Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies

Basis of Accounting

The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements in conformity with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and these differences could be material.

Silver Bullion

JPMorgan Chase Bank N.A., London branch (the "Custodian"), is responsible for the safekeeping of silver bullion owned by the Trust.

For financial statement purposes, the silver bullion held by the Trust is valued at the lower of cost or market, using the average cost method. Should the market value of the silver bullion held be lower than its average cost during the interim periods of the same fiscal year, an adjustment of value below cost ("market value reserve") is recorded by the Trust. Should the market value of the silver bullion held increase subsequent to the market value reserve being recorded, a "market value recovery" is recorded by the Trust. Gain or loss on sales of silver bullion is calculated on a trade date basis. Fair value of the silver bullion is based on the price for an ounce of silver set each working day by three market making members of The London Bullion Market Association ("London Fix").

The following table summarizes activity in silver bullion for the three months ended June 30, 2011 (all balances in 000's):

	Ounces			Average Cost			Fair Value			Realized Gain (Loss)
Beginning balance		358,143.9		$	6,464,223		$	13,562,906		$	—
Silver contributed		43,658.9			1,769,807			1,769,807			—
Silver distributed		(94,768.1	)		(1,884,272	)		(3,846,750	)		1,962,478
Silver sold		(424.3	)		(8,263	)		(16,864	)		8,601
Adjustment for realized gain		—			—			1,971,079			—
Adjustment for unrealized gain on silver bullion		—			—			(2,702,684	)		—
Ending balance		306,610.4		$	6,341,495		$	10,737,494		$	1,971,079

The following table summarizes activity in silver bullion for the six months ended June 30, 2011 (all balances in 000's):

	Ounces			Average Cost			Fair Value			Realized Gain (Loss)
Beginning balance		351,136.8		$	5,650,138		$	10,755,319		$	—
Silver contributed		86,720.9			3,174,587			3,174,587			—
Silver distributed		(130,420.6	)		(2,468,315	)		(4,903,925	)		2,435,610
Silver sold		(826.7	)		(14,915	)		(29,286	)		14,371
Adjustment for realized gain		—			—			2,449,981			—
Adjustment for unrealized gain on silver bullion		—			—			(709,182	)		—
Ending balance		306,610.4		$	6,341,495		$	10,737,494		$	2,449,981

Redeemable Capital Shares

Shares of the Trust are classified as "redeemable" for balance sheet purposes, since they are subject to redemption. Trust Shares are issued and redeemed continuously in aggregations of 50,000 Shares in exchange for silver bullion rather than cash. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. The Trust only transacts with registered broker-dealers eligible to settle securities transactions through the book-entry facilities of the Depository Trust Company and which have entered into a contractual arrangement with the Trust and the Sponsor governing, among other matters, the creation and redemption of Shares (such broker-dealers, the "Authorized Participants"). Holders of Shares of the Trust may redeem their Shares at any time acting through an Authorized Participant and in the prescribed aggregations of 50,000 Shares; provided, that redemptions of Shares may be suspended during any period while regular trading on NYSE Arca, Inc. ("NYSE Arca") is suspended or restricted, or in which an emergency exists as a result of which delivery, disposal or evaluation of silver is not reasonably practicable.

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, sales to cover expenses and liabilities and any losses that may have occurred.

When silver is exchanged in settlement of a redemption, it is considered a sale of silver for financial statement purposes.

Due to the expected continuing sales and redemption of capital stock and the three-day period for Share settlement, the Trust reflects capital Shares sold as a receivable, rather than as contra equity. Shares redeemed are reflected as a contra asset on the trade date. Outstanding Trust Shares are reflected at redemption value, which is the net asset value per Share at the period ended date. Adjustments to redemption value are reflected in shareholders' equity.

Net asset value is computed by deducting all accrued fees, expenses and other liabilities of the Trust, including the Sponsor's fees, from the fair value of the silver bullion held by the Trust.

Federal Income Taxes

The Trust is treated as a "grantor trust" for federal income tax purposes and, therefore, no provision for federal income taxes is required. Any interest and gains and losses are deemed "passed through" to the holders of Shares of the Trust.