Dear Friends,

The proper time to disclose an error is as soon as possible after discovery of the error. A few days ago I discovered an error in my article titled, A Great Way to Increase the Safety and Potential of My Silver, published August 20, 2009.

Numbered paragraph 3 on page one of this article said in part, “The initial public offering of SVRZF came in the form of 2,712,912 units at US10$ per unit. Each unit is one share of the fund plus one warrant, which gives the owner the right to buy one additional share of the fund at $10 during the life of the warrant. The warrant expires in nine months from the date of the offering (approximately April 1, 2010).”

This statement is in error, so it has been removed. When you buy SVRZF, you do NOT receive 1 warrant along with each share of the fund. Only the investors who purchased the IPO (Initial Public Offering) received the warrants. I knew nothing of the IPO. It was a very small offering (approximately $27 million), and was likely fully subscribed to by existing shareholders of Central Fund of Canada’s other two publicly traded funds (CEF and GTU). SVRZF didn’t even exist as a tradable symbol until after the public offering, and had nothing to do with the warrants which trade separately under a different symbol.

How did I make this error? In spite of the fact I did my home work by studying the web site and prospectus, I made the error by misinterpreting the term “unit” to mean “1 share of the fund plus 1 warrant” when in fact the term “unit” was synonymous with the term “share of the fund.” The warrants are separate, trade under a separate symbol, and must be purchased separately by all investors other than the ones who got in on the IPO. Although it was stupid on my part, and I should have known better, apparently a few other people were confused similarly. I say this because a few weeks after the IPO, a note at the bottom of the home page of the Web Site was revised to read: “There are currently 2,857,912 issued and outstanding Warrants that are exercisable into Units of the Trust at an exercise price of one Warrant plus 10 US$ = one Unit. To date no Warrants have been exercised. Given all Warrants were exercised today, on a fully diluted basis, the Net Asset Value per Unit would be: $10.78 US$. (This number is for the close October 9, 2009). 

On the same page where this note appears, it reports that the Net Asset Value per Unit of the Trust is 11.60 US$. In other words, if all the warrants were exercised (each one by paying $10 into the fund and giving up his Warrant), the Net Asset Value would be “diluted” to 10.78 US$.

As I indicated, this was a very careless error on my part for which I apologize. The important thing now is, what should I do in view of this correction? 

THE IMPORTANT QUESTIONS IN VIEW OF THE ERROR

Question: Will I sell my SVRZF as a result of the discovery of my error?

Answer: Emphatically not. My principle reason for buying it was its safety, and the fact I could buy silver at a small discount, and hold the investment for the potential of selling it at a premium at some time in the future, as explained in the articled referenced above, plus the article, Central Fund of Canada (CEF) and Arbitrage. Both of those objectives are still available. My only disappointment is that I will miss whatever value the Warrant might have added to my potential gain. Which brings me to my second question.

Question: Will I consider buying the Warrants? 

Answer: Yes, but I’m not sure when or how much. I need to do some thinking and investigating first. I plan to call my broker and find out what symbol the Warrants trade under in the US. Then I will see what it will cost me to put myself in the same position the IPO investors are in, i.e. hold the same number of warrants as I do units of the Trust. The Warrants have traded all the way from $.35 to $1.25, closing at $1.13 October 9, 2009 (US$). My average cost in my SVRZF is $10.03 per unit. I could pay $1.13 per warrant, and be in the same position as the IPO investors at a total cost of $11.16 compared to their $10.00. If the Warrants are eventually exercised, I would be protected from any “dilution” which occurred over and above my additional $1.16 cost.

The big question: what will silver do in the next eight months? 

Answer: No one has the answer to that. But I like the current prospects for silver. What must be clearly understood is that eight months is a very short period of time. Buying the Warrant would be a very high risk – high potential return bet. It could easily expire worthless in eight months, or it could return 5 to 10 times its cost. If we got a short term pull back in silver, and the Warrant fell to the $ .50 to $ .75 range, I would consider it a good reward/risk bet. I’ll be watching and studying it, and let you know if I buy it.