,000 Shares) and the number of Shareholders on record as
at December 31, 2009 totaled nine.
Fifteen Baskets (representing 1,500,000 Shares) were redeemed during the
Reporting Period.Net gain for the period ended December 31, 2009 was
$3,664,391 resulting from a net gain of $27,499 on the transfer of silver to
pay the Sponsors Fee, and a net gain of $3,842,918 on silver distributed for
the redemption of Baskets, which was offset by the Sponsors Fee of $206,026.
Other than the Sponsors Fee, the Trust had no expenses during the period ended
December 31, 2009.

Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 8. Financial
Statements and Supplementary Data.

Quarterly Income Statements (unaudited)

|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|------------------------------------------------------- |  | ------------------------------------------------------- | --------- | ------------------------------------- | - | ------------------------------------------------------ | - | - | --------- | -
|                                                        |  | For the
 period July 20,
 2009 through Sept. 30,
 2009* |           | Three
 months endedDecember
 31, 2009 |   | For the
 period July 20,
 2009 through Dec. 31,
 2009* |  
|Revenues                                                |  | $                                                       |           |                                       | $ |                                                        |   | $ |           |  
|Value of silver transferred to pay expenses             |  |                                                         | 36,294    |                                       |   | 169,732                                                |   |   | 206,026   |  
|Cost of silver transferred to pay expenses              |  |                                                         | (34,526   | )                                     |   | (144,001                                               | ) |   | (178,527  | )
|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|Gain on silver transferred to pay expenses              |  |                                                         | 1,768     |                                       |   | 25,731                                                 |   |   | 27,499    |  
|Gain on silver distributed for the redemption of shares |  |                                                         |          |                                       |   | 3,842,918                                              |   |   | 3,842,918 |  
|Unrealized
     Gain (Loss) on investment in silver     |  |                                                         | 1,768     |                                       |   |                                                       |   |   |          |  
|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|Total Gain (Loss) on sales
 and distributions of silver |  |                                                         | (422,434  | )                                     |   | 3,868,649                                              |   |   | 3,870,417 |  
|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|                                                        |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|Expenses                                                |  |                                                         |           |                                       |   |                                                        |   |   |           |  
|Sponsors fees                                          |  | $                                                       | 70,988    |                                       | $ | 102,716                                                |   | $ | 206,026   |  
|Total expenses                                          |  | $                                                       | 70,988    |                                       | $ | 102,716                                                |   | $ | 206,026   |  
|Net gain (loss) from
 Operations                        |  | $                                                       | 69,220    |                                       | $ | 3,765,933                                              |   | $ | 3,664,391 |  
|Net income (loss) per share                             |  | $                                                       | (0.01     | )                                     | $ | 0.42                                                   |   | $ | 0.48      |  
|Weighted-average shares
 outstanding                    |  |                                                         | 6,007,246 |                                       |   | 9,005,435                                              |   |   | 7,648,171 |  

|                                  | 
|--------------------------------- | 
|                                  | 
|* Period commenced July 24, 2009.

The financial
statements required by Regulation S-X, together with the report of the Trusts
independent registered public accounting firm, appear on pages F-1 to F-12 of
this filing.

Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure.

Deloitte &
Touche LLP was appointed independent accountants to the Trust from the Date of
Inception. There have been no disagreements with accountants during the period
ended December 31, 2009.

24

---



Item 9A. 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 were effective as of December 31, 2009.

There have
been no changes in the Trusts or Sponsors internal control over financial
reporting that occurred during the Trusts fourth fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Trusts
or Sponsors internal control over financial reporting. This Annual Report does
not include a report of managements assessment regarding internal control over
financial reporting or an attestation report of the Trusts registered public
accounting firm due to a transition period established by rules of the SEC for
newly public companies.

Item 9B. Other
Information.

Not
applicable.

25

---



PART III

Item 10.
Directors, Executive Officers and Corporate Governance.

Not
applicable.

Item 11.
Executive Compensation.

Not
applicable.

Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.

Securities authorized for issuance under
equity compensation plans

Not
applicable.

Security Ownership of Certain Beneficial
Owners

The Sponsor
has no knowledge of any person being the beneficial owner of more than five
percent of the Shares of the Trust or any arrangement which may subsequently
result in a change in control of the Trust.

Security Ownership of Management

The Trustee
does not beneficially own any of the Trust Shares.

Change In Control

Neither the
Sponsor nor the Trustee knows of any arrangements which may subsequently result
in a change in control of the Trust.

Item 13. Certain
Relationships and Related Transactions, and Director Independence.

Not
applicable.

Item 14.
Principal Accounting Fees and Services.

(1) to (4)
Fees for services performed by Deloitte & Touche LLP for the period ended
December 31, 2009 were as follows:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|Audit fees          |  | $ | 51,000 | 
|Audit-related
 fees |  |   | 17,500 | 
|Tax fees            |  |   |       | 
|All other
 fees     |  |   | 0      | 
|                    |  |   |        | 
|                    |  |   |        | 
|                    |  | $ | 68,500 | 

(5) The Trust
has no board of directors, and as a result, has no audit committee and no
pre-approval policies or procedures with respect to fees paid to Deloitte &
Touche LLP.(6) None of the hours expended by Deloitte & Touche LLP to
audit the Trusts financial statements for the fiscal period ended December 31,
2009 were attributable to work performed by persons other than the principal
accountants full-time, permanent employees.

26

---



PART IV

Item 15.
Exhibits, Financial Statement Schedules

1. Financial Statements

See Index to
Financial Statements on Page F-1 for a list of the financial statements being
filed herein.

2. Financial Statement Schedules

Schedules have
been omitted since they are either not required, not applicable, or the information
has otherwise been included.

3. Exhibits

|             |  |                                                                                                                                                       
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
 No. |  | Description                                                                                                                                           
|             |  |                                                                                                                                                       
|4.1          |  | Depositary
 Trust Agreement, incorporated by reference to Exhibit 4.1 filed with
 Registration Statement No. 333-156307 on July 21, 2009              
|             |  |                                                                                                                                                       
|4.2          |  | Form of
 Authorized Participant Agreement, incorporated by reference to Exhibit 4.2
 filed with Registration Statement No. 333-156307 on July 21, 2009
|             |  |                                                                                                                                                       
|4.3          |  | Global
 Certificate, incorporated by reference to Exhibit 4.3 filed with Registration
 Statement No. 333-15822 on July 21, 2009                       
|             |  |                                                                                                                                                       
|10.1         |  | Allocated
 Account Agreement, incorporated by reference to Exhibit 10.1 filed with
 Registration Statement No. 333-156307 on July 21, 2009            
|             |  |                                                                                                                                                       
|10.2         |  | Unallocated
 Account Agreement, incorporated by reference to Exhibit 10.2 filed with
 Registration Statement No. 333-156307 on July 21, 2009          
|             |  |                                                                                                                                                       
|10.3         |  | Depository
 Agreement, incorporated by reference to Exhibit 10.3 filed with Registration
 Statement No. 333-156307 on July 21, 2009                   
|             |  |                                                                                                                                                       
|10.4         |  | Marketing
 Agent Agreement, incorporated by reference to Exhibit 10.4 filed with
 Registration Statement No. 333-156307 on July 21, 2009              
|             |  |                                                                                                                                                       
|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.    

27

---



ETFS SILVER TRUSTFINANCIAL STATEMENTS INDEX

|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                      |  | Page
|                                                                                                      |  |     
|Report of Independent Registered Public Accounting Firm                                               |  | F-2 
|                                                                                                      |  |     
|Statement of Condition at December 31, 2009                                                           |  | F-3 
|                                                                                                      |  |     
|Statement of Operations for the period July 20, 2009 through December
 31, 2009                       |  | F-4 
|                                                                                                      |  |     
|Statement of Cash Flows for the period July 20, 2009 through December
 31, 2009                       |  | F-5 
|                                                                                                      |  |     
|Statement of Changes in Shareholders Deficit for the period July 20,
 2009 through December 31, 2009 |  | F-6 
|                                                                                                      |  |     
|Notes to the Financial Statements                                                                     |  | F-7 

F-1

---



REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the
Sponsor, Trustee and the Unitholders of the ETFS Silver Trust

We have
audited the accompanying statement of financial condition of ETFS Silver Trust
(the Trust) as of December 31, 2009, and the related statement of operations,
changes in shareholders deficit, and cash flows for the period July 20, 2009
(date of inception) to December 31, 2009. These financial statements are the
responsibility of the Trusts management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Trust is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Trusts internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.

In our
opinion, such financial statements present fairly, in all material respects,
the financial position of ETFS Silver Trust at December 31, 2009, and the
results of their operations and their cash flows for the period July 20, 2009
(date of inception) to December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.

/s/ DELOITTE
& TOUCHE LLP

New York, New
York
March 29, 2010

F-2

---



ETFS SILVER TRUST

Statement
of Condition

December 31, 2009

|                                                              |  |                    |             |  
|------------------------------------------------------------- |  | ------------------ | ----------- | -
|                                                              |  | December 31,
 2009 |            
|                                                              |  |                    |            
|ASSETS                                                        |  |                    |             |  
|Investment
 in silver (1)                                     |  | $                  | 139,223,967 |  
|                                                              |  |                    |             |  
|                                                              |  |                    |             |  
|Total Assets                                                  |  | $                  | 139,223,967 |  
|                                                              |  |                    |             |  
|                                                              |  |                    |             |  
|LIABILITIES                                                   |  |                    |             |  
|Accounts
 payable to Sponsor, net of waiver (Note 2.6)        |  | $                  |            |  
|                                                              |  |                    |             |  
|                                                              |  |                    |             |  
|Total
 Liabilities                                            |  | $                  |            |  
|                                                              |  |                    |             |  
|                                                              |  |                    |             |  
|Redeemable
 Shares:                                           |  |                    |             |  
|Shares at
 redemption value to investors (2)                  |  |                    | 156,066,265 |  
|                                                              |  |                    |             |  
|Shareholders
 Deficit                                        |  |                    | (16,842,298 | )
|                                                              |  |                    |             |  
|Total
 Liabilities, Redeemable Shares & Shareholders Deficit |  | $                  | 139,223,967 |  
|                                                              |  |                    |             |  

|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(1) | The market
 value of investment in silver at December 31, 2009 is $156,066,265.                                                      
|    |                                                                                                                                      
|(2) | Authorized
 share capital is unlimited and no par value per share. Shares issued and
 outstanding at December 31, 2009 are 9,200,000.

See Notes to the Financial Statements.

F-3

---



ETFS SILVER TRUST

Statement
of Operations

For the period July 20, 2009* through December 31, 2009

|                                                         |  |                                                            |           |  
|-------------------------------------------------------- |  | ---------------------------------------------------------- | --------- | -
|                                                         |  |                                                            |          
|                                                        
|                                                         |  | For the period
 July 20, 2009*
 through
 December 31, 2009 |          
|                                                         |  |                                                            |          
|REVENUES                                                 |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Value of silver transferred
 to pay expenses             |  | $                                                          | 206,026   |  
|Cost of silver transferred
 to pay expenses              |  |                                                            | (178,527  | )
|                                                         |  |                                                            |           |  
|Gain on silver transferred
 to pay expenses              |  |                                                            | 27,499    |  
|                                                         |  |                                                            |           |  
|Gain on silver distributed
 for the redemption of shares |  |                                                            | 3,842,918 |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Total Gain on silver                                     |  | $                                                          | 3,870,417 |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|EXPENSES                                                 |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Sponsor fees, net of waiver
 (Note 2.6)                  |  | $                                                          | 206,026   |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Total Expenses                                           |  |                                                            | 206,026   |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Net Gain from Operations                                 |  | $                                                          | 3,664,391 |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Net Gain
 per share                                      |  | $                                                          | 0.48      |  
|                                                         |  |                                                            |           |  
|                                                         |  |                                                            |           |  
|Weighted
 average number of shares                       |  |                                                            | 7,648,171 |  
|                                                         |  |                                                            |           |  

*       Date of Inception.

See Notes to the Financial Statements.

F-4

---



ETFS SILVER TRUST

Statement
of Cash Flows

|                                                        
|--------------------------------------------------------
|For the
 period July 20, 2009* through December 31, 2009
|                                                        

|                                                                                          |  |                                                            |              |  
|----------------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | ------------ | -
|                                                                                          |  | For the period
 July 20, 2009*
 through
 December 31, 2009 |             
|                                                                                          |  |                                                            |              |  
|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                                          |  | $                                                          | 161,927,868  |  
|                                                                                          |  |                                                            |              |  
|Value of
 silver distributed for redemption of shares - at average cost                   |  | $                                                          | 22,525,374   |  
|                                                                                          |  |                                                            |              |  
|                                                                                          |  |                                                            |              |  
|                                                                                          |  | For the period
 July 20, 2009*
 through
 December 31, 2009 |             
|                                                                                          |  |                                                            |              |  
|RECONCILIATION
 OF NET GAIN/(LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:          |  |                                                            |              |  
|                                                                                          |  |                                                            |              |  
|Net Gain from Operations                                                                  |  | $                                                          | 3,664,391    |  
|Adjustments to reconcile
 net gain to net cash provided by (used in) operating activities |  |                                                            |              |  
|Increase in silver assets                                                                 |  |                                                            | (139,223,967 | )
|Increase/(Decrease) in
 redeemable shares                                                 |  |                                                            |              |  
|Creations                                                                                 |  |                                                            | 161,914,997  |  
|Redemptions                                                                               |  |                                                            | (26,355,421  | )
|                                                                                          |  |                                                            |              |  
|Net cash provided by
 operating activities                                                |  | $                                                          |             |  
|                                                                                          |  |                                                            |              |  
|                                                                                          |  |                                                            |              |  
|Supplemental Disclosure of
 Non-Cash Item:                                                |  |                                                            |              |  
|Value of silver transferred to pay expenses                                               |  | $                                                          | 206,026      |  

|  |                    
|- | -------------------
|* | Date of
 Inception.

See Notes to the Financial Statements.

F-5

---



ETFS SILVER TRUST

Statement of Changes in Shareholders Deficit

|                                                        
|--------------------------------------------------------
|For the period
 July 20, 2009* through December 31, 2009

|                                                     |  |                                                            |             |  
|---------------------------------------------------- |  | ---------------------------------------------------------- | ----------- | -
|                                                     |  | For the period
 July 20, 2009*
 through
 December 31, 2009 |            
|                                                     |  |                                                            |             |  
|                                                     |  |                                                            |             |  
|Shareholders Deficit -
 Opening balance             |  | $                                                          |            |  
|Net Gain for the period                              |  |                                                            | 3,664,391   |  
|Adjustment of Redeemable
 Shares to redemption value |  |                                                            | (20,506,689 | )
|                                                     |  |                                                            |             |  
|Shareholders Deficit 
 Closing balance             |  | $                                                          | (16,842,298 | )
|                                                     |  |                                                            |             |  

|  |                    
|- | -------------------
|* | Date of
 Inception.

See Notes to the Financial Statements.

F-6

---



ETFS SILVER TRUST

|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes
 to the Financial Statements
|                                  
|1.                                 | Organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   | The ETFS
 Silver Trust (the Trust) is an investment trust formed on July 20, 2009,
 under New York law pursuant to a depositary 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 ETFS Physical Silver Shares (the
 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 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 that is 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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, National Association (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 (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 price for an ounce
 of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   | The table
 below summarizes the unrealized gains or losses on the Trusts silver
 holdings as of December 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                         |  |                   |             | 
|---------------------------------------- |  | ----------------- | ----------- | 
|                                         |  |                   |            
|                                         |  | December
 31,2009 |            
|                                         |  |                   |             | 
|                                        
|Investment in
 silver-average cost       |  | $                 | 139,223,967 | 
|Unrealized Gain on
 investment in silver |  |                   | 16,842,298  | 
|                                         |  |                   |             | 
|Investment in silver-market
 value       |  | $                 | 156,066,265 | 
|                                         |  |                   |             | 

F-7

---



ETFS SILVER TRUST

Notes to the Financial
Statements

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.   | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2.1. | Valuation of Silver (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | 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. | Creations and Redemptions of Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | The Trust
 expects to create and redeem Shares from time to time, but only in one or
 more Baskets (a Basket equals a block of 100,000 Shares). 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 the Sponsor and (4) has established an Authorized Participant
 Unallocated Account with the Custodian or another silver bullion clearing
 bank to effect transactions in silver bullion. 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 by an Authorized
 Participant
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | 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 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 period from July 20, 2009
 (the Date of Inception) through December 31, 2009 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-8

---



ETFS SILVER TRUST

Notes to the Financial
Statements

|     |                                                 
|---- | ------------------------------------------------
|2.   | Significant Accounting Policies (continued)     
|     |                                                 
|2.2. | Creations and Redemptions of Shares
 (continued)

|                             |  |                                                             |            |  
|---------------------------- |  | ----------------------------------------------------------- | ---------- | -
|                             |  | For the
 period
 July 20, 2009*
 through
 December 31, 2009 |           
|                             |  |                                                             |           
|                            
|Number of Redeemable Shares: |  |                                                             |            |  
|Opening
 Balance             |  |                                                             |           |  
|Creations                    |  |                                                             | 10,700,000 |  
|Redemptions                  |  |                                                             | (1,500,000 | )
|                             |  |                                                             |            |  
|Closing
 Balance             |  |                                                             | 9,200,000  |  
|                             |  |                                                             |            |  

|                                          |  |                                                             |             |  
|----------------------------------------- |  | ----------------------------------------------------------- | ----------- | -
|                                          |  |                                                             |             |  
|                                          |  | For the
 period
 July 20, 2009*
 through
 December 31, 2009 |            
|                                          |  |                                                             |             |  
|                                         
|Redeemable Shares:                        |  |                                                             |             |  
|Opening
 Balance                          |  | $                                                           |            |  
|Creations                                 |  |                                                             | 161,914,997 |  
|Redemptions                               |  |                                                             | (26,355,421 | )
|Adjustment
 to redemption value           |  |                                                             | 20,506,689  |  
|                                          |  |                                                             |             |  
|Closing
 Balance                          |  | $                                                           | 156,066,265 |  
|                                          |  |                                                             |             |  
|                                          |  |                                                             |             |  
|Redemption
 Value per Share at Period End |  | $                                                           | 16.96       |  
|                                          |  |                                                             |             |  

| |   |                   
| | - | ------------------
| | * | Date of Inception.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.3. | 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 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.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2.4. | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-9

---



ETFS SILVER TRUST

Notes to the Financial Statements

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.   | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2.4. | Income Taxes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | 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 (formerly FASB Interpretation Number 48, Accounting for Uncertainty in Income Taxes).
 FASB ASC 740-10 prescribes a recognition threshold and a measurement
 attribute for the financial statement recognition and measurement of a tax
 position taken or expected to be taken in a tax return. FASB ASC 740-10 also
 provides guidance on the related derecognition, classification, interest and
 penalties, accounting for interim periods, disclosure and transition of
 uncertain tax positions. The Sponsor has evaluated the effects of FASB ASC
 740-10 and has determined that it does not have a significant effect on the
 financial position or results of operations of the Trust.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2.5  | Investment in Silver                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | The
 following represents the changes in ounces of silver and the respective
 values for the period from the Date of Inception through December 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                                  |  |                                                            |              |  
| | ------------------------------------------------ |  | ---------------------------------------------------------- | ------------ | -
| |                                                  |  | For the period
 July 20, 2009*
 through
 December 31, 2009 |             
| |                                                  |  |                                                            |             
| | Ounces of
 Silver:                               |  |                                                            |              |  
| | Opening Balance                                  |  |                                                            |             |  
| | Creations                                        |  |                                                            | 10,696,328.6 |  
| | Redemptions                                      |  |                                                            | (1,498,198.4 | )
| | Transfers of silver                              |  |                                                            | (12,358.3    | )
| |                                                  |  |                                                            |              |  
| | Closing Balance                                  |  |                                                            | 9,185,771.9  |  
| |                                                  |  |                                                            |              |  
| |                                                  |  |                                                            |              |  
| | Investment
 in Silver (lower of cost or market): |  |                                                            |              |  
| | Opening Balance                                  |  | $                                                          |             |  
| | Creations                                        |  |                                                            | 161,927,868  |  
| | Redemptions                                      |  |                                                            | (22,525,374  | )
| | Transfers of silver                              |  |                                                            | (178,527     | )
| |                                                  |  |                                                            |              |  
| | Closing Balance                                  |  | $                                                          | 139,223,967  |  
| |                                                  |  |                                                            |              |  

|     |                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*    | Date of
 Inception.                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.6. | 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 daily NAV of the
 Trust, paid monthly in arrears. Presently, the Sponsor intends to waive a
 portion of its fee and reduce the Sponsors Fee to 0.30% for the first year
 of the Trusts operations beginning on the Trusts inception date and ending
 July 20, 2010.

F-10

---



ETFS SILVER TRUST

Notes to the Financial Statements

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.   | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.6. | Expenses (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | At December 31, 2009 there were no fees payable to the Sponsor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.7. | Organization Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | Expenses
 incurred in organizing the Trust and the initial offering of the Shares,
 including applicable SEC registration fees, of approximately $1,153,000, were
 borne directly by the Sponsor. The Trust will not be obligated to reimburse
 the Sponsor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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 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 affect on the Trusts financial position and results of operations.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|5.   | Indemnification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | Under the
 Trusts organizational documents, each of the Trustee (and its directors,
 employees and agents) and the Sponsor (and its members, managers, directors,
 officers, employees, and affiliates) is 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-11

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ETFS SILVER TRUST

Notes to the Financial Statements

|   |                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | Subsequent Events (continued)                                                                                                                                                                  
|   |                                                                                                                                                                                                
|   | through the
 issuance date. Management has determined that there are no material events
 that would require adjustment to or disclosure in the Trusts financial
 statements through this date.

F-12

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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* indicated thereunto duly authorized.

|                      |                                                                 | 
|--------------------- | --------------------------------------------------------------- | 
|                      | ETF
 SECURITIES USA LLC                                         | 
|                      | Sponsor of
 the ETFS Silver Trust                               | 
|                      | (Registrant)                                                    | 
|                      |                                                                 | 
|                      |                                                                 | 
|                      | /s/ Graham
 Tuckwell                                            | 
|                      |                                                                 | 
|                      | Graham
 Tuckwell                                                | 
|                      | President
 and Chief Executive Officer                          | 
|                      | (Principal
 Executive Officer)                                  | 
|                      |                                                                 | 
|Date: March
 30, 2010 |                                                                 | 
|                      |                                                                 | 
|                      |                                                                 | 
|                      | /s/ Greg
 Burgess                                               | 
|                      |                                                                 | 
|                      | Greg Burgess                                                    | 
|                      | Chief
 Financial Officer and Treasurer                          | 
|                      | (Principal
 Financial Officer and Principal Accounting Officer)
|                      |                                                                 | 
|Date: March
 30, 2010 |                                                                 | 

*   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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