Filed
pursuant to General Instruction II.L of Form F-10
File No. 333-271162
No
securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
This
prospectus supplement, together with the accompanying short form base shelf prospectus dated April 6, 2023 (the “accompanying
prospectus”) to which it relates, as amended or supplemented, and each document deemed to be incorporated by reference into
this prospectus supplement and the accompanying prospectus, constitutes a public offering of these securities only in those jurisdictions
where they may be lawfully offered for sale and therein only by persons permitted to sell such securities.
Information
has been incorporated by reference in this prospectus supplement and the accompanying prospectus from documents filed with the
securities commissions or similar regulatory authorities in Canada. Copies of the documents incorporated by reference
in this prospectus supplement and the accompanying prospectus may be obtained on request without charge from Sprott Asset Management
LP (the “Manager”), the manager of Sprott Physical Silver Trust, Royal Bank Plaza, South Tower, 200 Bay Street, Suite
2600, Toronto, Ontario, Canada M5J 2J1, Telephone: (416) 943-8099 and are also available electronically at www.sedar.com.
PROSPECTUS
SUPPLEMENT
TO THE SHORT FORM BASE SHELF PROSPECTUS DATED APRIL 6, 2023
Sprott
Physical Silver Trust
Up
to US$1,000,000,000
Trust
Units
Sprott
Physical Silver Trust (the “Trust”) is hereby qualifying for distribution the offering (the “offering”) of
transferable, redeemable units of the Trust (the “trust units” or “units of the Trust”, and each a
“trust unit”) having an aggregate offering price of up to US$1,000,000,000. Each trust unit represents an equal,
fractional, undivided ownership interest in the net assets of the Trust attributable to the particular class of trust units. On
October 21, 2020, the Trust entered into an amended and restated sales agreement dated October 21, 2020, as amended by an
amending agreement dated April 6, 2023 (the “Amended and Restated Sales Agreement”) with the Manager, Cantor Fitzgerald
& Co. (“CF&Co”), Virtu Americas LLC (“Virtu” and together with CF&Co, the “U.S.
Agents”) and Virtu Canada Corp. (the “Canadian Agent” and together with the U.S. Agents, the “Agents”)
relating to trust units offered by this prospectus supplement and the accompanying prospectus. The Amended and Restated Sales
Agreement supersedes and replaces the Controlled Equity OfferingSM sales agreement dated June 24, 2016, as amended by
Amendment No. 1 thereto dated January 29, 2020, between the Trust, the Manager and the U.S. Agents.
In
accordance with the Amended and Restated Sales Agreement, and except as noted below, the Trust may distribute trust units having
an aggregate offering price of up to US$1,000,000,000 through the Agents, as its agents for the distribution of the trust units.
See “Plan of Distribution” beginning on page S-10 of this prospectus supplement for more information regarding these
arrangements.
The
Agents will receive a cash fee of up to 3.0% of the aggregate gross proceeds realized from the sale of the trust units for services
rendered in connection with the offering. See “Plan of Distribution”. As described under the heading “Use of
Proceeds”, the net proceeds of the offering will be used by the Trust to acquire physical silver bullion in accordance with
the Trust’s objective and subject to the Trust’s investment and operating restrictions described herein.
The Trust estimates that the total expenses of the offering, excluding the Agents’ fee, will be approximately US$75,000, which
costs may be borne by the Manager. Each time trust units are issued and sold under this prospectus supplement, the Trust will
reimburse the Manager for expenses paid by it in respect of that drawdown, but only to the extent there is a sufficient premium
between the net asset value (the “NAV”) per trust unit and the market price at which each such trust unit is sold
under the offering.
No
underwriter or dealer involved in an at-the-market distribution, no affiliate of such underwriter or dealer and no person or company
acting jointly or in concert with underwriter or dealer, may, in connection with the distribution, enter into any transaction that
is intended to stabilize or maintain the market price of the trust units or securities of the same class as the trust units
distributed under this prospectus supplement, including selling an aggregate number or principal amount of trust units that would
result in the underwriter or dealer creating an over-allocation position in the trust units.
Neither
U.S. Agent is registered as a dealer in any Canadian jurisdiction and, accordingly, the U.S. Agents will only sell trust units
on marketplaces in the United States and are not permitted to and will not, directly or indirectly, advertise or solicit offers
to purchase any of the trust units in Canada. The Canadian Agent may only sell trust units on marketplaces in Canada.
Sales
of trust units, if any, under this prospectus supplement and the accompanying prospectus will be made in transactions that are
deemed to be “at-the-market distributions” as defined in National Instrument 44-102 - Shelf Distributions (“NI
44-102”), consisting of sales made directly on the Toronto Stock Exchange (the “TSX”) and the NYSE Arca, Inc.
(the “NYSE Arca”) or on any other “marketplace” as such term is defined in National Instrument
21-101 – Marketplace Operation (“NI 21-101”) in Canada and the United States. The trust units will be
distributed at market prices prevailing at the time of the sale of such trust units. As a result, prices may vary as between purchasers
and during the period of distribution. There is no minimum amount of funds that must be raised under the offering. This means
that the offering may terminate after raising only a portion of the offering amount set out above, or none at all. The U.S. Agents
will sell trust units on marketplaces in the United States. Virtu Canada will sell trust units on marketplaces in Canada. See
“Plan of Distribution”.
The
Trust has applied to list the trust units offered by this prospectus supplement on the TSX and the NYSE Arca. The TSX has conditionally
approved the Trust’s application to list the trust units issued hereunder, subject to the Trust fulfilling all of the requirements
of the TSX. Listing of the trust units issued hereunder on the NYSE Arca will be subject to the Trust fulfilling all applicable
requirements of such exchange.
The
trust units are listed and posted for trading on the NYSE Arca under the symbol “PSLV” and on the TSX under the symbols “PSLV”
(Canadian dollar denominated) and “PSLV.U” (U.S. dollar denominated). On April 5, 2023, the last trading day prior to the
date hereof, the closing price of the trust units on the NYSE Arca was US$8.59 and the closing price of the trust units on the TSX was
Cdn$11.55. On April 5, 2023, the total NAV of the Trust and the NAV per unit of the Trust were US$4,365,484,248 and US$8.7912, respectively.
The
Trust is not a trust company and does not carry on business as a trust company and, accordingly, the Trust is not registered under
the trust company legislation of any jurisdiction. Trust units are not “deposits” within the meaning of the Canada
Deposit Insurance Corporation Act (Canada) and are not insured under provisions of that act or any other legislation.
NEITHER
THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR ANY U.S. STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED
OF THE TRUST UNITS OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENCE.
The
Trust is permitted, under a multi-jurisdictional disclosure system (“MJDS”) adopted by the securities regulatory authorities
in Canada and the United States, to prepare this prospectus supplement in accordance with Canadian disclosure requirements, which
are different from those of the United States.
The Trust prepares its financial statements, which are incorporated by reference
in this prospectus supplement, in accordance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”). These financial statements may not be comparable to the financial
statements of United States issuers.
Purchasing
the trust units may subject you to tax consequences both in the United States and Canada. This prospectus supplement and the accompanying
prospectus may not describe these tax consequences fully. You should read the tax discussion in this prospectus supplement and
in the accompanying prospectus.
Your
ability to enforce civil liabilities under United States federal securities laws or securities laws of other relevant jurisdictions
may be affected adversely because the Trust is a mutual fund trust established under the laws of the Province of Ontario. Each
of the Trust, the Manager, and Sprott Asset Management GP Inc. (the “GP”), which is the general partner of the Manager,
is organized under the laws of the Province of Ontario, Canada and the Trust’s trustee, RBC Investor Services Trust (“RBC
Investor Services” or the “Trustee”) is organized under the federal laws of Canada, and all of their executive
offices and substantially all of the administrative activities and a majority of their assets are located outside the United States.
In addition, the directors and officers of the Trustee and the GP are residents of jurisdictions other than the United States
and all or a substantial portion of the assets of those persons are or may be located outside the United States.
Whitney
George, a director of the GP, resides outside of Canada. Mr. George has appointed the Trust, located at Royal Bank Plaza, South
Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, M5J 2J1, as his agent for service of process in Canada. It may not be possible
for you to enforce judgments obtained in Canada against any person who resides outside of Canada, even if the person has appointed
an agent for service of process.
See
“Risk Factors” in this prospectus supplement and the accompanying prospectus for a discussion of certain considerations
relevant to an investment in the trust units offered hereby.
The
registered and head office of the Trust is located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario,
M5J 2J1.
TABLE
OF CONTENTS
Prospectus
Supplement
Short
Form Base Shelf Prospectus dated April 6, 2023
IMPORTANT
NOTICE
This
document is in two parts. The first part is this prospectus supplement, which describes the specific terms of the trust units
being offered and the method of distribution of those securities and also supplements and updates information regarding the Trust
contained in the accompanying prospectus. The second part, the accompanying prospectus, gives more general information about the
trust units that may be offered from time to time. Both documents contain important information you should consider when making
your investment decision. This prospectus supplement may add, update or change information contained in the accompanying prospectus.
Before investing, you should carefully read both this prospectus supplement and the accompanying prospectus together with the
additional information about the Trust to which we refer you in the sections of this prospectus supplement entitled “Documents
Incorporated by Reference”.
You
should rely only on information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated
by reference in this prospectus supplement and the accompanying prospectus. If information in this prospectus supplement is inconsistent
with the accompanying prospectus or the information incorporated by reference, you should rely on this prospectus supplement.
The Trust has not authorized anyone to provide you with information that is different. If anyone provides you with any different
or inconsistent information, you should not rely on it. The Trust is offering the trust units only in jurisdictions where such
offers are permitted by law. The information contained in this prospectus supplement and the accompanying prospectus is accurate
only as of their respective dates, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus
and you should not assume otherwise.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying prospectus are part of a “shelf” registration statement on Form F-10 that
the Trust has filed with the SEC. Each time the Trust sells its securities under the accompanying prospectus the Trust will provide
a prospectus supplement that will contain specific information about the terms of that offering including price, the number and
type of securities being offered, and the plan of distribution. The shelf registration statement became effective under the rules
and regulations of the SEC on April 6, 2023. This prospectus supplement describes the specific details regarding the offering
including the price, number of trust units being offered, and the placement arrangements. The accompanying prospectus provides
general information about the Trust, some of which, such as the section entitled “Plan of Distribution”, may not apply
to the offering. This prospectus supplement does not contain all of the information contained in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the SEC. You should refer to the registration statement
and the exhibits to the registration statement for further information with respect to the Trust and its securities.
Some
of the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus concerning
economic and industry trends is based upon or derived from information provided by industry sources. The Trust believes that such
information is accurate and that the sources from which it has been obtained are reliable. However, the Trust cannot guarantee
the accuracy of such information and the Trust has not independently verified the assumptions upon which projections of future
trends are based.
The
Trust is subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, (the “Exchange
Act”), and applicable Canadian securities legislation, and in accordance therewith, the Trust files or furnishes reports
and other information with or to the SEC and with the securities regulatory authorities of each of the provinces and territories
of Canada. Under the MJDS, the Trust may generally prepare these reports and other information in accordance with the disclosure
requirements of Canada. These requirements are different from those of the United States. As a foreign private issuer, the Trust
is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and officers, directors
and principal unitholders of the Trust are exempt from the reporting and short-swing profit recovery provisions contained in Section
16 of the Exchange Act. In addition, the Trust is not required to publish financial statements as promptly as United States companies.
This
prospectus supplement is deemed to be incorporated by reference into the accompanying prospectus solely for the purposes of the
offering. Other documents are also incorporated or deemed to be incorporated by reference into this prospectus supplement and
into the accompanying prospectus. See “Documents Incorporated by Reference”.
The
reports and other information that the Trust files with, or furnishes to, the SEC may be accessed electronically through the SEC’s
Electronic Document Gathering and Retrieval System (“EDGAR”) at www.sec.gov. Copies of reports, statements and other
information that the Trust files with the Canadian securities regulatory authorities are electronically available from the Canadian
System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.
CONFLICTS
OF INTEREST
To
avoid any conflict of interest, or the appearance of a conflict of interest, the Manager has adopted a policy pursuant to which
any entity or account (a) that is managed or (b) for whom investment decisions are made, directly or indirectly, by a person that
is involved in the decision making process of, or has non-public information about, follow-on offerings of the Trust is prohibited
from investing in the Trust, and no such decision-making person is permitted to invest in the Trust for that decision-making person’s
benefit, directly or indirectly. In addition, the policy requires that any sales of units of the Trust currently owned by such
persons must be pre-cleared by the independent review committee of the Trust.
FINANCIAL
INFORMATION AND ACCOUNTING PRINCIPLES
Unless
otherwise indicated, financial information in this prospectus supplement has been prepared in accordance with IFRS as issued by
the IASB. The financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise
noted herein, all references to “$”, “US$”, “United States dollars” or “U.S. dollars”
are to the currency of the United States and all references to “Cdn$” are to the currency of Canada.
EXCHANGE
RATE
The
following table sets out certain exchange rates based upon the daily average rate published by the Bank of Canada. The rates are
set out as United States dollars per Cdn$1.00.
| |
Years
Ended December 31, |
| |
2022 |
|
2021 |
| Low |
$0.7217 |
|
$0.7727 |
| High |
$0.8031 |
|
$0.8306 |
| Average |
$0.7692 |
|
$0.7980 |
| End |
$0.7383 |
|
$0.7888 |
On
April 5, 2023, the daily average rate for United States dollars
in terms of Canadian dollars, as quoted by the Bank of Canada was Cdn$1.00 = US$0.7431.
DOCUMENTS
INCORPORATED BY REFERENCE
Incorporated
by reference in this prospectus supplement is certain information contained in documents filed by the Trust with the securities
regulatory authorities in each of the provinces and territories of Canada, which has also been filed with, or furnished to, the
SEC. This means that the Trust is disclosing important information to you by referring you to those documents. The information
incorporated by reference is deemed to be part of this prospectus supplement, except for any information superseded by information
contained directly
in this prospectus supplement or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein.
You
may obtain copies of the documents incorporated by reference in this prospectus supplement on request without charge by contacting
the Manager, located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1, Telephone:
(416) 943-8099, as well as through the sources described under “Additional Information” in the accompanying prospectus.
The
following documents (along with any documents listed below under “Documents Filed As Part of the Registration Statement”),
filed with the securities regulatory authorities in Canada, and filed with, or furnished to, the SEC are specifically incorporated
by reference into, and form an integral part of, this prospectus supplement and the accompanying prospectus:
| (a) | the
annual information form of the Trust for its fiscal year ended December 31, 2022, dated
March 17, 2023 (the “AIF”); |
| (b) | the
audited annual financial statements of the Trust as at December 31, 2022 and for its
fiscal years ended December 31, 2022 and 2021, and the related notes thereto, together
with the report of independent registered public accounting firm thereon (collectively,
the “Financial Statements”); and |
| (c) | the
management report of fund performance of the Trust for its fiscal year ended December
31, 2022 (the “MRFP”). |
The
documents identified above as incorporated by reference into this prospectus supplement have been filed with or furnished to the
SEC as follows: (1) the AIF has been filed as Exhibit 99.5 to the Trust’s annual report on Form 40-F filed with the SEC
on March 21, 2023; (2) the Financial Statements have been filed as Exhibit 99.6 to the Trust’s annual report on Form 40-F
filed with the SEC on March 21, 2023; and (3) the MRFP has been filed as Exhibit 99.6 to the Trust’s annual report on Form
40-F filed with the SEC on March 21, 2023.
Any
documents of the type referred to in Section 11.1 of Form 44-101F1 – Short Form Prospectus, if filed by the Trust
with the securities regulatory authorities in Canada after the date of this prospectus supplement and prior to the termination
of the offering, will be deemed to be incorporated by reference in this prospectus supplement.
When
new documents of the type referred to in the paragraph above are filed by the Trust with the securities regulatory authorities
in Canada during the currency of this prospectus supplement, such documents will be deemed to be incorporated by reference in
this prospectus supplement and the previous documents of the type referred to in the paragraph above will no longer be deemed
to be incorporated by reference in this prospectus supplement.
If
the Trust disseminates a news release in respect of previously undisclosed information that, in our determination, constitutes a
“material fact” (as such term is defined under applicable Canadian securities legislation), the Trust will identify such
news release as a “designated news release” for the purposes of this prospectus supplement and the accompanying
prospectus in writing on the face page of the version of such news release that the Trust files on the SEDAR (each such news
release a “Designated News Release”), and each such Designated News Release shall be deemed to be incorporated by
reference into this prospectus supplement and the accompanying prospectus only for the purposes of the offering. All Designated News
Releases shall be filed with the SEC on a Form 6-K and each such Designated News Release shall be deemed to be incorporated by
reference as an exhibit to the registration statement.
In
addition, to the extent that any document or information incorporated by reference into this prospectus supplement is included
in any report on Form 6-K or Form 40-F (or any respective successor form) that is filed
with or furnished to the SEC pursuant
to the Exchange Act after the date of this prospectus supplement, such document or information will be deemed to be incorporated
by reference as an exhibit to the registration statement of which this prospectus supplement forms a part. In addition, the Trust
may incorporate by reference into this prospectus supplement other information from documents that the Trust files with or furnishes
to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, if and to the extent expressly provided therein.
Any
statement contained in this prospectus supplement or in a document incorporated or deemed to be incorporated by reference in this
prospectus supplement shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that
a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded
a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying
or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made,
constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required
to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement
so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement.
ENFORCEMENT
OF CIVIL LIABILITIES
Each
of the Trust, the Manager, and the GP is organized under the laws of the Province of Ontario, Canada and the Trustee is organized
under the federal laws of Canada, and all of their executive offices and substantially all of the administrative activities and a
majority of their assets are located outside the United States. In addition, certain directors and officers of the Trustee and
the GP are residents of jurisdictions other than the United States and all or a substantial portion of the assets of those persons
are or may be located outside such jurisdictions.
As
a result, you may have difficulty serving legal process within your jurisdiction upon any of the Trust, the Trustee, the Manager
or the GP or any of their directors or officers, as applicable, or enforcing judgments obtained in courts in your jurisdiction
against any of them or the assets of any of them located outside your jurisdiction, or enforcing against them in the appropriate
Canadian court judgments obtained in courts of your jurisdiction, including, but not limited to, judgments predicated upon the
civil liability provisions of the federal securities laws of the United States, or bringing an original action in the appropriate
Canadian courts to enforce liabilities against the Trust, the Trustee, the Manager, the GP or any of their directors or officers,
as applicable, based upon United States federal securities laws.
In
the United States, the Trust and the Trustee have each filed with the SEC, concurrently with the Trust’s registration statement
on Form F-10, an appointment of agent for service of process on separate Forms F-X. Under such Forms F-X, each of the Trust and
the Trustee have appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, as its agent for service
of process.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this prospectus supplement, including any documents incorporated by reference, that are not purely historical
are forward-looking statements. The Trust’s forward-looking statements include, but are not limited to, statements regarding
its or its management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements
that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The words “anticipates”, “believe”, “continue”, “could”,
“estimate”, “expect”, “intends”, “may”, “might”, “plan”,
“possible”, “potential”, “predicts”, “project”, “should”, “would”
and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a
statement
is not forward-looking. Forward-looking statements in this prospectus supplement may include, for example, statements about:
| ● | trading
of the trust units issued pursuant to the offering on the NYSE Arca or the TSX; |
| ● | the
Trust’s objectives and strategies to achieve the objectives; |
| ● | success
in obtaining physical silver bullion in a timely manner and allocating such silver; |
| ● | success
in retaining or recruiting, or changes required in, the officers or key employees of
the Manager; and |
| ● | the
silver industry, sources of and demand for physical silver bullion, and the performance
of the silver market. |
The
forward-looking statements contained in this prospectus supplement, including any document incorporated by reference, are based
on the Trust’s current expectations and beliefs concerning future developments and their potential effects on the Trust.
There can be no assurance that future developments affecting the Trust will be those that it has anticipated. These forward-looking
statements involve a number of risks, uncertainties (some of which are beyond the Trust’s control) or other assumptions
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking
statements. These risks and uncertainties include those factors described under the heading “Risk Factors” in this
prospectus supplement and the accompanying prospectus. Should one or more of these risks or uncertainties materialize, or should
any of the Trust’s assumptions prove incorrect, actual results may vary in material respects from those projected in these
forward-looking statements. The Trust undertakes no obligation to update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise, except as may be required under applicable securities laws.
SPROTT
PHYSICAL SILVER TRUST
The
following is a summary of information pertaining to the Trust and does not contain all the information about the Trust that may
be important to you. You should read the more detailed information including but not limited to the AIF, the Financial Statements
and the MRFP that are incorporated by reference into and are considered to be a part of this prospectus supplement, and please
refer to the heading “Sprott Physical Silver Trust” beginning on page 4 of the accompanying prospectus.
Organization
of the Trust
Sprott
Physical Silver Trust was established on June 30, 2010 under the laws of the Province of Ontario, Canada, pursuant to a trust
agreement (the “Trust Agreement”) dated as of June 30, 2010, as amended and restated as of October 1, 2010 and as
further amended and restated as of February 27, 2015 and as further amended on November 13, 2020. The Trust has received relief
from certain provisions of National Instrument 81-102 - Investment Funds (“NI 81-102”), and, as such, the Trust
is not subject to certain of the policies and regulations of the Canadian Securities Administrators that apply to other mutual
funds.
The
Trust’s registered office is located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada,
M5J 2J1. The Manager acts as the manager of the Trust pursuant to the Trust Agreement and a management agreement with the Trust. The
Trustee, a trust company organized under the laws of Canada, acts as the trustee. RBC Investor Services Trust also acts as custodian
on behalf of the Trust for the Trust’s assets other than physical silver bullion. The Royal Canadian Mint (the
“Mint”) acts as custodian on behalf of the Trust for the physical silver bullion owned by the Trust.
As
of December 31, 2022, the Manager, together with its affiliates and related entities, had assets under management totaling approximately
US$23 billion, and provided management and investment advisory services to many entities, including private investment funds,
exchange-listed products, mutual funds, and discretionary managed accounts. The Manager also acts as: (A) manager of (i) the Sprott
Physical Gold and Silver Trust, a closed-end mutual fund trust whose trust units are listed and posted for trading on the TSX
and the NYSE Arca that invests and holds substantially all of its assets in physical gold and silver bullion, (ii) the Sprott
Physical Gold Trust, a closed-end mutual fund trust whose units are listed and posted for trading on the TSX and the NYSE Arca
that invests and holds substantially all of its assets in physical gold bullion, (iii) the Sprott Physical Platinum and Palladium
Trust, a closed-end mutual fund trust whose units are listed and posted for trading on the TSX and the NYSE Arca that invests
and holds substantially all of its assets in physical platinum and palladium bullion, and (iv) the Sprott Physical Uranium Trust,
a closed-end mutual fund trust whose units are listed and posted for trading on the TSX that invests and holds substantially all
of its assets in physical uranium; (B) sub-advisor for (i) the Ninepoint Gold Bullion Fund, a Canadian public mutual fund that
invests in physical gold bullion and (ii) the Ninepoint Silver Bullion Fund, a Canadian public mutual fund that invests in physical
silver bullion; and (C) sponsor of the Sprott ESG Gold ETF, an exchange-traded fund whose shares are listed and posted for trading
on the NYSE Arca that invests and holds substantially all of its assets in fully allocated unencumbered physical gold bullion
that meets certain environmental, social and governance standards and criteria.
Business
of the Trust
Investment
Objectives of the Trust
The
Trust was created to invest and hold substantially all of its assets in physical silver bullion. Many investors are unwilling
to invest directly in physical silver bullion due to inconveniences such as transaction, handling, storage, insurance and other
costs that are typical of a direct investment in physical silver bullion. The Trust seeks to provide a secure, convenient and
exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that
is typical of a direct investment in physical silver bullion. The Trust invests primarily in long-term holdings of unencumbered,
fully allocated, physical silver bullion and will not speculate with regard to short-term changes in silver prices. The Trust
does not invest in silver certificates or other financial instruments that represent silver or that may be exchanged for silver.
The Trust has only purchased and expects only to own “Good Delivery” bars as defined by the London Bullion
Market Association (the “LBMA”), with each bar purchased being verified against the LBMA source. The Trust does not
anticipate making regular cash distributions to unitholders.
Investment
Strategies of the Trust
The
Trust is expressly prohibited from investing in units or shares of other investment funds or collective investment schemes other
than money market mutual funds and then only to the extent that its interest does not exceed 10% of the total net assets of the
Trust.
The
Trust may not borrow funds except under limited circumstances as set out in NI 81-102 and, in any event, not in excess of 10%
of the total net assets of the Trust.
Borrowing
Arrangements
As
of the date of this prospectus supplement, the Trust has no borrowing arrangements in place and is unleveraged. The Trust has
historically not used leverage and the Manager has no intention of doing so in the future (save for the short term borrowings
to settle trades). Unitholders will be notified of any changes to the Trust’s use of leverage.
Trustee
RBC
Investor Services, a trust company organized under the federal laws of Canada, is the trustee of the Trust. The Trustee holds
title to the Trust’s assets and has, together with the Manager, exclusive authority over the assets and affairs of the Trust.
The Trustee has a fiduciary responsibility to act in the best interest of the unitholders.
The
Custodians
The
Trust employs two custodians. The Mint acts as custodian for the Trust’s physical
silver bullion pursuant to the Silver Storage Agreement (as defined in the accompanying prospectus). The Mint is a Canadian Crown
corporation, which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations
of the Canadian Government. The Mint is responsible for and bears all risk of the loss of, and damage to, the Trust’s physical
silver bullion that is in the Mint’s custody, subject to certain limitations, including events beyond the Mint’s control
and proper notice by the Manager.
RBC
Investor Services acts as custodian on behalf of the Trust for the Trust’s assets other than physical silver bullion.
RBC Investor Services is only responsible for the Trust’s assets that are directly held by it, its affiliates or appointed
sub-custodians.
RISK
FACTORS
You
should consider carefully the risks described in the “Risk Factors” beginning on page 11 of the accompanying prospectus that
are incorporated by reference in this prospectus supplement before making an investment decision. You should also refer to the other
information included and incorporated by reference herein, including but not limited to the AIF, the Financial Statements and the
MRFP. See “Documents Incorporated by Reference”.
USE
OF PROCEEDS
The
net proceeds from the offering are not determinable in light of the nature of the distribution. The net proceeds of any given
distribution of trust units through the Agents in an “at-the-market distribution” will represent the gross proceeds
after deducting the applicable compensation payable to the Agents under the Amended and Restated Sales Agreement. The Manager
may bear the expenses of the distribution. The net proceeds will be used by the Trust to acquire physical silver bullion in accordance
with the Trust’s objective and subject to the Trust’s investment and operating restrictions described herein. See
“Sprott Physical Silver Trust - Business of the Trust - Investment Objectives of the Trust” and “Sprott Physical
Silver Trust - Business of the Trust - Investment and Operating Restrictions” in the accompanying prospectus. Each time
trust units are issued and sold under this prospectus supplement, the Trust will reimburse the Manager for expenses paid by it
in respect of that drawdown, but only to the extent there is a sufficient premium between the NAV per trust unit and the market
price at which each such trust unit is sold under the offering.
The
offering is intended to be accretive to NAV per trust unit. The Manager believes that the offering may increase liquidity for
the trust units with the goal to make the Trust more available for institutional investors. In addition, the offering may result
in economies of scale which may lead to an ultimate decrease of expenses on a per trust unit basis. Due to the nature of the “at-the-market
offering”, the Manager will be able to utilize the program immediately or from time to time when it deems it appropriate.
CAPITALIZATION
There
have been no material changes in the Trust’s capitalization since the date of the Financial Statements, being the most recently
filed financial statements of the Trust, other than: (i) as a result of changes in the price of silver; and (ii) as described
under the heading “Prior Sales” below. On April 5,
2023, the total NAV
of the Trust and the NAV per unit of the Trust were US$4,365,484,248 and US$8.7912, respectively, and there
were a total of 496,572,980 units of the Trust issued and outstanding.
DESCRIPTION
OF THE UNITS OF THE TRUST
The
Trust is authorized to issue an unlimited number of trust units in one or more classes and series of a class. Currently, the Trust
has issued only one class or series of units, which is the class of trust units that are qualified by this prospectus supplement.
Each trust unit of a class or series of a class represents an undivided ownership interest in the net assets of the Trust attributable
to that class or series of a class of trust units. Trust units are transferable and redeemable at the option of the unitholder
in accordance with the provisions set forth in the Trust Agreement. All trust units of the same class or series of a class have
equal rights and privileges with respect to all matters, including voting, receipt of distributions from the Trust, liquidation
and other events in connection with the Trust. Trust units and fractions thereof are issued only as fully paid and non-assessable.
Trust units have no preference, conversion, exchange or pre-emptive rights. Each whole trust unit of a particular class or series
of a class entitles the holder thereof to a vote at meetings of unitholders where all classes vote together, or to a vote at meetings
of unitholders where that particular class or series of a class of unitholders votes separately as a class.
The
Trust may not issue trust units except (i) if the net proceeds per trust unit to be received by the Trust are not less than 100%
of the most recently calculated NAV per trust unit immediately prior to, or upon, the determination of the pricing of such issuance
or (ii) by way of unit distribution in connection with an income distribution.
Registration
or transfers of the trust units will be made through CDS Clearing and Depository Services Inc., and/or the Depository Trust Company,
each of which holds the trust units on behalf of its participants (i.e., brokers), which in turn may hold the trust units on behalf
of their customers.
References
in this prospectus supplement and the accompanying prospectus to a holder of trust units or unitholder mean, unless the context
otherwise requires, the owner of the beneficial interest in such trust units.
The
Trust and the Manager do not have any liability for: (i) records maintained by a depository relating to the beneficial interests
in the trust units or the accounts maintained by such depositary; (ii) maintaining, supervising or reviewing any records relating
to such beneficial ownership interests; or (iii) any advice or representation made or given by a depositary and made or given
with respect to the rules and regulations of the depositary or any action taken by a depositary or at the direction of the depositary’s
participants.
The
Trust has the option to terminate registration of the trust units through the non-certificated inventory system in which case
certificates for trust units in fully registered form will be issued to beneficial owners of such trust units or to their nominees.
PRIOR
SALES
Prior
Sales
The
following table summarizes the trust units that have been issued from treasury during the 12-month period before the date of this
prospectus supplement, all of which have been issued pursuant to the Amended and Restated Sales Agreement.
| Date |
Price
Per Trust Unit
(US$) |
Number
of Trust Units Issued |
| April
6, 2022 |
8.6838 |
244,159 |
| April
7, 2022 |
8.7051 |
354,700 |
| April
7, 2022 |
8.7328 |
105,352 |
| Date |
Price
Per Trust Unit
(US$) |
Number
of Trust Units Issued |
| April
8, 2022 |
8.7793 |
331,342 |
| April
11, 2022 |
8.8440 |
823,300 |
| April
11, 2022 |
8.9061 |
570,234 |
| April
12, 2022 |
8.9500 |
840,000 |
| April
12, 2022 |
8.9508 |
1,136,480 |
| April
13, 2022 |
9.0454 |
583,354 |
| April
18, 2022 |
9.1460 |
608,200 |
| May
11, 2022 |
7.5718 |
48,400 |
| July
28, 2022 |
6.8034 |
891,529 |
| July
28, 2022 |
6.8021 |
172,600 |
| August
8, 2022 |
7.0833 |
500,000 |
| September
2, 2022 |
6.3606 |
1,395,534 |
| September
7, 2022 |
6.4183 |
543,300 |
| September
7, 2022 |
6.4256 |
1,261,200 |
| September
12, 2022 |
6.8195 |
3,342,712 |
| September
12, 2022 |
6.8244 |
203,600 |
| September
21, 2022 |
6.8775 |
671,374 |
| September
21, 2022 |
6.8696 |
228,600 |
| September
28, 2022 |
6.5494 |
1,650,000 |
| September
30, 2022 |
6.6852 |
270,200 |
| September
30, 2022 |
6.6865 |
155,263 |
| October
3, 2022 |
6.9762 |
3,007,500 |
| October
3, 2022 |
6.9681 |
354,900 |
| October
3, 2022 |
6.9900 |
500,000 |
| October
17, 2022 |
6.5206 |
1,580,683 |
| October
20, 2022 |
6.5695 |
630,091 |
| October
21, 2022 |
6.6353 |
2,565,624 |
| November
1, 2022 |
6.8346 |
1,800,000 |
| November
1, 2022 |
6.8625 |
324,800 |
| November
4, 2022 |
7.0828 |
2,079,000 |
| November
4, 2022 |
7.0514 |
520,000 |
| November
4, 2022 |
7.0418 |
2,553,476 |
| November
8, 2022 |
7.3765 |
667,152 |
| November
30, 2022 |
7.5309 |
550,000 |
| December
20, 2022 |
8.2420 |
1,382,342 |
| December
20, 2022 |
8.2499 |
421,800 |
| January
6, 2023 |
8.2424 |
94,025 |
| March
10, 2023 |
7.1281 |
118,384 |
| March
13, 2023 |
7.3472 |
4,307,900 |
| March
13, 2023 |
7.3378 |
514,500 |
| March
17, 2023 |
7.6888 |
500,000 |
| March
17, 2023 |
7.6859 |
385,800 |
| March
22, 2023 |
7.9525 |
127,200 |
| March
22, 2023 |
7.9421 |
1,831,900 |
| March 30, 2023 |
8.2556 |
31,900 |
| March 30, 2023 |
8.2523 |
931,509 |
| April 4, 2023 |
8.5575 |
270,700 |
| April 4, 2023 |
8.5504 |
4,335,232 |
Trading
Price and Volume
The
trust units are traded on the NYSE Arca under the symbol “PSLV” and on the TSX under the symbols “PSLV”
(Canadian dollar denominated) and “PSLV.U” (U.S. dollar denominated). The following table sets forth the high and
low prices and monthly average trading volume for the trust units on the TSX (as reported by the TSX) and the NYSE Arca (as reported
by the NYSE Arca) for each month during the 12-month period before the date of this prospectus supplement.
| Calendar
Period |
NYSE
ARCA |
TSX |
| “PSLV” |
“PSLV” |
“PSLV.U” |
High
(US$) |
Low
(US$) |
Average
Volume (1) |
High
(Cdn$) |
Low
(Cdn$) |
Average
Volume |
High
(US$) |
Low
(US$) |
Average
Volume |
| April
2022 |
9.17
|
7.91
|
5,051,423 |
11.55 |
10.18 |
135,173 |
9.01 |
7.99 |
1,389 |
| May
2022 |
8.04
|
7.08
|
4,666,338 |
10.24 |
9.18 |
87,856 |
7.99 |
7.10 |
1,930 |
| June
2022 |
7.66
|
6.88
|
3,270,568 |
9.69 |
8.87 |
49,278 |
7.63 |
6.88 |
1,449 |
| July
2022 |
6.94
|
6.20
|
4,014,597 |
8.88 |
8.10 |
66,153 |
6.91 |
6.24 |
1,293 |
| August
2022 |
7.18
|
6.29
|
2,755,530 |
9.17 |
8.26 |
40,892 |
7.17 |
6.33 |
648 |
| September
2022 |
6.89
|
6.16
|
4,246,908 |
9.22 |
8.13 |
89,515 |
6.84 |
6.23 |
588 |
| October
2022 |
7.29
|
6.33
|
4,913,972 |
9.85 |
8.79 |
72,225 |
7.18 |
6.38 |
2,146 |
| November
2022 |
7.54
|
6.58
|
4,186,335 |
10.13 |
9.12 |
76,030 |
7.54 |
6.69 |
2,537 |
| December
2022 |
8.34
|
7.50
|
5,130,553 |
11.27 |
10.18 |
112,294 |
8.27 |
7.55 |
4,531 |
| January
2023 |
8.40
|
7.76
|
3,314,989 |
11.45 |
10.41 |
79,416 |
8.37 |
7.82 |
1,443 |
| February
2023 |
8.31 |
7.05 |
3,342,207 |
11.04 |
9.57 |
63,764 |
8.01 |
7.07 |
3,044 |
| March
2023 |
8.34 |
6.85 |
4,420,769 |
11.28 |
9.46 |
103,127 |
8.28 |
6.90 |
752 |
| April 1 – 5, 2023 |
8.62 |
8.26 |
6,713,826 |
11.58 |
11.10 |
131,696 |
8.57 |
8.28 |
2,153 |
Note:
| (1) | Includes
volume traded on other United States exchanges and trading markets. |
PLAN
OF DISTRIBUTION
Pursuant
to the Amended and Restated Sales Agreement, the Trust may offer and sell from time to time up to US$1,000,000,000 of trust units
through the Agents in connection with the offering.
Sales
of the trust units pursuant to the Amended and Restated Sales Agreement will be made in transactions that are deemed to be “at-the-market
distributions” as defined in NI 44-102, consisting of sales made directly on the TSX and the NYSE Arca or other existing
trading markets in Canada and the United States. Subject to the terms and conditions of the Amended and Restated Sales Agreement
and upon instructions from the Trust, the Agents will sell the trust units directly on the TSX and the NYSE Arca or other existing
trading markets in Canada and the United States. The Trust will instruct the Agents as to the number of trust units to be sold
by them. The Trust or the Agents may suspend the offering of trust units upon proper notice and subject to other conditions.
In
accordance with paragraph 9.3(2) of NI 81-102, the issue price of the trust units will not (a) as far as reasonably practicable,
be a price that causes dilution of the NAV of the Trust’s other outstanding securities at the time of issue and (b) be a
price that is less than the most recently calculated NAV per trust unit. Accordingly, the trust units sold pursuant to the offering
will not be sold at an issue price that is less than 100% of the most recently calculated NAV per trust unit immediately prior
to, or upon, the determination of the pricing of such issuance.
To
compensate an Agent for its services in acting as agent in the sale of trust units, the Trust will pay a cash commission of up
to 3.0% of the aggregate gross proceeds of sales made by such Agent pursuant to the Amended and Restated Sales Agreement. The
Trust estimates that the total expenses that it will incur for the
offering (including fees payable to stock exchanges, securities
regulatory authorities and the Trust’s counsel and auditors, but excluding compensation payable to the Agents under the
terms of the Amended and Restated Sales Agreement) will be approximately US$75,000, which costs may be borne by the Manager. The
Trust has also agreed to reimburse the Agents for certain specified expenses, including the fees and disbursements of its legal
counsel in an amount not to exceed US$25,000. There is no arrangement for funds to be received in an escrow trust or similar arrangement.
Each time trust units are issued and sold under this prospectus supplement, the Trust will reimburse the Manager for expenses
paid by it in respect of that drawdown, but only to the extent there is a sufficient premium between the NAV per trust unit and
the market price at which each such unit is sold under the offering.
Settlement
for sales of the trust units is expected to occur on the second business day following the date on which any sales are made, or
on such other date as is industry practice for regular-way trading, in return for payment of the net proceeds to the Trust.
Neither
U.S. Agent is registered as a dealer in any Canadian jurisdiction and, accordingly, the U.S. Agents will only sell trust units
on marketplaces in the United States and are not permitted to and will not, directly or indirectly, advertise or solicit offers
to purchase any of the trust units in Canada. The Canadian Agent may only sell trust units in Canada.
In
connection with the sale of the trust units on the Trust’s behalf, the Agents will be deemed to be an
“underwriter” within the meaning of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and
the compensation of the Agents will be deemed to be underwriting commissions or discounts. The Trust has agreed to provide
indemnification and contribution to the Agents against certain civil liabilities, including liabilities under the Securities
Act.
The
offering of trust units pursuant to the Amended and Restated Sales Agreement will terminate upon the termination of the Amended
and Restated Sales Agreement as permitted therein. The Agents may terminate the Amended and Restated Sales Agreement under the
circumstances specified in the Amended and Restated Sales Agreement. Each of the Trust and the Agents may also terminate the Amended
and Restated Sales Agreement upon giving the other party ten days’ notice.
The
Agents and their affiliates may in the future provide various investment banking, commercial banking and other financial services
for the Trust and its affiliates, for which services they may in the future receive customary fees. No underwriter or dealer involved
in an “at-the-market distribution”, no affiliate of such underwriter or dealer, and no person or company acting
jointly or in concert with such underwriter or dealer, may, in connection with the distribution, enter into any transaction
that is intended to stabilize or maintain the market price of the trust units, or securities of the same class as the trust units
distributed under this prospectus supplement, including selling an aggregate number or principal amount of trust units that would
result in the underwriter or dealer creating an over-allocation position in the trust units. To the extent required by Regulation
M under the Exchange Act, the Agents will not engage in any market making activities involving the trust units while the offering
is ongoing under this prospectus supplement.
The
Trust has applied to list the trust units offered by this prospectus supplement on the TSX and the NYSE Arca. The TSX has conditionally
approved the listing of the trust units offered by this prospectus supplement. Listing is subject to us fulfilling all of the
requirements of the TSX. The NYSE Arca has authorized, upon official notice of issuance, the listing of the trust units offered
hereunder.
This
prospectus supplement and the accompanying prospectus in electronic format may be made available on a website maintained by an
Agent, and the Agents may distribute this prospectus supplement and the accompanying prospectus electronically.
Expenses
of Issuance and Distribution
The
expenses of the issuance and distribution may be borne by the Manager. Each time trust units are issued and sold under this prospectus
supplement, the Trust will reimburse the Manager for expenses paid by it in respect of that drawdown, but only to the extent there
is a sufficient premium between the NAV per trust unit and the market price at which each such unit is sold under the offering.
Selling
Restrictions Outside of the United States and Canada
Other
than in the United States and Canada, no action has been taken by the Trust that would permit a public offering of the trust units
offered by this prospectus supplement in any jurisdiction outside the United States and Canada where action for that purpose is
required. The trust units offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this
prospectus supplement or any other offering material or advertisements in connection with the offer and sale of any such units
be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform
themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement.
This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any trust units offered by
this prospectus supplement in any jurisdiction in which such an offer or a solicitation is unlawful.
MATERIAL
TAX CONSIDERATIONS
Material
U.S. Federal Income Tax Considerations
The
accompanying prospectus describes certain material U.S. federal income tax consequences to U.S. Holders (as such term is defined
in the accompanying prospectus), of the ownership and disposition of trust units. Please refer to the heading “Material
Tax Considerations - Material U.S. Federal Income Tax Considerations” beginning on page 17 of the accompanying prospectus
and “Material Tax Considerations - Backup Withholding and Information Reporting” beginning on page 22 of the accompanying
prospectus.
Canadian
Federal Income Tax Considerations
The
accompanying prospectus describes certain Canadian federal income tax consequences to an investor who is a resident of Canada
and to an investor who is a non-resident of Canada, of acquiring, owning or disposing of any trust units, including to the extent
applicable, whether the distributions relating to the trust units will be subject to Canadian non-resident withholding tax. Please
refer to the heading “Material Tax Considerations - Material Canadian Federal Income Tax Considerations” and “Material
Tax Considerations - Canadian Taxation of Unitholders” beginning on pages 22 and 25, respectively, of the accompanying prospectus,
and “Eligibility Under the Tax Act for Investment by Canadian Exempt Plans”, beginning on page 30 of the accompanying
prospectus.
U.S.
ERISA CONSIDERATIONS
The
accompanying prospectus describes the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and how it imposes certain requirements on employee benefit plans subject to Title I of ERISA and on entities that are deemed
to hold the assets of such plans (collectively “ERISA Plans”), and on those persons who are fiduciaries with respect
to ERISA Plans. Investments by ERISA Plans are subject to ERISA’s general fiduciary requirements, including, but not limited
to, the requirement of investment prudence and diversification and the requirement that an ERISA Plan’s investments be made
in accordance with the documents governing the ERISA Plan. Please refer to the heading “U.S. ERISA Considerations”
beginning on page 30 of the accompanying prospectus.
AUDITORS
The
Financial Statements, incorporated in this prospectus supplement by reference, have been audited by KPMG LLP, Chartered Professional
Accountants, Licensed Public Accountants, as stated in their report, which is incorporated herein by reference. KPMG LLP has advised
the Trust and the Manager that it was independent within the meaning of the relevant rules and related interpretations prescribed
by the relevant professional bodies in Canada and any applicable legislation or regulation and all relevant US professional and
regulatory standards for the period under audit in respect of the Trust’s financial year ended December 31, 2022.
LEGAL
MATTERS
Certain
legal matters relating to the issue and sale of trust units offered hereby will be passed upon by Stikeman Elliott LLP, Toronto,
Ontario, Canada on behalf of the Trust. Seward & Kissel LLP, New York, New York, is acting as special U.S. counsel to the
Trust. Certain legal matters in connection with the offering will be passed upon for the Agents by Borden Ladner Gervais LLP,
Toronto, Ontario, as to Canadian legal matters and Cooley LLP, New York, New York as to U.S. legal matters. As of the date hereof,
the “designated professionals” (as such term is defined in Form 51-102F2 - Annual Information Form) of each
of Stikeman Elliott LLP and Seward & Kissel LLP, respectively, beneficially own, directly or indirectly, less than 1% of the
units of the Trust or the securities of any associate or affiliate of the Trust.
DOCUMENTS
FILED AS PART OF THE REGISTRATION STATEMENT
The
documents specified in this prospectus supplement and in the accompanying prospectus under “Documents Incorporated by Reference”
are hereby incorporated by reference into the registration statement on Form F-10 (File No. 333-271162)
of which this prospectus supplement forms a part.
WHERE
YOU CAN FIND MORE INFORMATION
The
Trust is subject to the information requirements of the Exchange Act and applicable Canadian securities legislation, and in accordance
therewith, the Trust files or furnishes reports and other information with or to the SEC and with the securities regulatory authorities
of each of the provinces and territories of Canada. Under the MJDS, the Trust may generally prepare these reports and other information
in accordance with the disclosure requirements of Canada. These requirements are different from those of the United States. As
a foreign private issuer, the Trust is exempt from the rules under the Exchange Act prescribing the furnishing and content of
proxy statements, and officers, directors and principal unitholders of the Trust are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act. In addition, the Trust is not required to publish financial
statements as promptly as United States companies.
The
reports and other information that the Trust files with, or furnishes to, the SEC may be accessed electronically through EDGAR
at www.sec.gov. Copies of reports, statements and other information that the Trust files with the Canadian securities regulatory
authorities are electronically available from SEDAR at www.sedar.com.
This
short form prospectus has been filed under legislation in all provinces and territories of Canada that permits certain information
about these securities to be determined after this prospectus has become final and that permits the omission from this prospectus
of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information
within a specified period of time after agreeing to purchase any of these securities.
No
securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form prospectus constitutes a public offering of the securities only in those jurisdictions where they may be lawfully
offered for sale and therein only by persons permitted to sell such securities.
Information
has been incorporated by reference in this short form base shelf prospectus from documents filed with the securities commissions
or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request
without charge from Sprott Asset Management LP, the manager of Sprott Physical Silver Trust, located at Royal Bank Plaza, South
Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1, Telephone: (416) 943-8099 and are also available electronically
at www.sedar.com.
SHORT
FORM BASE SHELF PROSPECTUS
Sprott
Physical Silver Trust
US$
2,000,000,000
Trust
Units
Sprott
Physical Silver Trust (the “Trust”) may offer from time to time, during the 25-month period that this short form base
shelf prospectus (including any amendments hereto) (this “prospectus”) remains effective, up to US$2,000,000,000 of
transferable, redeemable trust units (the “trust units”). Each trust unit represents an equal, fractional, undivided
ownership interest in the net assets of the Trust attributable to the particular class of trust units. To date, the Trust has
issued only one class or series of trust units, which is the class of trust units that will be qualified by this prospectus. The
Trust is a closed-end mutual fund trust established under the laws of the Province of Ontario and is managed by Sprott Asset Management
LP (the “Manager”). See “Sprott Physical Silver Trust — Management of the Trust — The Manager”
for further information about the Manager. The Trust was created to invest and hold substantially all of its assets in physical
silver bullion. See “Sprott Physical Silver Trust — Business of the Trust — Investment Objectives of the Trust”
for further information about the Trust’s investment objectives.
The
specific terms of the trust units offered, including the number of trust units offered and the offering price (or the manner of
determination thereof if offered on a non-fixed price basis, including sales in transactions that are deemed to be “at-the-market”
distributions as defined in National Instrument 44-102 – Shelf Distribution (“NI 44-102”)), will be described
in supplements to this prospectus (each a “prospectus supplement”). All shelf information omitted from this prospectus
under applicable laws will be contained in one or more prospectus supplements that will be delivered to purchasers together with
this prospectus. Each prospectus supplement will be incorporated by reference into this prospectus for the purposes of securities
legislation as of the date of the prospectus supplement and only for the purposes of the distribution of the trust units to which
the prospectus supplement pertains. A prospectus supplement may include specific terms pertaining to the trust units that are
not within the alternatives or parameters described in this prospectus. You should read this prospectus and any applicable prospectus
supplement carefully before you invest.
This
prospectus may qualify an “at-the-market distribution” as defined in NI 44-102.
The
trust units are listed and posted for trading on the NYSE Arca, Inc. (the “NYSE Arca”) under the symbol “PSLV”
and on the Toronto Stock Exchange (the “TSX”) under the symbols “PSLV” (Canadian dollar denominated) and “PSLV.U”
(U.S. dollar denominated). On April 5, 2023, the last trading day prior to the date hereof, the closing price of the trust units on the
NYSE Arca was US$8.59 and the closing price of the trust units on the TSX was Cdn$11.55, respectively.
The
Trust may sell the trust units to or through underwriters or dealers purchasing as principals to one or more purchasers directly,
or through agents designated from time to time by the Manager on behalf of the Trust. Subject to the provisions of the Trust Agreement
(as defined below) pursuant to which the Trust was established, the trust units may be sold at fixed prices or non-fixed prices,
such as prices determined by reference to the prevailing market price of the trust units or at prices to be negotiated with purchasers,
which prices may vary between purchasers and during the period of distribution of the trust units. The prospectus supplement relating
to a particular offering of the trust units will identify each underwriter, dealer or agent engaged by the Trust in connection
with the offering and sale of the trust units, and will set forth the terms of the offering of such trust units, the method of
distribution of such trust units including, to the extent applicable, the proceeds to the Trust, and any fees, discounts or any
other compensation payable to underwriters, dealers or agents and any other material term of the plan of distribution. In connection
with such offering, other than an “at-the-market” distribution, the underwriters, dealers or agents, as the case may
be, may over-allot or effect transactions intended to stabilize or maintain the market price of the trust units at levels other
than those which otherwise might prevail on the open market. Such transactions, if commenced, may be discontinued at any time.
See “Plan of Distribution”.
The
Trust is not a trust company and does not carry on business as a trust company and, accordingly, the Trust is not registered under
the trust company legislation of any jurisdiction. Trust units are not “deposits” within the meaning
of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under provisions of that Act or any other
legislation.
No
underwriter or dealer involved in an at-the-market distribution, no affiliate of such underwriter or dealer and no person or company
acting jointly or in concert with underwriter or dealer, may, in connection with the distribution, enter into any transaction that is
intended to stabilize or maintain the market price of the trust units or securities of the same class as the trust units distributed
under the at-the-market prospectus including selling an aggregate number or principal amount of trust units that would result in the
underwriter or dealer creating an over-allocation position in the trust units.
NEITHER
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR ANY U.S. STATE SECURITIES REGULATOR HAS APPROVED
OR DISAPPROVED OF THE TRUST UNITS OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENCE.
The
Trust is permitted, under a multi-jurisdictional disclosure system (“MJDS”) adopted by the securities regulatory authorities
in Canada and the United States, to prepare this prospectus in accordance with Canadian disclosure requirements, which are different
from those of the United States. The Trust prepares its financial statements, which are incorporated by reference in this prospectus,
in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). These financial statements may not be comparable to the financial statements of United States
issuers.
Purchasing
the trust units may subject you to tax consequences both in the United States and Canada. This prospectus or any prospectus supplement
may not describe these tax consequences fully. You should read the tax discussion in this prospectus and any applicable prospectus
supplement.
Your
ability to enforce civil liabilities under United States federal securities laws or securities laws of other relevant jurisdictions may
be affected adversely because the Trust is a mutual fund trust established under the laws of the Province of Ontario. Each of the Trust,
the Manager and Sprott Asset Management GP Inc. (the “GP”), which is the general partner of the Manager, is organized under
the laws of the Province of Ontario, Canada and the Trust’s trustee, RBC Investor Services Trust (“RBC Investor Services”
or the “Trustee”), is
organized under the federal laws of Canada, and all of their executive
offices and substantially all of the administrative activities and a majority of their assets are located outside the United States. In addition, the directors and officers of the Trustee and the GP are residents of jurisdictions other than
the United States and all or a substantial portion of the assets of those persons are or may be located outside
the United States.
Whitney
George, a director of the GP, resides outside of Canada. Mr. George has appointed the Trust, located at Royal Bank Plaza, South
Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, M5J 2J1, as his agent for service of process in Canada. It may not be possible
for you to enforce judgments obtained in Canada against any person who resides outside of Canada, even if the person has appointed
an agent for service of process.
See
“Risk Factors” for a discussion of certain considerations relevant to an investment in the trust units offered hereby.
In the opinion of Stikeman Elliott LLP, counsel to the Trust, the trust units, once offered under a prospectus supplement, will
be qualified investments for certain funds, plans and accounts under the Income Tax Act (Canada) (the “Tax Act”),
subject to the qualifications set out under the heading “Eligibility Under the Tax Act for Investment by Canadian Exempt
Plans”.
The
financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise noted herein,
all references to “$”, “US$”, “United States dollars”, “U.S. dollars” or “dollars”
are to the currency of the United States and all references to “Cdn$” or “Canadian dollars” are to the
currency of Canada.
The
registered and head office of the Trust is located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario,
M5J 2J1.
TABLE
OF CONTENTS
FINANCIAL
INFORMATION AND ACCOUNTING PRINCIPLES
Unless
otherwise indicated, financial information in this prospectus has been prepared in accordance with IFRS as issued by the IASB.
The financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise noted
herein, all references to “$”, “US$”, “United States dollars”, “U.S. dollars”
or “dollars” are to the currency of the United States and all references to “Cdn$” or “Canadian
dollars” are to the currency of Canada.
EXCHANGE
RATE
The
following table sets out certain exchange rates based upon the daily average rate published by the Bank of Canada. The rates are
set out as United States dollars per Cdn$1.00.
| | | |
Year Ended
December 31, | |
| | | |
2022 | | |
2021 | |
| Low | | |
$ | 0.7217 | | |
$ | 0.7727 | |
| High | | |
$ | 0.8031 | | |
$ | 0.8306 | |
| Average | | |
$ | 0.7692 | | |
$ | 0.7980 | |
| End | | |
$ | 0.7383 | | |
$ | 0.7888 | |
On
April 5, 2023, the daily average rate for United States dollars in terms of Canadian dollars, as quoted by the Bank of Canada was Cdn$1.00
= US$0.7431.
DOCUMENTS
INCORPORATED BY REFERENCE
Incorporated
by reference in this prospectus is certain information contained in documents filed by the Trust with the securities regulatory
authorities in each of the provinces and territories of Canada. This means that the Trust is disclosing important information
to you by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein.
You
may obtain copies of the documents incorporated by reference in this prospectus on request without charge by contacting the Manager,
located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1, Telephone: (416) 943-8099
(toll free number: 1-855-943-8099), as well as through the sources described below under “Additional Information”.
The
following documents are specifically incorporated by reference in this prospectus:
| (a) | the
annual information form of the Trust for its fiscal year ended December 31, 2022, dated March 17, 2023 (the “AIF”); |
| (b) | the
audited annual financial statements of the Trust as at December 31, 2022 and for its fiscal years ended December 31, 2022 and
2021, and the related notes thereto, together with the report of independent registered public accounting firm thereon (collectively,
the “Financial Statements”); and |
| (c) | the
management report of fund performance of the Trust for its fiscal year ended December 31, 2022 (the “MRFP”). |
Any
documents of the type referred to in the preceding paragraph with respect to the Trust, material change reports (other than confidential
material change reports) or any document of the type referred to in section 11.1 of Form 44-101F1 of National Instrument 44-101
— Short Form Prospectus Distributions (“NI 44-101”) required to be incorporated by reference herein pursuant
to NI-44-101, as well as all prospectus supplements (solely for the purposes
of the offering of trust units covered by that prospectus
supplement unless otherwise provided therein) disclosing additional or updated information filed by the Trust with the securities
regulatory authorities in Canada subsequent to the date of this prospectus and prior to 25 months from the date of issuance of
the receipt for this prospectus, shall be deemed to be incorporated by reference in this prospectus.
When
new documents of the type referred to in the paragraphs above are filed by the Trust with the securities regulatory authorities
in Canada during the currency of this prospectus, such documents will be deemed to be incorporated by reference in this prospectus
and the previous documents of the type referred to in the paragraphs above and all material change reports, unaudited interim
financial statements (and management reports of fund performance of the Trust relating thereto) and certain prospectus supplements
filed by the Trust with the securities regulatory authorities in Canada before the commencement of the financial year in which
the new documents are filed will no longer be deemed to be incorporated by reference in this prospectus.
The
documents identified above as incorporated by reference into this prospectus have been filed with or furnished to the SEC as follows:
(1) the AIF has been filed as Exhibit 99.5 to the Trust’s annual report on Form 40-F filed with the SEC on March 21, 2023;
(2) the Financial Statements have been filed as Exhibit 99.6 to the Trust’s annual report on Form 40-F filed with the SEC
on March 21, 2023; and (3) the MRFP has been filed as Exhibit 99.6 to the Trust’s annual report on Form 40-F filed with
the SEC on March 21, 2023.
In
addition, to the extent that any document or information incorporated by reference into this prospectus is included in any report
on Form 6-K, Form 40-F or Form 20-F (or any respective successor form) that is filed with or furnished to the SEC after the date
of this prospectus, such document or information shall be deemed to be incorporated by reference as an exhibit to the registration
statement of which this prospectus forms a part. In addition, the Trust may incorporate by reference into this prospectus, or
the registration statement of which it forms a part, other information from documents that the Trust will file with or furnish
to the SEC pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”),
if and to the extent expressly provided therein.
If
we disseminate a news release in respect of previously undisclosed information that, in our determination, constitutes a “material
fact” (as such term is defined under applicable Canadian securities legislation), we will identify such news release as
a “designated news release” for the purposes of this prospectus and any prospectus supplement to this prospectus in
writing on the face page of the version of such news release that we file on the SEDAR (each such news release, a “Designated
News Release”), and each such Designated News Release shall be deemed to be incorporated by reference into this prospectus
and any prospectus supplement to this prospectus only for the purposes of the offering in respect to which the prospectus supplement
relates. All Designated News Releases shall be filed with the SEC on a Form 6-K and each such Designated News Release shall be
deemed to be incorporated by reference as an exhibit to the registration statement.
A
prospectus supplement containing the specific terms of any trust units offered will be delivered to purchasers of such trust units
together with this prospectus and will be deemed to be incorporated by reference in this prospectus as of the date of the prospectus
supplement solely for the purposes of the offering of trust units covered by that prospectus supplement unless otherwise provided
therein.
Any
statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus
shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or
include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding
statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted
a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated
or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
ADDITIONAL
INFORMATION
The
Trust intends to file with the SEC a registration statement on Form F-10 of which this prospectus will form a part. This prospectus
does not contain all the information set out in the registration statement. For further information about the Trust and the trust
units, please refer to the registration statement, including the exhibits to the registration statement.
The
Trust is subject to the information requirements of the Exchange Act and applicable Canadian securities legislation, and in accordance
therewith, the Trust files or furnishes reports and other information with or to the SEC and with the securities regulatory authorities
of each of the provinces and territories of Canada. Under the MJDS, the Trust may generally prepare these reports and other information
in accordance with the disclosure requirements of Canada. These requirements are different from those of the United States. As
a foreign private issuer, the Trust is exempt from the rules under the Exchange Act prescribing the furnishing and content of
proxy statements, and officers, directors and principal unitholders of the Trust are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act. In addition, the Trust is not required to publish financial
statements as promptly as United States companies.
The
SEC maintains a website (www.sec.gov) that makes available reports and other information that the Trust files electronically with
it, including the registration statement that the Trust has filed with respect hereto.
Copies
of reports, statements and other information that the Trust files with the Canadian provincial and territorial securities regulatory
authorities are electronically available from the Canadian System for Electronic Document Analysis and Retrieval (www.sedar.com).
ENFORCEABILITY
OF CIVIL LIABILITIES
Each
of the Trust, the Manager, and the GP is organized under the laws of the Province of Ontario, Canada, and the Trustee is organized
under the federal laws of Canada, and all of their executive offices and substantially all of the administrative activities and
a majority of their assets are located outside the United States or EU Member States. In addition, the directors and officers
of the Trustee and the GP are residents of jurisdictions other than the United States or EU Member States and all or a substantial
portion of the assets of those persons are or may be located outside such jurisdictions.
As
a result, you may have difficulty serving legal process within your jurisdiction upon any of the Trust, the Trustee, the Manager
or the GP or any of their directors or officers, as applicable, or enforcing judgments obtained in courts in your jurisdiction
against any of them or the assets of any of them located outside your jurisdiction, or enforcing against them in the appropriate
Canadian court judgments obtained in courts of your jurisdiction, including, but not limited to, judgments predicated upon the
civil liability provisions of the federal securities laws of the United States or any EU Member State, or bringing an original
action in the appropriate Canadian courts to enforce liabilities against the Trust, the Trustee, the Manager, the GP or any of
their directors or officers, as applicable, based upon the United States federal securities laws or securities laws of any EU
Member State.
While
you, whether or not a resident of the United States or United Kingdom, may be able to commence an action in Canada relating to
the Trust and may also be able to petition Canadian courts to enforce judgments obtained in the courts of any part of the United
States or United Kingdom against any of the Trust, the Trustee, the Manager or the GP or any of their directors or officers, in
the case of the United Kingdom, in accordance with the Convention between the Government of Canada and the Government of the United
Kingdom of Great Britain and Northern Ireland providing for the Reciprocal Recognition and Enforcement of Judgments in Civil and
Commercial Matters (in force since January 1, 1987), you may face additional requirements serving legal process within the United
States or United Kingdom upon or enforcing judgments obtained in the United States or United Kingdom courts against any of them
or the assets of any of them located outside the United States or United Kingdom, or enforcing against any of them in the appropriate
Canadian courts judgments obtained in the courts of any part of the United States or United Kingdom, or bringing an original action
in the appropriate Canadian courts to enforce liabilities against the Trust, the Trustee, the Manager, the GP or any of their
directors or officers, as applicable.
In
the United States, the Trust and the Trustee will each file with the SEC, concurrently with the Trust’s registration statement
on Form F-10, an appointment of agent for service of process on separate Forms F-X. Under such Forms F-X, the Trust and the Trustee
will appoint Puglisi & Associates as their agent.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this prospectus, including any documents incorporated by reference, that are not purely historical are
forward-looking statements. The Trust’s forward-looking statements include, but are not limited to, statements regarding
its or its management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements
that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,”
“estimate,” “expect,” “intends,” “may,” “might,” “plan,”
“possible,” “potential,” “predicts,” “project,” “should,” “would”
and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement
is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:
| ● | trading
of the trust units on the NYSE Arca or the TSX; |
| ● | the
Trust’s objectives and strategies to achieve the objectives; |
| ● | success
in obtaining physical silver bullion in a timely manner and allocating such silver; |
| ● | success
in retaining or recruiting, or changes required in, the officers or key employees of
the Manager; and |
| ● | the
silver industry, sources of and demand for physical silver bullion, and the performance
of the silver market. |
The
forward-looking statements contained in this prospectus, including any document incorporated by reference, are based on the Trust’s
current expectations and beliefs concerning future developments and their potential effects on the Trust. There can be no assurance
that future developments affecting the Trust will be those that it has anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond the Trust’s control) or other assumptions that may cause actual
results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks
and uncertainties include those factors described under the heading “Risk Factors” in this prospectus and in any prospectus
supplement. Should one or more of these risks or uncertainties materialize, or should any of the Trust’s assumptions prove
incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Trust undertakes
no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws.
SPROTT
PHYSICAL SILVER TRUST
The
following is a summary of information pertaining to the Trust and does not contain all the information about the Trust that may
be important to you. You should read the more detailed information including but not limited to the AIF, the Financial Statements
and the MRFP that are incorporated by reference into and are considered to be a part of this prospectus.
Organization
of the Trust
Sprott
Physical Silver Trust was established on June 30, 2010 under the laws of the Province of Ontario, Canada, pursuant to a trust
agreement dated as at June 30, 2010, as amended and restated as of October 1, 2010 and as further amended and restated as of February
27, 2015 and as further amended on November 13, 2020 (the “Trust Agreement”). The Trust has received relief from certain
provisions of National Instrument 81-102 — Investment Funds (“NI 81-102”), and, as such, the Trust is
not subject to certain of the policies and regulations of the Canadian Securities Administrators that apply to other funds. See
“Exemptions and Approvals”.
Management
of the Trust
The
Manager
Sprott
Asset Management LP is the Manager of the Trust. The Manager acts as the manager of the Trust pursuant to the Trust Agreement
and the management agreement between the Trust and the Manager. The Manager is a limited partnership formed and organized under
the laws of the Province of Ontario, Canada, pursuant to the Limited Partnerships Act (Ontario) by declaration dated September
17, 2008. The general partner of the Manager is the GP, which is a corporation incorporated under the laws of the Province of
Ontario, Canada, on September 17, 2008. The GP is a wholly-owned subsidiary of Sprott Inc., which is a corporation incorporated
under the laws of the Province of Ontario, Canada, on February 13, 2008. Sprott Inc. is also the sole limited partner of the Manager.
Sprott Inc. is a public company whose common shares are listed and posted for trading on the TSX and the New York Stock Exchange
under the symbol “SII”. See “Responsibility for Operation of the Trust — The Manager” in the AIF
for further information.
As
of December 31, 2022, the Manager, together with its affiliates and related entities, had assets under management totaling approximately
US$23 billion, and provided management and investment advisory services to many entities, including private investment funds,
exchange listed products, mutual funds and discretionary managed accounts. The Manager also acts as: (A) manager of (i) the Sprott
Physical Gold and Silver Trust, a closed-end mutual fund trust whose trust units are listed and posted for trading on the TSX
and the NYSE Arca that invests and holds substantially all of its assets in physical gold and silver bullion, (ii) the Sprott
Physical Gold Trust, a closed-end mutual fund trust whose trust units are listed and posted for trading on the TSX and the NYSE
Arca that invests and holds substantially all of its assets in physical gold bullion, (iii) the Sprott Physical Platinum and Palladium
Trust, a closed-end mutual fund trust whose units are listed and posted for trading on the TSX and the NYSE Arca that invests
and holds substantially all of its assets in physical platinum and palladium bullion, and (iv) the Sprott Physical Uranium Trust,
a closed-end mutual fund trust whose units are listed and posted for trading on the TSX that invests and holds substantially all
of its assets in physical uranium; (B) sub-advisor for (i) the Ninepoint Gold Bullion Fund, a Canadian public mutual fund that
invests in physical gold bullion and (ii) the Ninepoint Silver Bullion Fund, a Canadian public mutual fund that invests in physical
silver bullion; and (C) sponsor of the Sprott ESG Gold ETF, an exchange-traded fund whose shares are listed and posted for trading
on the NYSE Arca that invests and holds substantially all of its assets in fully allocated unencumbered physical gold bullion
that meets certain environmental, social and governance standards and criteria.
The
Manager is responsible for the day-to-day business and administration of the Trust, including management of the Trust’s
portfolio and all clerical, administrative and operational services. The Trust maintains a public website that contains information
about the Trust and the trust units. The internet address of the website is http://sprott.com/investment-strategies/physical-bullion-trusts/.
This internet address is provided here only as a convenience to you, and the information contained on or connected to the website
is not incorporated into, and does not form part of, this prospectus.
The
Trustee
RBC
Investor Services, a trust company organized under the federal laws of Canada, is the trustee of the Trust. The Trustee holds
title to the Trust’s assets and has, together with the Manager, exclusive authority over the assets and affairs of the Trust.
The Trustee has a fiduciary responsibility to act in the best interest of the unitholders.
The
Custodians
The
Trust employs two custodians. The Royal Canadian Mint (the “Mint”), acts as custodian for the Trust’s
physical silver bullion pursuant to a silver storage agreement (the “Silver Storage Agreement”). The Mint is a Canadian Crown corporation,
which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations of the Canadian
Government. The Mint is responsible for and bears all risk of the loss of, and damage to, the Trust’s physical silver bullion
that is in the Mint’s custody, subject to certain limitations, including events beyond the Mint’s control and proper
notice by the Manager.
RBC
Investor Services acts as custodian on behalf of the Trust for the Trust’s assets other than physical silver bullion. RBC
Investor Services is only responsible for the Trust’s assets that are directly held by it, its affiliates or appointed sub-custodians.
Under
the Trust Agreement, the Manager, with the consent of the Trustee, may determine to change the custodial arrangements of the Trust.
Principal
Offices
The
Trust’s office is located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1. The Manager’s
office is located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1 and its telephone number
is (416) 943-8099 (toll free: 1-855-943-8099). The Trustee’s office is located at 155 Wellington Street West, 10th Floor,
Toronto, Ontario, Canada M5V 3L3. The custodian for the Trust’s physical silver bullion, the Mint, has its office located at 320
Sussex Drive, Ottawa, Ontario, Canada K1A 0G8, and the custodian for the Trust’s assets other than physical silver bullion, RBC
Investor Services, has its office located at 155 Wellington Street West, 10th Floor, Toronto, Ontario, Canada M5V 3L3.
Business
of the Trust
Investment
Objectives of the Trust
The
Trust was created to invest and hold substantially all of its assets in physical silver bullion. Many investors are unwilling
to invest directly in physical silver bullion due to inconveniences such as transaction, handling, storage, insurance and other
costs that are typical of a direct investment in physical silver bullion. The Trust seeks to provide a secure, convenient and
exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that
is typical of a direct investment in physical silver bullion. The Trust invests primarily in long-term holdings of unencumbered,
fully allocated, physical silver bullion and will not speculate with regard to short-term changes in silver prices. The Trust
does not invest in silver certificates or other financial instruments that represent silver or that may be exchanged for silver.
The Trust has only purchased and expects only to own “Good Delivery” bars as defined by the London Bullion Market Association (“LBMA”), with
each bar purchased being verified against the LBMA source. The Trust does not anticipate making regular cash distributions to
unitholders. The Trust holds no assets that are subject to special arrangements arising from their illiquid nature (to the extent
that any such assets are held, the Trust is in compliance at all times with the Investment and Operating Restrictions (as defined
below)).
Investment
Strategies of the Trust
The
Trust is expressly prohibited from investing in units or shares of other investment funds or collective investment schemes other
than money market mutual funds and then only to the extent that its interest does not exceed 10% of the total net assets of the
Trust.
The
Trust may not borrow funds except under limited circumstances as set out in NI 81-102 and, in any event, not in excess of 10%
of the total net assets of the Trust.
Borrowing
Arrangements
The
Trust has no borrowing arrangements in place and is unleveraged. The Trust has historically not used leverage and the Manager
has no intention of doing so in the future (save for the short-term borrowings to settle trades). Unitholders will be notified
of any changes to the Trust’s use of leverage.
Calculating
Net Asset Value (“NAV”)
The
value of the net assets of the Trust and the net asset value for a particular class or series of a class of trust units (the “Class
Net Asset Value”) are determined daily as of 4:00 p.m., Toronto time, on each business day by the Trust’s valuation agent,
which is RBC Investor Services. Throughout this prospectus, unless otherwise indicated, the term “business day” refers to
any day on which the NYSE Arca or the TSX is open for trading. In addition, the Manager may calculate the value of the net assets of
the Trust, the Class Net Asset Value and the NAV per trust unit at such other times as the Manager deems appropriate. The value of the
net assets of the Trust as of the valuation time on any such day is equal to the aggregate fair market value of the assets of the Trust
as of such date, less an amount equal to the fair value of the liabilities of the Trust (excluding all liabilities represented by outstanding
trust units, if any) as of such date. The valuation agent calculates the NAV by dividing the value of the net assets of the class of
the Trust represented by the trust units on that day by the total number of trust units of that class then outstanding on such day. The
total NAV of the Trust as of April 5, 2023 was US$4,365,484,248.
Redemption
of Trust Units for Physical Silver Bullion
Subject
to the terms of the Trust Agreement, trust units may be redeemed at the option of a unitholder for physical silver bullion in any
month. Trust units redeemed for physical silver bullion will be entitled to receive a redemption price equal to 100% of the NAV of
the redeemed trust units on the last day of the month on which NYSE Arca is open for trading for the month in respect of which the
redemption request is processed. Redemption requests must be for amounts that are at least equivalent to the value of ten Good Delivery bars or an integral multiple of one bar in excess thereof, plus applicable expenses. A “Good Delivery
bar” weighs between 750 and 1,100 troy ounces (approximately 23 to 34 kilograms) and usually are approximately 1,000 troy
ounces. Any fractional amount of redemption proceeds in excess of ten Good Delivery bars or an integral multiple of one bar
in excess thereof will be paid in cash at a rate equal to 100% of the NAV of such excess amount. The ability of a unitholder to
redeem trust units for physical silver bullion may be limited by the sizes of Good Delivery bars held by the Trust at the
time of redemption. A unitholder redeeming trust units for physical silver bullion will be responsible for expenses in connection
with effecting the redemption and applicable delivery expenses, including the handling of the notice of redemption, the delivery of
the physical silver bullion for trust units that are being redeemed and the applicable fees charged by the Mint in connection with
such redemption, including but not limited to silver storage redemption fees, pallet repackaging fees and administrative
fees.
Notwithstanding
the foregoing, unitholders that are constituted and authorized as Undertakings for Collective Investments in Transferable Securities
(“UCITS”) or are otherwise prohibited by their investment policies, guidelines or restrictions from receiving
physical silver bullion may only redeem trust units for cash.
Since
inception, 2,536,802 trust units have been redeemed for physical silver bullion.
A
unitholder that owns a sufficient number of trust units who desires to exercise redemption privileges for physical silver bullion
must do so by instructing his, her or its broker, who must be a direct or indirect participant of CDS Clearing and Depository
Services Inc. (“CDS”) or The Depository Trust Company (“DTC”), to deliver to the Trust’s transfer
agent, TSX Trust Company, on behalf of the unitholder a written notice (the “Silver Redemption Notice”) of the
unitholder’s intention to redeem trust units for physical silver bullion (the transfer agent is permitted to directly accept
redemption requests. See “Exemptions and Approvals”). If a unitholder desires to redeem trust units for bullion, and
such unitholder holds his, her or its units through the direct registration system (“DRS”), the holder first has to
request and then receive a trust unit certificate before engaging in the redemption process. A Silver Redemption Notice must be
received by the transfer agent no later than 4:00 p.m., Toronto time, on the 15th day of the month in which the Silver Redemption
Notice will be processed or, if such day is not a business day, then on the immediately following day that is a business day. Any
Silver Redemption Notice received after such time will be processed in the next month. Any Silver Redemption Notice must include a
valid signature guarantee to be deemed valid by the Trust.
Physical
silver bullion received by a unitholder as a result of a redemption of trust units will be delivered by armoured transportation
service carrier pursuant to delivery instructions provided by the unitholder to the Manager, provided that the delivery instructions
are acceptable to the armoured transportation service carrier. Physical silver bullion delivered to an institution located in
North America authorized to accept and hold Good Delivery bars will
likely retain its Good Delivery status while
in the custody of such institution; physical silver bullion delivered pursuant to a unitholder’s delivery instruction to
a destination other than an institution located in North America authorized to accept and hold Good Delivery bars will
no longer be deemed Good Delivery once received by the unitholder.
Redemption
of Trust Units for Cash
Unitholders
whose trust units are redeemed for cash will be entitled to a redemption price equal to 95% of the lesser of (i) the volume-weighted
average trading price of the trust units traded on the NYSE Arca or, if trading has been suspended on the NYSE Arca, the volume-weighted
average trading price of the trust units traded on the TSX, for the last five days on which the respective exchange is open for
trading for the month in which the redemption request is processed and (ii) the NAV of the redeemed trust units as of 4:00 p.m.,
Toronto time, on the last day of the month on which the NYSE Arca is open for trading for the month in which the redemption request
is processed. Cash redemption proceeds will be transferred to a redeeming unitholder approximately three business days after the
end of the month in which the redemption notice is processed.
Since
inception, 185,937 trust units have been redeemed for cash.
To
redeem trust units for cash, a unitholder must instruct the unitholder’s broker to deliver a notice to redeem trust units
for cash (the “Cash Redemption Notice”) to the transfer agent (the transfer agent is permitted to accept redemption
requests. See “Exemptions and Approvals”). If a unitholder desires to redeem trust units for cash, and such unitholder
holds his, her or its trust units through DRS, the holder first has to request and then receive a trust unit certificate before
engaging in the redemption process. A Cash Redemption Notice must be received by the transfer agent no later than 4:00 p.m., Toronto
time, on the 15th day of the month in which the Cash Redemption Notice will be processed or, if such day is not a business day,
then on the immediately following day that is a business day. Any Cash Redemption Notice received after such time will be processed
in the next month. Any Cash Redemption Notice must include a valid signature guarantee to be deemed valid by the Trust.
Investment
and Operating Restrictions
In
making investments on behalf of the Trust, the Manager is subject to certain investment and operating restrictions (the “Investment
and Operating Restrictions”), which are set out in the Trust Agreement. The Investment and Operating Restrictions may not
be changed without the prior approval of unitholders by way of an extraordinary resolution, which must be approved, in person
or by proxy, by unitholders holding trust units representing in aggregate not less than 662/3% of the value of the
net assets of the Trust as determined in accordance with the Trust Agreement, at a duly constituted meeting of unitholders, or
at any adjournment thereof, called and held in accordance with the Trust Agreement, or a written resolution signed by unitholders
holding trust units representing in aggregate not less than 662/3% of the value of the net assets of the Trust as determined
in accordance with the Trust Agreement, unless such change or changes are necessary to ensure compliance with applicable laws,
regulations or other requirements imposed from time to time by applicable securities regulatory authorities.
The
Investment and Operating Restrictions provide that the Trust:
| (a) | will
invest in and hold a minimum of 90% of the total net assets of the Trust in physical silver bullion in Good Delivery bar
form and hold no more than 10% of the total net assets of the Trust, at the discretion of the Manager, in physical silver bullion
(in Good Delivery bar form or otherwise), debt obligations of or guaranteed by the Government of Canada or a province of
Canada or by the Government of the United States or a state thereof, short-term commercial paper obligations of a corporation
or other person whose short-term commercial paper is rated R-1 (or its equivalent, or higher) by Dominion Bond Rating Service
Limited or its successors or assigns or F1 (or its equivalent, or higher) by Fitch Ratings or its successors or assigns or A-1
(or its equivalent, or higher) by Standard & Poor’s or its successors or assigns or P-1 (or its equivalent, or higher)
by Moody’s Investor Service or its successors or assigns, interest-bearing accounts and short-term certificates of deposit
issued or guaranteed by a Canadian chartered bank or trust company, money market mutual funds, short-term government debt or short-term
investment grade corporate debt, or other short-term debt obligations approved by the Manager from time to time (for the purpose
of this paragraph, the term “short-term” means having a date of maturity or call for payment not more |
| | | than 182 days
from the date on which the investment is made), except during the 60-day period following the closing of an offering of trust
units or additional offerings or prior to the distribution of the assets of the Trust, the Trust is permitted to invest up to
100% of its net assets, taken at market value at the time of purchase, in physical silver bullion. See “Exemptions and Approvals”; |
| | | |
| (b) | will
not invest in silver certificates or other financial instruments that represent silver
or that may be exchanged for silver; |
| (c) | will
store all physical silver bullion owned by the Trust at the Mint (including at a facility
located in Canada leased by the Mint for this purpose) or in the treasury vaults of a
Schedule I Canadian chartered bank or an affiliate or division thereof in Canada on a
fully allocated basis, provided that the physical while with that custodian; |
| (d) | will
not hold any “taxable Canadian property” within the meaning
of the Tax Act; |
| (e) | will
not purchase, sell or hold derivatives; |
| (f) | will
not issue trust units except (i) if the net proceeds per trust unit to be received by
the Trust are not less than 100% of the most recently calculated NAV per trust unit prior
to, or upon, the determination of the pricing of such issuance or (ii) by way of trust
unit distribution in connection with an income distribution; |
| (g) | will
ensure that no part of the stored physical silver bullion may be delivered out of safekeeping
by the Mint or, if the physical silver bullion is held by another custodian, that custodian,
without receipt of an instruction from the Manager in the form specified by the Mint
or such other custodian indicating the purpose of the delivery and giving direction with
respect to the specific amount; |
| (h) | will
ensure that no director or officer of the Manager or director or officer of the GP, or
representative of the Trust or the Manager will be authorized to enter into the physical
silver bullion storage vaults without being accompanied by at least one representative
of the Mint or, if the physical silver bullion is held by another custodian, that custodian,
as the case may be; |
| (i) | will
ensure that the physical silver bullion remains unencumbered; |
| (j) | will
ensure that the physical silver bullion is subject to a physical count by a representative
of the Manager periodically on a spot-inspection basis as well as subject to audit procedures
by the Trust’s external auditors on at least an annual basis; |
| (k) | will
not guarantee the securities or obligations of any person other than the Manager, and
then only in respect of the activities of the Trust; |
| (l) | in
connection with requirements of the Tax Act, will not make or hold any investment that
would result in the Trust failing to qualify as a “mutual fund trust” within
the meaning of the Tax Act; |
| (m) | in
connection with requirements of the Tax Act, will not invest in any security that would
be a “tax shelter investment” within the meaning of section 143.2 of the
Tax Act; |
| (n) | in
connection with requirements of the Tax Act, will not invest in the securities of any
non-resident corporation, trust or other non-resident entity (or of any partnership that
holds such securities) if the Trust (or the partnership) would be required to include
any significant amount in income under any of sections 94, 94.1, or 94.2 of the Tax Act; |
| (o) | in
connection with requirements of the Tax Act, will not invest in any security of an issuer
that would be a foreign affiliate of the Trust for purposes of the Tax Act; and |
| (p) | in
connection with requirements of the Tax Act, will not carry on any business and make
or hold any investments that would result in the Trust itself being subject to the tax
for specified investment flow-through (“SIFT”) trusts as provided for in
section 122 of the Tax Act. |
Termination
of the Trust
The
Trust does not have a fixed termination date but will be terminated in the event there are no trust units outstanding, the Trustee
resigns or is removed and no successor trustee is appointed by the Manager by the time the resignation or removal becomes effective,
the Manager resigns and no successor manager is appointed by the Manager and approved by unitholders by the time the resignation
becomes effective, the Manager is, in the opinion of the Trustee, in material default of its obligations under the Trust Agreement
and such default continues for 120 days from the date that the Manager receives notice of such default from the Trustee and no
successor manager has been appointed by the unitholders of the Trust, the Manager experiences certain insolvency events or the
assets of the Manager are seized or confiscated by a public or governmental authority. In addition, the Manager may, in its discretion,
terminate the Trust, without unitholder approval, if, in the opinion of the Manager, after consulting with the independent review
committee, the value of the net assets of the Trust has been reduced such that it is no longer economically feasible to continue
the Trust and it would be in the best interests of the unitholders to terminate the Trust, by giving the Trustee and each holder
of trust units at the time not less than 60 days and not more than 90 days written notice prior to the effective date of the termination
of the Trust. To the extent such termination in the discretion of the Manager may involve a matter that would be a “conflict
of interest matter” as set forth under applicable Canadian securities legislation, the matter will be referred by the Manager
to the Trust’s independent review committee for its recommendation. In connection with the termination of the Trust, the
Trust will, to the extent possible, convert its assets into cash and, after paying or making adequate provision for all of the
Trust’s liabilities, distribute the net assets of the Trust to unitholders, on a pro rata basis, as soon as practicable
after the termination date.
FEES
AND EXPENSES
This
table lists the fees and expenses that the Trust pays for the continued operation of its business and that unitholders may have
to pay if they invest in the Trust. Payment of these fees and expenses will reduce the value of the unitholders’ investment
in the Trust. The unitholders will have to pay fees and expenses directly if they redeem their trust units for physical silver
bullion.
Fees
and Expenses Payable by the Trust
| Type
of Fee |
|
Amount
and Description |
| |
|
|
| Management
Fee: |
|
The
Trust pays the Manager a monthly management fee equal to 1/12 of 0.45% of the value of net assets of the Trust (determined
in accordance with the Trust Agreement), plus any applicable Canadian taxes (such as harmonized sales tax). The management
fee is calculated and accrued daily and payable monthly in arrears on the last day of each month. |
| Operating
Expenses: |
|
Except
as otherwise described, the Trust is responsible for all costs and expenses incurred in connection with the ongoing operation
and administration of the Trust including, but not limited to: the fees and expenses payable to and incurred by the Trustee,
the Manager, any investment manager, the Mint, RBC Investor Services as custodian, any sub-custodians, the registrar, the
transfer agent and the valuation agent of the Trust; transaction and handling costs for the physical silver bullion including
transportation costs for any physical silver bullion purchased for London delivery; storage fees for the physical silver bullion;
custodian settlement fees; counterparty fees; legal, audit, accounting, bookkeeping and record-keeping fees and expenses;
costs and expenses of reporting to unitholders and conducting unitholder meetings; printing and mailing costs; filing and
listing fees payable to applicable securities regulatory authorities and stock exchanges; other administrative expenses and
costs incurred in connection with the Trust’s continuous disclosure public filing requirements and investor relations;
any applicable Canadian taxes payable by the Trust or to which the Trust may be |
|
|
subject; interest expenses and borrowing costs,
if any; brokerage expenses and commissions; costs and expenses relating to the issuance of trust units, including fees payable
to Cantor, Virtu and Virtu Canada upon sale of trust units under the sales agreement; costs and expenses of preparing financial
and other reports; any expenses associated with the implementation and ongoing operation of the independent review committee
of the Trust; costs and expenses arising as a result of complying with all applicable laws; and any expenditures incurred
upon the termination of the Trust. |
| Other
Fees and Expenses: |
|
The
Trust is responsible for the fees and expenses of any action, suit or other proceedings in which, or in relation to which,
the Trustee, the Manager, the Mint, RBC Investor Services as custodian, any sub-custodians, the valuation agent, the registrar
and transfer agent or the underwriters for its offerings and/or any of their respective officers, directors, employees, consultants
or agents is entitled to indemnity by the Trust. |
The
Trust has retained cash from the net proceeds of each of its offerings of trust units in an amount not exceeding 3% of the net
proceeds of each such offering, which has been added to its available funds to be used for its ongoing expenses and cash redemptions.
From time to time, the Trust will sell physical silver bullion to replenish this cash reserve to meet its expenses and cash redemptions.
There is no limit on the total amount of silver bullion that the Trust may sell in order to pay expenses, but the Manger intends
that the cash reserve will not exceed 3% of the value of the net assets of the Trust at any time.
Fees
and Expenses Payable Directly by Unitholders
| Type
of Fee |
Amount
and Description |
| Redemption
and Delivery Costs: |
Except
as set forth above, there are no redemption fees payable upon the redemption of units for cash. However, if a unitholder chooses
to receive physical silver bullion upon redemption of trust units, the unitholder will be responsible for expenses in connection
with effecting the redemption and applicable delivery expenses, including the handling of the notice of redemption, the delivery
of the physical silver bullion for trust units that are being redeemed and the applicable silver storage redemption fees. |
| Other
Fees and Expenses: |
No
other charges apply. If applicable, the unitholder may be subject to brokerage commissions or other fees associated with trading
the trust units. |
RISK
FACTORS
You
should consider carefully the risks described below before making an investment decision. You should also refer to the other information
included and incorporated by reference herein, including but not limited to the AIF, the Financial Statements and the MRFP. See
“Documents Incorporated by Reference”.
The
trading price of the trust units could potentially be more volatile relative to NAV.
The
trading price of the trust units may become more volatile relative to NAV and could continue to be impacted by various factors
which may be unrelated or disproportionate to the price of silver, including market trends and the sentiment of investors towards
silver.
The
Trust and other exchange-traded products that invest in silver have experienced material increases in average daily trading volumes,
which may cause greater price volatility. If trading volumes were to decline significantly, that could negatively impact the trading
price of the Trust and could result in wider differences between the Trust’s trading price and the NAV per trust unit. If you purchase
trust units at a premium to NAV, you may incur losses if the factors that have contributed to the increase in premium to NAV were to
disappear.
Global
events outside the Trust’s control, such as the COVID-19 pandemic and Russia’s invasion of Ukraine, may adversely
affect the Trust’s business, financial condition and result of operations.
The
Trust cautions that current global uncertainty with respect to the coronavirus disease 2019 (COVID-19) and its ongoing effect
on the broader global and local economy may have a significant negative effect on the Trust, such as continuing decreases of the
willingness of the general population to travel, causing staff shortages, market fluctuations in the price of silver, and increased
government regulation, all of which may negatively impact the Trust’s business, financial condition and results of operations
including the ability for the Trust to provide services, including but not limited to, the Trust’s ability to carry out
unitholders’ redemption requests and its ability to deliver physical silver bullion, including increased delivery times
and/or associated costs.
In
addition, governments may take additional preventative measures such as imposing travel restrictions, closing points of entry
or enacting emergency legislation. These preventative measures along with market uncertainty could have a material adverse impact
on taxation, liquidity of units and other unitholder rights generally.
Other
global events that may adversely affect the Trust’s business, financial condition and result of operations include Russia’s
invasion of Ukraine which has led to sanctions being levied against Russia by the international community and may result in additional
sanctions or other international action, any of which may have a destabilizing effect on commodity prices, supply chain and global
economies more broadly. Volatility in commodity prices and supply chain disruptions may adversely affect the Trust’s business
and financial condition. The extent and duration of the current Russian-Ukrainian conflict and related international action cannot
be accurately predicted at this time and the effects of such conflict may magnify the impact of the other risks identified in
this Prospectus, including those relating to commodity price volatility and global financial conditions.
A
large purchase of physical silver bullion by the Trust in connection with an offering may temporarily affect the price of silver.
Depending
on the size of an offering, the amount of silver that the Trust will purchase in connection with an offering may be significant
on a short-term basis and such purchase may have the effect of temporarily increasing the spot price of physical silver bullion.
In the event that the purchase of physical silver bullion by the Trust in connection with an offering temporarily increases the
spot price of physical silver bullion, the Trust will be able to purchase a smaller amount of physical silver bullion with the
proceeds of an offering than otherwise, and if the spot price of physical silver bullion decreases after the purchase of physical
silver bullion by the Trust, such decrease would decrease the NAV of the Trust.
A
delay in the purchase by the Trust of physical silver bullion with the net proceeds of an offering may result in the Trust purchasing
less physical silver bullion than it could have purchased earlier.
The
Trust intends to purchase physical silver bullion with the net proceeds of an offering as described in this prospectus as soon
as practicable. The Trust may not be able to purchase immediately all of the required physical silver bullion. Although the Trust
will endeavour to complete the necessary purchases as quickly as practicable, there may be a delay in the completion of the Trust’s
purchases of physical silver bullion. If physical silver bullion prices increase between the time of completion of an offering
and the time the Trust completes its purchases of physical
silver bullion, whether or
not caused by the Trust’s acquisition of physical silver bullion, the amount of physical silver bullion the Trust will be able
to purchase will be less than it would have been able to purchase had it been able to complete its purchases of the required physical
silver bullion immediately. In either of these circumstances, the quantity of physical silver bullion purchased per trust unit will be
reduced, which will have a negative effect on the value of the trust units.
If
there is a loss, damage or destruction of the Trust’s physical silver bullion in the custody of the Mint and the Trust does
not give timely notice, all claims against the Mint will be deemed waived.
If
either party to the Silver Storage Agreement discovers loss, damage or destruction of the Trust’s physical silver bullion
in the Mint’s custody, care and control, such party must give written notice to the other party within five business days,
in the case of the Manager’s notice, and one business day, in the case of the Mint’s notice, after its discovery of
any such loss, damage or destruction, but, in the event that the Manager receives a written notice from the Mint in which a discrepancy
in the quantity of physical silver bullion first appears, it shall give the Mint a notice of loss no later than 60 days following
receipt of such written statement. If such notice is not given in a timely manner, all claims against the Mint will be deemed
to have been waived. In addition, no action, suit or other proceeding to recover any loss or shortage can be brought against the
Mint unless timely notice of such loss or shortage has been given and such action, suit or proceeding will have commenced within
12 months from the time a claim is made. The loss of the right to make a claim or of the ability to bring an action, suit or other
proceeding against the Mint may mean that any such loss will be non-recoverable, which will have an adverse effect on the value
of the net assets of the Trust and the NAV.
Canadian
Registered Plans that redeem their trust units for physical silver bullion may be subject to adverse consequences.
Physical
silver bullion received by a Registered Plan (as defined below) that is a resident of Canada, such as a registered retirement
savings plan (“RRSP”), on a redemption of trust units for physical silver bullion will not be a qualified
investment for such plan. Accordingly, such plans (and in the case of certain plans, the annuitants or beneficiaries thereunder
or holders thereof) may be subject to adverse Canadian tax consequences.
Tax
treatment of realized gains and losses.
The
Canada Revenue Agency (the “CRA”) has expressed the opinion that gains (or losses) resulting from certain transactions
in commodities should generally be treated for purposes of the Tax Act as being derived from an adventure in the nature in trade,
so that, subject to the particular facts, such transactions give rise to ordinary income rather than capital gains. As the Manager
intends for the Trust to be a long-term holder of physical silver bullion and does not anticipate that the Trust will sell its
physical silver bullion (otherwise than where necessary to fund in specie on a redemption of trust units), the Manager
anticipates that the Trust generally will treat gains (or losses) as a result of dispositions of physical silver bullion as capital
gains (or capital losses). If the CRA were to assess or re-assess the Trust on the basis that gains realized on dispositions of
physical silver were not on capital account, then the Trust could be required to pay Canadian income tax on the full amount of
such gains under Part I of the Tax Act to the extent such gains were not distributed to unitholders, which could reduce the NAV
for all unitholders.
USE
OF PROCEEDS
Unless
otherwise specified in a prospectus supplement, the net proceeds that the Trust will receive from the issue of its trust units
will be used to acquire physical silver bullion in accordance with the Trust’s objective and subject to the Trust’s
investment and operating restrictions described herein. See “Sprott Physical Silver Trust — Business of the Trust
— Investment Objectives of the Trust” and “Investment and Operating Restrictions”.
CAPITALIZATION
There
have been no material changes in the Trust’s capitalization since the date of the Financial Statements, being the most recently
filed financial statements of the Trust, other than: (i) as a result of changes in the price of silver; and (ii) as described under the
heading “Prior Sales”. On April 5, 2023, the total NAV of the Trust and the
NAV per unit of the Trust were US$4,365,484,248 and
US$8.7912, respectively, and there were a total of 496,572,980 units of the Trust issued and outstanding.
DESCRIPTION
OF THE TRUST UNITS
The
Trust is authorized to issue an unlimited number of trust units in one or more classes and series of a class. Currently, the Trust
has issued only one class or series of trust units, which are the class of trust units that will be qualified by this prospectus.
Each trust unit of a class or series of a class represents an undivided ownership interest in the net assets of the Trust attributable
to that class or series of a class of trust units. Trust units are transferable and redeemable at the option of the unitholder
in accordance with the provisions set forth in the Trust Agreement. All trust units of the same class or series of a class have
equal rights and privileges with respect to all matters, including voting, receipt of distributions from the Trust, liquidation
and other events in connection with the Trust. Trust units and fractions thereof are issued only as fully paid and non-assessable.
Trust units have no preference, conversion, exchange or pre-emptive rights. Each whole trust unit of a particular class or series
of a class entitles the holder thereof to a vote at meetings of unitholders where all classes vote together, or to a vote at meetings
of unitholders where that particular class or series of a class of unitholders votes separately as a class.
The
Trust may not issue trust units except (i) if the net proceeds per trust unit to be received by the Trust are not less than 100%
of the most recently calculated NAV per trust unit immediately prior to, or upon, the determination of the pricing of such issuance
or (ii) by way of trust unit distribution in connection with an income distribution.
PRIOR
SALES
The
following table summarizes the trust units that have been issued from treasury during the 12-month period before the date of this
prospectus, all of which have been issued pursuant to the sales agreement.
| Date |
Price
Per Trust Unit
(US$) |
Number
of Trust Units Issued |
| April
6, 2022 |
8.6838 |
244,159 |
| April
7, 2022 |
8.7051 |
354,700 |
| April
7, 2022 |
8.7328 |
105,352 |
| April
8, 2022 |
8.7793 |
331,342 |
| April
11, 2022 |
8.8440 |
823,300 |
| April
11, 2022 |
8.9061 |
570,234 |
| April
12, 2022 |
8.9500 |
840,000 |
| April
12, 2022 |
8.9508 |
1,136,480 |
| April
13, 2022 |
9.0454 |
583,354 |
| April
18, 2022 |
9.1460 |
608,200 |
| May
11, 2022 |
7.5718 |
48,400 |
| July
28, 2022 |
6.8034 |
891,529 |
| July
28, 2022 |
6.8021 |
172,600 |
| August
8, 2022 |
7.0833 |
500,000 |
| September
2, 2022 |
6.3606 |
1,395,534 |
| September
7, 2022 |
6.4183 |
543,300 |
| September
7, 2022 |
6.4256 |
1,261,200 |
| September
12, 2022 |
6.8195 |
3,342,712 |
| September
12, 2022 |
6.8244 |
203,600 |
| September
21, 2022 |
6.8775 |
671,374 |
| Date |
Price
Per Trust Unit
(US$) |
Number
of Trust Units Issued |
| September
21, 2022 |
6.8696 |
228,600 |
| September
28, 2022 |
6.5494 |
1,650,000 |
| September
30, 2022 |
6.6852 |
270,200 |
| September
30, 2022 |
6.6865 |
155,263 |
| October
3, 2022 |
6.9762 |
3,007,500 |
| October
3, 2022 |
6.9681 |
354,900 |
| October
3, 2022 |
6.9900 |
500,000 |
| October
17, 2022 |
6.5206 |
1,580,683 |
| October
20, 2022 |
6.5695 |
630,091 |
| October
21, 2022 |
6.6353 |
2,565,624 |
| November
1, 2022 |
6.8346 |
1,800,000 |
| November
1, 2022 |
6.8625 |
324,800 |
| November
4, 2022 |
7.0828 |
2,079,000 |
| November
4, 2022 |
7.0514 |
520,000 |
| November
4, 2022 |
7.0418 |
2,553,476 |
| November
8, 2022 |
7.3765 |
667,152 |
| November
30, 2022 |
7.5309 |
550,000 |
| December
20, 2022 |
8.2420 |
1,382,342 |
| December
20, 2022 |
8.2499 |
421,800 |
| January
6, 2023 |
8.2424 |
94,025 |
| March
10, 2023 |
7.1281 |
118,384 |
| March
13, 2023 |
7.3472 |
4,307,900 |
| March
13, 2023 |
7.3378 |
514,500 |
| March
17, 2023 |
7.6888 |
500,000 |
| March
17, 2023 |
7.6859 |
385,800 |
| March
22, 2023 |
7.9525 |
127,200 |
| March
22, 2023 |
7.9421 |
1,831,900 |
| March 30, 2023 |
8.2556 |
31,900 |
| March 30, 2023 |
8.2523 |
931,509 |
| April 4, 2023 |
8.5575 |
270,700 |
| April 4, 2023 |
8.5504 |
4,335,232 |
MARKET
PRICE OF TRUST UNITS
The
trust units are traded on the NYSE Arca under the symbol “PSLV” and on the TSX under the symbols “PSLV”
(Canadian dollar denominated) and “PSLV.U” (U.S. dollar denominated). The following table sets forth the high and
low prices and monthly average trading volume for the trust units on the TSX (as reported by the TSX) and the NYSE Arca (as reported
by the NYSE Arca) for each month during the 12-month period before the date of this prospectus.
| |
NYSE
ARCA |
TSX |
| |
“PSLV” |
“PSLV” |
“PSLV.U” |
| Calendar
Period |
High
(US$) |
Low
(US$) |
Average
Volume(1) |
High
(Cdn$) |
Low
(Cdn$) |
Average
Volume |
High
(US$) |
Low
(US$) |
Average
Volume |
| April
2022 |
9.17
|
7.91
|
5,051,423 |
11.55 |
10.18 |
135,173 |
9.01 |
7.99 |
1,389 |
| May
2022 |
8.04
|
7.08
|
4,666,338 |
10.24 |
9.18 |
87,856 |
7.99 |
7.10 |
1,930 |
| June
2022 |
7.66
|
6.88
|
3,270,568 |
9.69 |
8.87 |
49,278 |
7.63 |
6.88 |
1,449 |
| July
2022 |
6.94
|
6.20
|
4,014,597 |
8.88 |
8.10 |
66,153 |
6.91 |
6.24 |
1,293 |
| August
2022 |
7.18
|
6.29
|
2,755,530 |
9.17 |
8.26 |
40,892 |
7.17 |
6.33 |
648 |
| September
2022 |
6.89
|
6.16
|
4,246,908 |
9.22 |
8.13 |
89,515 |
6.84 |
6.23 |
588 |
| October
2022 |
7.29
|
6.33
|
4,913,972 |
9.85 |
8.79 |
72,225 |
7.18 |
6.38 |
2,146 |
| November
2022 |
7.54
|
6.58
|
4,186,335 |
10.13 |
9.12 |
76,030 |
7.54 |
6.69 |
2,537 |
| December
2022 |
8.34
|
7.50
|
5,130,553 |
11.27 |
10.18 |
112,294 |
8.27 |
7.55 |
4,531 |
| January
2023 |
8.40
|
7.76
|
3,314,989 |
11.45 |
10.41 |
79,416 |
8.37 |
7.82 |
1,443 |
| February
2023 |
8.31 |
7.05 |
3,342,207 |
11.04 |
9.57 |
63,765 |
8.01 |
7.07 |
3,045 |
| March
2023 |
8.34 |
6.85 |
4,420,769 |
11.28 |
9.46 |
103,127 |
8.28 |
6.90 |
752 |
| April 1 – 5, 2023 |
8.62 |
8.26 |
6,713,826 |
11.58 |
11.10 |
131,696 |
8.57 |
8.28 |
2,153 |
Note:
(1) Includes volume traded on other United States exchanges and trading markets.
PLAN
OF DISTRIBUTION
The
Trust may sell the trust units to or through underwriters or dealers purchasing as principals to one or more purchasers directly,
or through agents designated from time to time by the Manager on behalf of the Trust. Subject to the provisions of the Trust Agreement
pursuant to which the Trust was established, the trust units may be sold at fixed prices or non-fixed prices, such as prices determined
by reference to the prevailing market price of the trust units at the time of sale or at prices to be negotiated with purchasers,
which prices may vary between purchasers and during the period of distribution of the trust units. The prospectus supplement for
any of the trust units being offered thereby will set forth the terms of the offering of such trust units, including the name
or names of underwriters, dealers or agents, any underwriting discounts and other items constituting underwriters’ compensation,
any public offering price (or the manner of determination thereof if offered on a non-fixed price basis, including sales in transactions
that are deemed to be “at the market” distributions as defined in NI 44-102) and any discounts or concessions allowed
or paid to dealers or agents. Only underwriters so named in the relevant prospectus supplement will be deemed to be underwriters
in connection with the trust units offered thereby.
In
accordance with paragraph 9.3(2) of NI 81-102, the issue price of the trust units will not (a) as far as reasonably practicable,
be a price that causes dilution of the NAV of the Trust’s other outstanding securities at the time of issue and (b) be a
price that is less than the most recently calculated NAV per trust unit. Accordingly, the trust units sold pursuant to the offering
will not be sold at an issue price that is less than 100% of the most recently calculated NAV per trust unit immediately prior
to, or upon, the determination of the pricing of such issuance.
If
underwriters are used in connection with an offering, other than an “at-the-market” distribution, the trust units will be
acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters
to purchase such trust units will be subject to certain conditions
precedent, and the underwriters will be
obligated to purchase all the trust units offered by the prospectus supplement if any of such trust units are purchased. Any public
offering price and any discounts or concessions allowed or paid to dealers may be changed from time to time.
In
connection with an offering, the underwriters, dealers or agents, as the case may be, may over-allot or effect transactions intended
to fix or stabilize the market price of the trust units at a level above that which might otherwise prevail in the open market. An over-allotment,
if any, involves sales in excess of the offering size, which creates a short position. Stabilizing transactions involve bids to purchase
the underlying security so long as the stabilizing bids do not exceed a specified maximum. These transactions may cause the price of
the trust units sold in an offering to be higher than they would otherwise be. The size of the over-allotment, if any, is not known at
this time. Such transactions, if commenced, may be discontinued at any time.
No
underwriter or dealer involved in an at-the-market distribution, no affiliate of such underwriter or dealer, and no person or
company acting jointly or in concert with such underwriter or dealer, may, in connection with the distribution, enter into
any transaction that is intended to stabilize or maintain the market price of the trust units distributed under the at-the-market
prospectus, including selling an aggregate number or principal amount of trust units that would result in the underwriter or dealer
creating an over-allocation position in the trust units.
The
trust units may also be sold directly by the Trust at such prices and upon such terms as are agreed to by the Manager, on behalf
of the Trust, and the purchaser or through agents designated by the Manager on behalf of the Trust from time to time. Any agent
involved in the offering and sale of the trust units in respect of which this prospectus is delivered will be named, and any commissions
payable by the Trust to such agent will be set forth, in a prospectus supplement. Unless otherwise indicated in the prospectus
supplement, any agent would be acting on a best efforts basis for the period of its appointment.
Underwriters,
dealers and agents who participate in the distribution of the trust units may be entitled, under agreements to be entered into
with the Trust, to indemnification by the Trust against certain liabilities, including liabilities under securities legislation,
or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof.
MATERIAL
TAX CONSIDERATIONS
Material
U.S. Federal Income Tax Considerations
The
following are the material U.S. federal income tax consequences to U.S. Holders (as defined below) of the ownership and disposition
of trust units. This discussion does not purport to deal with the tax consequences of owning trust units to all categories of
investors, some of which, such as dealers in securities, regulated investment companies, tax-exempt organizations, investors whose
functional currency is not the U.S. dollar, investors who are liable for an alternative minimum tax, investors required to recognize
income for U.S. federal income tax purposes no later than when such income is reported on an “applicable financial statement”
and investors that own, actually or under applicable constructive ownership rules, 10% or more of the trust units, may be subject
to special rules. This discussion does not address U.S. state or local tax, U.S. federal estate or gift tax or foreign tax consequences
of the ownership and disposition of trust units. This discussion deals only with unitholders who hold the trust units as a capital
asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular
situation under U.S. federal, state, local or foreign law of the ownership of trust units.
The
following discussion of U.S. federal income tax matters is based on the U.S. Internal Revenue Code of 1986, as amended, (the “Code”),
judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department of the
Treasury (the “Treasury Regulations”), all of which are subject to change, possibly with retroactive effect.
U.S.
Federal Income Tax Classification of the Trust
The
Trust has filed an affirmative election with the Internal Revenue Service (“IRS”) to be classified as an association
taxable as a corporation for U.S. federal income tax purposes.
U.S.
Federal Income Taxation of U.S. Holders
As
used herein, the term “U.S. Holder” means a beneficial owner of less than 10% of trust units that is a U.S. citizen
or resident for U.S. federal income tax purposes, a U.S. corporation or other U.S. entity taxable as a corporation, an estate
the income of which is subject to U.S. federal income taxation regardless of its source, or a trust if a court within the United
States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust.
If
a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds the trust units, the tax
treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. However,
a U.S. person that is an individual, trust or estate and that owns trust units through a partnership generally will be eligible
for the reduced rates of taxation described below that are applicable to U.S. Individual Holders (as defined below). If a unitholder
is a partner in a partnership holding the trust units, such unitholder should consult with his, her or its tax advisor.
Distributions
The
Trust does not anticipate making regular cash distributions to unitholders. Subject to the passive foreign investment company
(“PFIC”) discussion below, any distributions made by the Trust with respect to the trust units to a U.S. Holder will
generally constitute dividends, which will generally be taxable as ordinary income to the extent of the Trust’s current
or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of the Trust’s
earnings and profits will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s tax basis
in his, her or its trust units on a dollar-for-dollar basis and thereafter as gain from the disposition of trust units. Since
the Trust will be a PFIC, as described below, dividends paid on the trust units to a U.S. Holder who is an individual, trust or
estate, (a “U.S. Individual Holder”), will generally not be treated as “qualified dividend income” that
is taxable to U.S. Individual Holders at preferential tax rates. Any dividends generally will be treated as foreign-source income
for U.S. foreign tax credit limitation purposes.
Redemption
of Trust Units
As
described under “Sprott Physical Silver Trust — Business of the Trust — Redemption of Trust Units for Physical
Silver Bullion” and “Sprott Physical Silver Trust — Business of the Trust — Redemption of Trust Units
for Cash”, a U.S. Holder may have trust units redeemed for cash or physical silver bullion. Under Section 302 of the Code,
a U.S. Holder generally will be treated as having sold his, her or its trust units (rather than having received a distribution
on the trust units) upon the redemption of trust units if the redemption completely terminates or significantly reduces the U.S.
Holder’s interest in the Trust. In such case, the redemption will be treated as described in the relevant section below
depending on whether the U.S. Holder makes a qualified electing fund (“QEF”) election, a mark-to-market
election or makes no election and therefore is subject to the Default PFIC Regime (as defined below).
PFIC
Status and Significant Tax Consequences
Special
U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for U.S. federal
income tax purposes. In general, the Trust will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in
which such U.S. Holder held the trust units, either:
| ● | at
least 75% of the Trust’s gross income for such taxable year consists of passive
income; or |
| ● | at
least 50% of the average value of the assets held by the Trust during such taxable year
produce, or are held for the production of, passive income. |
For
purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange
of investment property (including commodities). The income that the Trust derives from its sales of physical silver bullion is
expected to be treated as passive income for this purpose. Since substantially all of the Trust’s assets will consist of
physical silver bullion and the Trust expects to derive substantially all of its income from the sales of physical silver bullion,
it is expected the Trust will be treated as a PFIC for each of its taxable years.
Assuming
the Trust is a PFIC, a U.S. Holder will be subject to different taxation rules depending on whether the U.S. Holder (1) makes
an election to treat the Trust as a QEF, which is referred to as a QEF election, (2) makes a mark-to-market election with respect
to the trust units, or (3) makes no election and therefore is subject to the Default PFIC Regime. As discussed in detail below,
making a QEF election or a mark-to-market election generally will mitigate the otherwise adverse U.S. federal income tax consequences
under the Default PFIC Regime. However, the mark-to-market election may not be as favorable as the QEF election because a U.S.
Holder generally will recognize income each year attributable to any appreciation in the U.S. Holder’s trust units without
a corresponding distribution of cash or other property.
Assuming
that the Trust is a PFIC, a U.S. Holder is required to file an annual report with the IRS reporting his, her or its investment
in the Trust.
Taxation
of U.S. Holders Making a Timely QEF Election
Making
the Election. A U.S. Holder would make a QEF election with respect to any year that the Trust is a PFIC by filing IRS Form
8621 with his, her or its U.S. federal income tax return. The Trust intends to annually provide each U.S. Holder with all necessary
information in order to make and maintain a QEF election. A U.S. Holder who makes a QEF election for the first taxable year in
which he, she or it owns trust units, or an Electing Holder, will not be subject to the Default PFIC Regime for any taxable year.
The Trust will refer to an Electing Holder that is a U.S. Individual Holder as a Non- Corporate Electing Holder. A U.S. Holder
who does not make a timely QEF election would be subject to the Default PFIC Regime for taxable years during his, her or its holding
period in which a QEF election was not in effect, unless such U.S. Holder makes a special “purging”
election. A U.S. Holder who does not make a timely QEF election is encouraged to consult such U.S. Holder’s tax advisor
regarding the availability of such purging election.
Current
Taxation and Dividends. An Electing Holder must report each year for U.S. federal income tax purposes his, her or its pro
rata share of the Trust’s ordinary earnings and the Trust’s net capital gain, if any, for the Trust’s taxable
year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received
from the Trust by the Electing Holder. A Non-Corporate Electing Holder’s pro rata share of the Trust’s net
capital gain generally will be taxable at a maximum rate of 28% under current law to the extent attributable to sales of physical
silver bullion by the Trust if the Trust has held the silver bullion for more than one year. Otherwise such gain generally will
be treated as ordinary income.
If
any unitholder redeems his, her or its trust units for physical silver bullion (regardless of whether the unitholder requesting
redemption is a U.S. Holder or an Electing Holder), the Trust will be treated as if it sold physical silver bullion for its fair
market value in order to redeem the unitholder’s trust units. As a result, any Electing Holder will be required to currently
include in income his, her or its pro rata share of the Trust’s gain from such deemed disposition (taxable to a Non- Corporate
Electing Holder at a maximum rate of 28% under current law if the Trust has held the physical silver bullion for more than one
year) even though the deemed disposition by the Trust is not attributable to any action on the Electing Holder’s part. If
any unitholder redeems trust units for cash and the Trust sells physical silver bullion to fund the redemption (regardless of
whether the unitholder requesting redemption is a U.S. Holder or an Electing Holder), an Electing Holder similarly will include
in income his, her or its pro rata share of the Trust’s gain from the sale of the physical silver bullion, which will be
taxable as described above even though the Trust’s sale of physical silver bullion is not attributable to any action on
the Electing Holder’s part. An Electing Holder’s adjusted tax basis in the trust units will be increased to reflect
any amounts currently included in income under the QEF rules. Distributions of earnings and profits that had been previously included
in income will result in a corresponding reduction in the adjusted tax basis in the trust units and will not be taxed again once
distributed. Any other distributions generally will be treated as discussed above under “Material Tax Considerations —
Material U.S. Federal Income Tax Considerations —U.S. Federal Income Taxation of U.S. Holders — Distributions”.
Income
inclusions under the QEF rules described above generally should be treated as foreign-source income for U.S. foreign tax credit
limitation purposes, but Electing Holders should consult their tax advisors in this regard.
Sale,
Exchange or Other Disposition. An Electing Holder will generally recognize capital gain or loss on the sale, exchange, or other disposition
of the trust units in an amount equal to the excess of the amount realized on such disposition over the Electing Holder’s adjusted
tax basis in the trust units. Such gain or loss will be treated as a long-
term capital gain or loss if
the Electing Holder’s holding period in the trust units is greater than one year at the time of the sale, exchange or other
disposition. Long-term capital gains of U.S. Individual Holders currently are taxable at a maximum rate of 20%. An Electing Holder’s
ability to deduct capital losses is subject to certain limitations. Any gain or loss generally will be treated as U.S.-source
gain or loss for U.S. foreign tax credit limitation purposes.
An
Electing Holder that redeems his, her or its trust units will be required to currently include in income his, her or its pro rata share
of the Trust’s gain from the deemed or actual disposition of physical silver bullion, as described above, which will be taxable
to a Non-Corporate Electing Holder at a maximum rate of 28% under current law if the Trust has held the physical silver bullion for more
than one year. The Electing Holder’s adjusted tax basis in the trust units will be increased to reflect such gain that is included
in income. The Electing Holder will further recognize capital gain or loss on the redemption in an amount equal to the excess of the
fair market value of the physical silver bullion or cash received upon redemption over the Electing Holder’s adjusted tax basis
in the trust units. Such gain or loss will be treated as described in the preceding paragraph.
Taxation
of U.S. Holders Making a Mark-to-Market Election
Making
the Election. Alternatively, if, as is anticipated, the trust units are treated as “marketable stock”, a U.S.
Holder would be allowed to make a mark-to-market election with respect to the trust units, provided the U.S. Holder completes
and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. The trust units will be
treated as marketable stock for this purpose if they are regularly traded on a qualified exchange or other market. The trust units
will be regularly traded on a qualified exchange or other market for any calendar year during which they are traded (other than
in de minimis quantities) on at least 15 days during each calendar quarter. A qualified exchange or other market means either
a U.S. national securities exchange that is registered with the SEC, the NASDAQ, or a foreign securities exchange that is regulated
or supervised by a governmental authority of the country in which the market is located and which satisfies certain regulatory
and other requirements. The Trust believes that both the TSX and the NYSE Arca should be treated as a qualified exchange or other
market for this purpose.
Current
Taxation and Dividends. If the mark-to-market election is made, the U.S. Holder generally would include as ordinary income
in each taxable year the excess, if any, of the fair market value of the trust units at the end of the taxable year over such
U.S. Holder’s adjusted tax basis in the trust units. The U.S. Holder would also be permitted an ordinary loss in respect
of the excess, if any, of the U.S. Holder’s adjusted tax basis in the trust units over their fair market value at the end
of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market
election. Any income inclusion or loss under the preceding rules should be treated as gain or loss from the sale of trust units
for purposes of determining the source of the income or loss. Accordingly, any such gain or loss generally should be treated as
U.S.-source income or loss for U.S. foreign tax credit limitation purposes. A U.S. Holder’s tax basis in his, her or its
trust units would be adjusted to reflect any such income or loss amount. Distributions by the Trust to a U.S. Holder who has made
a mark-to-market election generally will be treated as discussed above under “Material Tax Considerations — Material
U.S. Federal Income Tax Considerations — U.S. Federal Income Taxation of U.S. Holders — Distributions.”
Sale,
Exchange or Other Disposition. Gain realized on the sale, exchange, redemption or other disposition of the trust units would
be treated as ordinary income, and any loss realized on the sale, exchange, redemption or other disposition of the trust units
would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included
by the U.S. Holder. Any loss in excess of such previous inclusions would be treated as a capital loss by the U.S. Holder. A U.S.
Holder’s ability to deduct capital losses is subject to certain limitations. Any such gain or loss generally should be treated
as U.S.-source income or loss for U.S. foreign tax credit limitation purposes.
Taxation
of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
Finally,
a U.S. Holder who does not make either a QEF election or a mark-to-market election for that year, or a Non- Electing Holder, would
be subject to special rules (the “Default PFIC Regime”) with respect to (1) any excess distribution (i.e., the portion
of any distributions received by the Non-Electing Holder on the trust units in a taxable year in excess of 125% of the average
annual distributions received by the Non-Electing Holder in the three
preceding taxable years, or, if shorter, the Non-Electing Holder’s
holding period for the trust units), and (2) any gain realized on the sale, exchange, redemption or other disposition of the trust units.
Under
the Default PFIC Regime:
| ● | the
excess distribution or gain would be allocated rateably over the Non-Electing Holder’s
aggregate holding period for the trust units; |
| ● | the
amount allocated to the current taxable year and any taxable year before the Trust became
a PFIC would be taxed as ordinary income; and |
| ● | the
amount allocated to each of the other taxable years would be subject to tax at the highest
rate of tax in effect for the applicable class of taxpayer for that year, and an interest
charge for the deemed tax deferral benefit would be imposed with respect to the resulting
tax attributable to each such other taxable year. |
Any
distributions other than “excess distributions” by the Trust to a Non-Electing Holder will be treated as discussed
above under “Material Tax Considerations — Material U.S. Federal Income Tax Considerations — U.S. Federal Income
Taxation of U.S. Holders — Distributions”.
The
penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise
utilize leverage in connection with its acquisition of the trust units. If a Non-Electing Holder who is an individual dies while
owning the trust units, such Non-Electing Holder’s successor generally would not receive a step- up in tax basis with respect
to the trust units.
3.8%
Tax on Net Investment Income
A
U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax on the lesser
of (1) the U.S. Holder’s net investment income for the taxable year; and (2) the excess of the U.S. Holder’s modified
adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000
and $250,000). A U.S. Holder’s net investment income will generally include dividends distributed by the Trust and capital
gains from the sale, redemption or other disposition of the trust units. This tax is in addition to any income taxes due on such
investment income.
Income
inclusions under the QEF rules are not considered “net investment income” unless: (1) the Electing Holder holds the
trust units in connection with a trade or business of trading in financial instruments or commodities; or (2) the Electing Holder
elects to treat the income inclusion under the QEF rules as “net investment income”. If an Electing Holder does not
make this election, such holder’s tax basis in the trust units would not be increased by the amount of income inclusions
under the QEF rules for purposes of calculating “net investment income” upon the sale, redemption or other disposition
of the trust units. With respect to a U.S. Holder that has made a mark-to-market election with respect to the trust units, income
inclusions under the mark-to-market election would be included in the calculation of “net investment income”. An excess
distribution made to a U.S. Holder subject to the Default PFIC Regime would be included in “net investment income”
to the extent that such distribution constitutes a dividend for U.S. federal income tax purposes. If you are a U.S. Holder that
is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax
on net investment income to your trust units.
Foreign
Taxes
Distributions,
if any, by the Trust may be subject to Canadian withholding taxes as discussed under “Material Tax Considerations —
Canadian Taxation of Unitholders — Unitholders Not Resident in Canada”. A U.S. Holder may elect to either treat such
taxes as a credit against U.S. federal income taxes, subject to certain limitations, or deduct his, her or its share of such taxes
in computing such U.S. Holder’s U.S. federal taxable income. No deduction for foreign taxes may be claimed by an individual
who does not itemize deductions.
Backup
Withholding and Information Reporting
Payments
made within the United States, or by a U.S. payor or U.S. middleman, of dividends on, or proceeds arising from the sale or other
taxable disposition of, trust units generally will be subject to information reporting and backup withholding, currently at the
rate of 24%, if a U.S. Holder fails to furnish its correct U.S. taxpayer identification number (generally on IRS Form W-9), and
to make certain certifications, or otherwise fails to establish an exemption. Backup withholding tax is not an additional tax.
Rather, a U.S. Holder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed his, her,
or its U.S. federal income tax liability by filing a refund claim with the IRS.
U.S.
Holders may be subject to certain IRS filing requirements as a result of holding trust units. For example, a U.S. person who transfers
property (including cash) to a foreign corporation in exchange for stock in the corporation is in some cases required to file
an information return on IRS Form 926 with the IRS with respect to such transfer. Accordingly, a U.S. Holder may be required to
file Form 926 with respect to its acquisition of trust units in an offering. Depending on the number of trust units held, acquired
or disposed of by a U.S. Holder, the U.S. Holder may also be required to file an information return on IRS Form 5471 with the
IRS. U.S. Holders also may be required to file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) with respect to
their investment in the Trust.
U.S.
Holders who are individuals (and to the extent specified in applicable Treasury Regulations, certain U.S. entities) who hold “specified
foreign financial assets” (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information
relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during
the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury
Regulations). Specified foreign financial assets would include, among other assets, the trust units, unless the trust units are
held through an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file
IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the
event a U.S. Holder who is an individual (and to the extent specified in applicable Treasury regulations, a U.S. entity) that
is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S.
federal income taxes of such holder for the related tax year may not close until three years after the date that the required
information is filed. U.S. Holders should consult their own tax advisors with respect to these reporting obligations or any other
applicable filing requirements.
Foreign
Account Tax Compliance Act
The
Foreign Account Tax Compliance Act provisions of Hiring Incentives to Restore Employment Act (“FATCA”)
provide that the Trust must disclose the name, address and taxpayer identification number of certain U.S. persons that own, directly
or indirectly, an interest in the Trust, as well as certain other information relating to any such interest pursuant to an Intergovernmental
Agreement between the United States and Canada (the “Canadian IGA”) and any applicable Canadian legislation or regulations
implementing the Canadian IGA. If the Trust fails to comply with these requirements, then a 30% withholding tax will be imposed
on payments to the Trust of certain U.S. source income.
Material
Canadian Federal Income Tax Considerations
The
following is, as of the date hereof, a general description of the principal Canadian federal income tax considerations generally
applicable under the Tax Act to the acquisition, holding and disposition of trust units by a unitholder. This description is generally
applicable to a unitholder who deals at arm’s length and is not affiliated with the Trust and holds trust units as capital
property. Trust units will generally be considered capital property to a unitholder unless the unitholder holds the trust units
in the course of carrying on a business of trading or dealing in securities or has acquired the trust units in a transaction or
transactions considered to be an adventure in the nature of trade. Canadian-resident unitholders who are not traders or dealers
in securities and who might not otherwise be considered to hold their trust units as capital property may be entitled to have
their trust units (and every other “Canadian security” owned by them in that taxation year or any subsequent taxation
year) treated as capital property by making the irrevocable election permitted by subsection 39(4) of the Tax Act. Such unitholders
should consult their own tax advisors regarding the availability and appropriateness of making this election having regard to
their particular circumstances and the anticipated commodity holdings of the Trust.
This
description is not applicable to a unitholder: (i) that is a “financial institution”, (ii) that is a “specified
financial institution”, (iii) that has elected to determine its Canadian tax results in accordance with the “functional
currency” rules, (iv) an interest in which is a “tax shelter investment”, or (v) who enters into a “derivative
forward agreement” with respect to the trust units (as all such terms are defined in the Tax Act). This description assumes
that the Trust is not subject to a “loss restriction event”, as defined in the Tax Act. In addition, this description
does not address the deductibility of interest by a unitholder who has borrowed to acquire trust units. All such unitholders should
consult with their own tax advisors.
This
description is also based on the assumption (discussed below under “Material Tax Considerations — Material Canadian
Federal Income Tax Considerations — SIFT Trust Rules”) that the Trust will at no time be a “SIFT trust”
as defined in the Tax Act.
This
description is based on the current provisions of the Tax Act, the regulations thereunder, all specific proposals to amend the
Tax Act and the regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”),
and an understanding of the current administrative and assessing policies of the CRA. There can be no assurance that the Tax Proposals
will be implemented in their current form or at all, nor can there be any assurance that the CRA will not change its administrative
or assessing practices. This description further assumes that the Trust will comply with the Trust Agreement and that the Manager
and the Trust will comply with a certificate issued to Canadian counsel regarding certain factual matters. Except for the Tax
Proposals, this description does not otherwise take into account or anticipate any change in the law, whether by legislative,
governmental or judicial decision or action, which may affect adversely any income tax consequences described herein, and does
not take into account provincial, territorial or foreign tax considerations, which may differ significantly from those described
herein.
This
description is not exhaustive of all possible Canadian federal tax considerations applicable to an investment in trust units.
Moreover, the income and other tax consequences of acquiring, holding or disposing of trust units will vary depending on a taxpayer’s
particular circumstances. Accordingly, this description is of a general nature only and is not intended to constitute legal or
tax advice to any unitholder or prospective purchaser of trust units. You should consult with your own tax advisors about tax
consequences of an investment in trust units based on your particular circumstances.
For
the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of trust units (including distributions,
adjusted cost base and proceeds of disposition), or transactions of the Trust, must be expressed in Canadian dollars. Amounts
denominated in United States dollars must be converted into Canadian dollars using the rate of exchange quoted by the Bank of
Canada on the day on which the amount first arose or such other rate of exchange as is acceptable to the CRA.
Qualification
as a Mutual Fund Trust
This
description is based on the assumptions that the Trust will qualify at all times as a “unit trust” and a “mutual
fund trust” within the meaning of the Tax Act. The Manager expects that the Trust will meet the requirements necessary for
it to qualify as a mutual fund trust at all times.
One
of the conditions to qualify as a mutual fund trust for the purposes of the Tax Act is that the Trust has not been established
or maintained primarily for the benefit of non-residents unless, at all times, all or substantially all of the Trust’s property
consists of property other than “taxable Canadian property” within the meaning of the Tax Act. Physical silver bullion
is not “taxable Canadian property”. Accordingly, based on the investment objectives and investment restrictions, the
Trust should not hold any such property.
In
addition, to qualify as a mutual fund trust: (i) the Trust must be a Canadian resident “unit trust” for purposes of the Tax
Act; (ii) the only undertaking of the Trust must be (a) the investing of its funds in property (other than real property or interests
in real property), or (b) the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real
property) that is capital property of the Trust, or (c) any combination of the activities described in (a) and (b); and (iii) the Trust
must comply with certain minimum requirements regarding the ownership and dispersal of trust units (the “minimum distribution requirements”).
In this regard, the Manager intends to cause the Trust to qualify as a unit trust throughout the life of the Trust; that the Trust’s
undertaking conforms with
the restrictions for mutual fund
trusts; and that it has no reason to believe at the date hereof that the Trust will not comply with the minimum distribution requirements
at all material times.
If
the Trust were not to qualify as a mutual fund trust at all times, the income tax considerations described in this description
and under “Eligibility Under the Tax Act for Investment by Canadian Exempt Plans” would, in some respects, be materially
and adversely different.
Canadian
Taxation of the Trust
Each
taxation year of the Trust will end on December 31. In each taxation year, the Trust will be subject to tax under Part I of the
Tax Act on any income for the year, including net realized taxable capital gains, less the portion thereof that it deducts in
respect of the amounts paid or payable in the year to unitholders. An amount will be considered to be payable to a unitholder
in a taxation year if it is paid to the unitholder in the year by the Trust or if the unitholder is entitled in that year to enforce
payment of the amount.
The
Trust intends to deduct, in computing its income in each taxation year, such amount in each year as will be sufficient to ensure
that the Trust will generally not be liable for income tax under Part I of the Tax Act. The Trust will be entitled for each taxation
year to reduce (or receive a refund in respect of) its liability, if any, for tax on its capital gains by an amount determined
under the Tax Act based on the redemption of trust units during the year. Based on the foregoing, the Trust will generally not
be liable for income tax under Part I of the Tax Act.
The
CRA has expressed the opinion that gains (or losses) of mutual fund trusts resulting from transactions in commodities should generally
be treated for purposes of the Tax Act as being derived from an adventure in the nature in trade, so that such transactions give
rise to ordinary income rather than capital gains — although the treatment in each particular case remains a question of
fact to be determined having regard to all the circumstances. In the view of Canadian counsel, the holding by the Trust of physical
silver bullion with no intention of disposing of such bullion except in specie on a redemption of trust units likely would not
represent an adventure in the nature of trade so that a disposition, on a redemption of trust units, of physical silver bullion
that previously had been acquired with such intention would likely give rise to a capital gain (or capital loss) to the Trust.
As the Manager intends for the Trust to be a long-term holder of physical silver bullion and does not anticipate that the Trust
will sell its physical silver bullion (otherwise than where necessary to fund expenses of the Trust), the Manager anticipates
that the Trust generally will treat gains (or losses) as a result of dispositions of physical silver bullion as capital gains
(or capital losses), although depending on the circumstances, the Trust may instead include (or deduct) the full amount of such
gains or losses in computing its income. If the CRA were to assess or re-assess the Trust on the basis that gains realized on
dispositions of physical silver bullion were not on capital account, then the Trust could be required to pay Canadian income tax
on such gains under Part I of the Tax Act to the extent such gains were not distributed to unitholders, and could be liable for
taxes, penalties and interest under Part XIII of the Tax Act in connection with withholding tax which was not withheld on distributions
to non-residents, which could reduce the NAV for all unitholders.
The
Trust will also be required to include in its income for each taxation year all interest that accrues to it to the end of the
year, or becomes receivable or is received by it before the end of the year, except to the extent that such interest was included
in computing its income for a preceding taxation year. Upon the actual or deemed disposition of indebtedness, the Trust will be
required to include in computing its income for the year of disposition all interest that accrued on such indebtedness from the
last interest payment date to the date of disposition except to the extent such interest was included in computing the Trust’s
income for that or another taxation year, and such income inclusion will reduce the proceeds of disposition for purposes of computing
any capital gain or loss.
Under
the current provisions of the Tax Act, the Trust is entitled to deduct in computing its income reasonable administrative and other
operating expenses (other than certain expenses on account of capital) incurred by it for the purposes of earning income (other
than taxable capital gains). No assurance can be provided that administration expenses of the Trust will not be considered to
be on account of capital. The Trust generally may also deduct from its income for the year a portion of the reasonable expenses
incurred by it to issue trust units. The portion of the issue expenses deductible by the Trust in a taxation year is 20% of the
total issue expenses, pro rated where the Trust’s taxation year is less than 365 days.
Losses
incurred by the Trust in a taxation year cannot be allocated to unitholders, but may be deducted by the Trust in future years
in accordance with the Tax Act.
SIFT
Trust Rules
The
Trust will be a “SIFT trust” as defined in the Tax Act for a taxation year of the Trust if in that year the trust units are
listed or traded on a stock exchange or other public market and the Trust holds one or more “non-portfolio properties,” as
defined in the Tax Act. If the Trust were a SIFT trust for a taxation year of the Trust, it would effectively be taxed similarly to a
corporation on income and capital gains in respect of such non-portfolio properties at a combined federal/provincial tax rate comparable
to rates that apply to income earned and distributed by Canadian corporations. Distributions of such income received by unitholders would
be treated as dividends from a taxable Canadian corporation.
Physical
silver bullion and other property of the Trust will be non-portfolio property if such property is used by the Trust (or by a person
or partnership with which it does not deal at arm’s length within the meaning of the Tax Act) in the course of carrying
on a business in Canada. In some circumstances, significant holdings of “securities” (the term “security”
is broadly defined in the Tax Act) of other entities could also be non-portfolio property.
The
Trust is subject to investment restrictions, including a prohibition against carrying on any business, that are intended to ensure
that it will not be a SIFT trust. The mere holding by the Trust of physical silver bullion as capital property (or as an adventure
in the nature of trade) would not represent the use of such property in carrying on a business in Canada and, therefore, would
not by itself cause the Trust to be a SIFT trust.
Canadian
Taxation of Unitholders
Unitholders
Resident in Canada
This
part of the general description of the principal Canadian federal income tax considerations is applicable to a unitholder who,
for the purposes of the Tax Act and any applicable tax treaty, is, or is deemed to be, resident in Canada at all relevant times
(a “Canadian unitholder”). This portion of the description is primarily directed at unitholders who are individuals.
Unitholders who are Canadian resident corporations, trusts or other entities should consult their own tax advisors regarding their
particular circumstances.
Canadian
unitholders will generally be required to include in their income for tax purposes for a particular year the portion of the income
of the Trust for that particular taxation year, including net realized taxable capital gains, if any, that is paid or payable
to the Canadian unitholder in the particular taxation year, whether such amount is received in additional trust units or cash.
Provided that appropriate designations are made by the Trust, such portion of its net taxable capital gains as is paid or payable
to a Canadian unitholder will effectively retain its character and be treated as such in the hands of the unitholder for purposes
of the Tax Act.
The
non-taxable portion of any net realized capital gains of the Trust that is paid or payable to a Canadian unitholder in a taxation
year will not be included in computing the Canadian unitholder’s income for the year. Any other amount in excess of the
income of the Trust that is paid or payable to a Canadian unitholder in such year also will not generally be included in the Canadian
unitholder’s income for the year. However, where such other amount is paid or payable to a Canadian unitholder (other than
as proceeds of disposition of trust units), the Canadian unitholder generally will be required to reduce the adjusted cost base
of a trust unit to the Canadian unitholder by such amount. To the extent that the adjusted cost base of a trust unit would otherwise
be less than zero, the negative amount will be deemed to be a capital gain realized by the Canadian unitholder from the disposition
of the trust unit and the Canadian unitholder’s adjusted cost base in respect of the trust unit will be increased by the
amount of such deemed capital gain to zero.
Upon
the actual or deemed disposition of a trust unit, including its redemption, a capital gain (or a capital loss) will generally
be realized to the extent that the proceeds of disposition of the trust unit exceed (or are exceeded by) the aggregate of the
adjusted cost base of the trust unit to the Canadian unitholder and any costs of disposition. For the purpose of determining the
adjusted cost base to a Canadian unitholder of a trust unit, when a trust unit is acquired,
the cost of the newly acquired trust
unit will be averaged with the adjusted cost base of all trust units owned by the Canadian unitholder as capital property that
were acquired before that time. For this purpose, the cost of trust units that have been issued as an additional distribution
will generally be equal to the amount of the net income or capital gain distributed to the Canadian unitholder in trust units.
A consolidation of trust units following a distribution paid in the form of additional trust units will not be regarded as a disposition
of trust units and will not affect the aggregate adjusted cost base to a Canadian unitholder of trust units.
Under
the Tax Act, one-half of capital gains (“taxable capital gains”) are included in an individual’s income and
one-half of capital losses (“allowable capital losses”) are generally deductible only against taxable capital gains.
Any unused allowable capital losses may be carried back up to three taxation years and forward indefinitely and deducted against
net taxable capital gains realized in any such other year to the extent and under the circumstances described in the Tax Act.
Capital gains realized by individuals may give rise to alternative minimum tax. If any transactions of the Trust are reported
by it on capital account but are subsequently determined by the CRA to be on income account, there may be an increase in the net
income of the Trust for tax purposes and the taxable component of redemption proceeds (or any other amounts) distributed to unitholders,
with the result that Canadian resident unitholders could be reassessed by the CRA to increase their taxable income by the amount
of such increase.
If,
at any time, the Trust delivers physical silver bullion to any Canadian unitholder upon a redemption of a Canadian unitholder’s
trust units, the Canadian unitholder’s proceeds of disposition of the trust units will generally be equal to the aggregate
of the fair market value of the distributed physical silver bullion and the amount of any cash received, less any capital gain
or income realized by the Trust on the disposition of such physical silver bullion and allocated to the Canadian unitholder. The
cost of any physical silver bullion distributed by the Trust in specie will generally be equal to the fair market value of such
physical silver bullion at the time of the distribution. Pursuant to the Trust Agreement, the Trust has the authority, subject
to the rules relating to the allocation of income and capital gains to redeeming unitholders discussed below, to distribute, allocate
and designate any income or taxable capital gains of the Trust to a Canadian unitholder who has redeemed trust units during a
year in an amount equal to the taxable capital gains or other income realized by the Trust as a result of such redemption (including
any taxable capital gain or income realized by the Trust in distributing physical silver bullion to a unitholder who has redeemed
trust units for such physical silver bullion, and any taxable capital gain or income realized by it before, at or after the redemption
on selling physical silver bullion in order to fund the payment of the cash redemption proceeds), or such other amount that is
determined by the Trust to be reasonable. The Manager anticipates that the Trust may make such an allocation where the Manager
determines that the Trust realized a capital gain on such redemption and the Trust had net realized capital gains for that year
for which the Trust was not entitled to a capital gains refund (as described under “Material Tax Considerations —
Material Canadian Federal Income Tax Considerations — Canadian Taxation of the Trust”). Any such allocations will
reduce the redeeming Canadian unitholder’s proceeds of disposition for the purposes of the Tax Act.
A
trust that is a “mutual fund trust” for purposes of the Tax Act throughout a taxation year that paid or made payable
to a unitholder an amount on a redemption of units (the “allocated amount”) will be denied a deduction in computing
its income for the taxation year in respect of the portion of the allocated amount (a) that would be, without reference to subsection
104(6) of the Tax Act, an amount paid out of the income (other than taxable capital gains) of the trust, and (b) that is a capital
gain of the trust designated to a unitholder on a redemption of units that exceeds the capital gain that would otherwise have
been realized by the unitholder on the redemption, if the unitholder’s proceeds from the disposition of that unit do not
include the allocated amount. To the extent the Trust would be denied a deduction in respect of taxable capital gains that would
otherwise have been designated to redeeming unitholders, such taxable capital gains may be made payable to the remaining, non-redeeming
unitholders to ensure the Trust will not be liable for non-refundable income tax thereon. Accordingly, the amounts of taxable
distributions made to unitholders of the Trust may be greater than they would have been in the absence of such rules.
The
Manager anticipates that the Trust generally will treat gains as a result of dispositions of physical silver bullion as capital
gains (see above under “Material Tax Considerations — Material Canadian Federal Income Tax Considerations —
Canadian Taxation of the Trust”) and that it anticipates that when the Trust distributes physical silver bullion on the
redemption of trust units by Canadian unitholders, any resulting taxable capital gains of the Trust (to the extent that there
are resulting net realized capital gains of the Trust for the related taxation year) for which the Trust is not entitled to a
capital gains refund, as described under “Canadian Taxation of the Trust” generally will be designated as taxable
capital gains of such unitholders, subject to the rules relating to the allocation of capital gains to
redeeming unitholders discussed
above. If any transactions of the Trust are reported by it on capital account but are subsequently determined by the CRA to be
on income account, there may be an increase in the net income of the Trust for tax purposes and the taxable component of redemption
proceeds (or any other amounts) distributed to unitholders, with the result that Canadian unitholders could be reassessed by the
CRA to increase their taxable income by the amount of such increase.
Unitholders
Not Resident in Canada
This
portion of the description is applicable to a unitholder who, at all relevant times for purposes of the Tax Act, has not been
and is not resident in Canada or deemed to be resident in Canada and does not use or hold, and is not deemed to use or hold its
trust units in connection with a business that the unitholder carries on, or is deemed to carry on, in Canada at any time, and
is not an insurer or bank who carries on an insurance or banking business or is deemed to carry on an insurance or banking business
in Canada and elsewhere (a “Non-Canadian unitholder”). Prospective non-resident purchasers of trust units should consult
their own tax advisors to determine their entitlement to relief under any income tax treaty between Canada and their jurisdiction
of residence, based on their particular circumstances.
Any
amount paid or credited by the Trust to a Non-Canadian unitholder as income of or from the Trust, whether such amount is received
in additional trust units or cash (other than an amount that the Trust has designated in accordance with the Tax Act as a taxable
capital gain, and including an amount paid on a redemption of trust units to a Non-Canadian unitholder that is designated as a
distribution of income in accordance with the Trust Agreement) generally will be subject to Canadian withholding tax at a rate
of 25%, unless such rate is reduced under the provisions of an income tax treaty between Canada and the Non-Canadian unitholder’s
jurisdiction of residence. Pursuant to the Convention Between Canada and the United States of America With Respect to Taxes on
Income and on Capital, as amended (the “Treaty”), a Non-Canadian unitholder who is a resident of the United States
and entitled to benefits under the Treaty will generally be entitled to have the rate of Canadian withholding tax reduced to 15%
of the amount of any distribution that is paid or credited as income of or from the Trust. A Non-Canadian unitholder that is a
religious, scientific, literary, educational or charitable organization that is resident in, and exempt from tax in, the United
States may be exempt from Canadian withholding tax under the Treaty, provided that certain administrative procedures are observed
regarding the registration of such unitholder.
Any
amount paid or credited by the Trust to a Non-Canadian unitholder that the Trust has validly designated in accordance with the
Tax Act as a taxable capital gain, including such an amount paid on a redemption of trust units, generally will not be subject
to Canadian withholding tax or otherwise be subject to tax under the Tax Act.
The
Trust does not presently own any “taxable Canadian property” and does not intend to own any taxable Canadian property.
However, if the Trust realizes a capital gain on the disposition of a taxable Canadian property and that gain is treated under
the Tax Act and in accordance with a designation by the Trust as being distributed to a Non-Canadian unitholder, there may be
Canadian withholding tax at the rate of 25% (unless reduced by an applicable tax treaty) on both the taxable and non-taxable portions
of the gain.
Any
amount in excess of the income of the Trust that is paid or payable by the Trust to a Non-Canadian unitholder (including the non-taxable
portion of capital gains realized by the Trust) generally will not be subject to Canadian withholding tax. Where such excess amount
is paid or becomes payable to a Non-Canadian unitholder, otherwise than as proceeds of disposition or deemed disposition of trust
units or any part thereof, the amount generally will reduce the adjusted cost base of the trust units held by such Non-Canadian
unitholder. (However, the non-taxable portion of net realized capital gains of the Trust that is paid or payable to a Non-Canadian
unitholder will not reduce the adjusted cost base of the trust units held by the Non-Canadian unitholder.) If, as a result of
such reduction, the adjusted cost base to the Non-Canadian unitholder in any taxation year of trust units would otherwise be a
negative amount, the Non-Canadian unitholder will be deemed to realize a capital gain in such amount for that year from the disposition
of trust units. Such capital gain will not be subject to tax under the Tax Act, unless the trust units represent “taxable
Canadian property” to such Non-Canadian unitholder. The Non-Canadian unitholder’s adjusted cost base in respect of
trust units will, immediately after the realization of such capital gain, be zero.
A
disposition or deemed disposition of a trust unit by a Non-Canadian unitholder, whether on a redemption or otherwise, will not
give rise to any capital gain subject to tax under the Tax Act, provided that the trust unit does
not constitute “taxable
Canadian property” of the Non-Canadian unitholder for purposes of the Tax Act. Trust units will not be “taxable Canadian
property” of a Non-Canadian unitholder unless at any time during the 60-month period immediately preceding their disposition
by such Non-Canadian unitholder, (i) 25% or more of the issued trust units were owned by or belonged to one or more of the Non-Canadian
unitholder, persons with whom the Non-Canadian unitholder did not deal at arm’s length and partnerships in which the Non-Canadian
unitholder or persons with whom the non-Canadian unitholder did not deal at arm’s length holds a membership interest directly
or indirectly through one or more partnerships; and (ii) the trust units derived directly or indirectly more than 50% of their
fair market value from any combination of “Canadian resource properties” (which definition in the Tax Act does not
include silver bullion), real or immovable property situated in Canada, “timber resource properties” (as defined in
the Tax Act) or options in respect of, or interests in, or for civil law rights in, such properties, whether or not such property
exists, or the trust units were otherwise deemed to be taxable Canadian property. Assuming that the Trust adheres to its mandate
to invest and hold substantially all of its assets in physical silver bullion, the trust units should not be taxable Canadian
property.
Even
if trust units held by a Non-Canadian unitholder were “taxable Canadian property”, a capital gain from the disposition
of trust units may be exempted from tax under the Tax Act pursuant to an applicable income tax treaty or convention. A capital
gain realized on the disposition of trust units by a Non-Canadian unitholder entitled to benefits under the Treaty (and who is
not a former resident of Canada for purposes of the Treaty) should be exempt from tax under the Tax Act.
Non-Canadian
unitholders whose trust units constitute “taxable Canadian property” and who are not entitled to relief under an applicable
income tax treaty are referred to the discussion above under “Material Tax Considerations — Canadian Taxation of Unitholders
— Unitholders Resident in Canada” relating to the Canadian tax consequences in respect of a disposition of a trust
unit.
The
Manager anticipates that the Trust generally will treat gains as a result of dispositions of physical silver bullion as capital
gains (see above under “Material Tax Considerations — Material Canadian Federal Income Tax Considerations —
Canadian Taxation of the Trust”) and that it anticipates that when the Trust distributes physical silver bullion on the
redemption of trust units by Non-Canadian unitholders, any resulting taxable capital gains of the Trust (to the extent that there
are resulting net realized capital gains of the Trust for the related taxation year) for which the Trust is not entitled to a
capital gains refund, as described under “Material Tax Considerations — Material Canadian Federal Income Tax Considerations
— Canadian Taxation of the Trust” generally will be designated as taxable capital gains of such unitholders, subject
to the rules relating to the allocation of capital gains to redeeming unitholders discussed above. If such treatment is accepted
by the CRA, there will be no Canadian withholding tax applicable to such distributions and Non-Canadian unitholders will not be
subject to tax under the Tax Act on amounts so designated. However, if the CRA were to consider that such gains instead were gains
from an adventure in the nature of trade, the distribution of such gains generally would be subject to Canadian withholding tax,
as discussed above. Similarly, if the Trust disposed of physical silver bullion (or other assets) at a gain and designated one-half
of that gain as a taxable capital gain of a Non-Canadian unitholder who had redeemed trust units for cash, the full amount of
such gain generally would be subject to Canadian withholding tax if the CRA were to treat such gain as being from an adventure
in the nature of trade rather than as a capital gain.
In
addition to the foregoing, if the CRA were to assess or re-assess the Trust itself on the basis that gains were not on capital
account, then the Trust could be required to pay Canadian income tax on such gains under Part I of the Tax Act, which could reduce
the NAV for all unitholders, including Non-Canadian unitholders.
International
Information Reporting
Generally,
investors will be required to provide their dealer with information related to their tax residency or citizenship and, if
applicable, a foreign tax identification number. If an investor does not provide the information or is identified as a U.S. citizen
or a foreign (including U.S.) tax resident, additional details about the investor and their investment in the Trust will be reported
to the CRA, unless the investment is held within a Registered Plan but excluding a FHSA (each as defined below). The CRA will
provide that information to the U.S. Internal Revenue Service (in the case of U.S. tax residents or citizens) or the relevant tax
authority of any country that is a signatory of the Multilateral Competent Authority Agreement on Automatic Exchange of Financial
Account Information or that has otherwise agreed to a bilateral information exchange with Canada.
Taxation
of Registered Plans
Provided
that either (i) the Trust qualifies as a “mutual fund trust” within the meaning of the Tax Act or (ii) the trust units
are listed on a “designated stock exchange” (which currently includes the TSX and the NYSE Arca) for purposes of the Tax
Act, the trust units, if issued on the date hereof, will be qualified investments under the Tax Act and the regulations thereunder
for deferred profit sharing plans, tax-free savings accounts (“TFSAs”), first home savings accounts
(“FHSAs”), registered disability savings plans (“RDSPs”), registered education savings plans
(“RESPs”), RRSPs and registered retirement income funds (“RRIFs”) (collectively, “Registered
Plans”). Notwithstanding that the trust units may be qualified investments for RRSPs, RRIFs, RESPs, RDSPs, FHSA, and TFSAs,
the subscriber of a RESP, the holder of a RDSP, FHSA, or TFSA, or the annuitant under an RRSP or RRIF, as the case may be, will be
subject to penalty taxes in respect of the trust units if such properties are a “prohibited investment” (as defined in
the Tax Act) for the RESP, RDSP, FHSA, TFSA, RRSP or RRIF, as applicable. Trust units will not generally be a prohibited investment
provided that the subscriber, holder or annuitant, as applicable, deals at arm’s length with the Trust for purposes of the Tax
Act and does not have a “significant interest” (within the meaning of the Tax Act) in the Trust. Generally, a
subscriber, holder or annuitant, as the case may be, will not have a “significant interest” in the Trust unless the
subscriber, holder, or annuitant, as the case may be, owns interests as a beneficiary under the Trust that have a fair market value
of 10% or more of the fair market value of the interests of all beneficiaries under the Trust, either alone or together with persons
and partnerships with which the subscriber, holder or annuitant, as the case may be, does not deal at arm’s length, In
addition, the trust units will not be a “prohibited investment” if such units are “excluded property” as
defined in the Tax Act for a trust governed by a RESP, RDSP, FHSA, TFSA, RRSP or RRIF.
Amounts
of income and capital gains included in a Registered Plan’s income are generally not taxable under Part I of the Tax Act,
provided that the trust units are qualified investments for the Registered Plan. Unitholders should consult their own advisors
regarding the tax implications of establishing, amending, terminating or withdrawing amounts from a Registered Plan.
Physical
silver bullion received by a Registered Plan that is a resident of Canada, such as a RRSP, on a redemption of trust units for
physical silver bullion will not be a qualified investment for such plan. Accordingly, such plans (and in the case of certain
plans, the annuitants or beneficiaries thereunder or holders thereof) may be subject to adverse Canadian tax consequences.
Exchange
of Tax Information
The
Trust has due diligence and reporting obligations under the Foreign Account Tax Compliance Act (as implemented in Canada by the
Canada-United States Enhanced Tax Information Exchange Agreement and Part XVIII of the Tax Act, collectively “FATCA”)
and the OECD’s Common Reporting Standard (as implemented in Canada by Part XIX of the Tax Act, referred to as “CRS”).
As long as units are registered in the name of CDS, the Trust should not have any reportable accounts under FATCA and CRS. However,
generally, unitholders (or in the case of certain unitholders that are entities, the “controlling persons” thereof)
will be required by law to provide their dealer with information related to their citizenship and tax residence, including their
foreign taxpayer identification number. If a unitholder (or, if applicable, any of its controlling persons), (i) is identified
as a Specified U.S. Person (including a U.S. resident or a U.S. citizen); (ii) is identified as a tax resident of a country other
than Canada or the U.S.; or (iii) does not provide the required information and indicia of U.S. or non-Canadian status is present,
information about the unitholder (or, if applicable, its controlling persons) and their investment in the Trust will generally
be reported to the CRA unless the units are held within a Registered Plan other than a first home savings account (“FHSA”).
The CRA will provide that information to, in the case of FATCA, the U.S. Internal Revenue Service (the “IRS”) and
in the case of CRS, the relevant tax authority of any country that is a signatory of the Multilateral Competent Authority Agreement
on Automatic Exchange of Financial Account Information or that has otherwise agreed to a bilateral information exchange with Canada
under CRS.
The
CRA and the Department of Finance have engaged with the IRS in relation to the possibility of exempting the FHSA from the FATCA
due diligence and reporting obligations imposed under Part XVIII of the Tax Act. It is too early to confirm that bilateral agreement
has been reached on this matter. The Department of Finance has also issued a comfort letter indicating that they are prepared
to recommend that Part XIX of the Tax Act be amended to exempt the FHSA from the CRS due diligence and reporting obligations imposed
under those rules.
U.S.
ERISA CONSIDERATIONS
The
following disclosure is a summary of certain aspects of laws and regulations applicable to retirement plan investments as in existence
on the date hereof, all of which are subject to change. This summary is general in nature and does not address every issue that may be
applicable to the trust units or a particular investor. The U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
imposes certain requirements on employee benefit plans subject to Title I of ERISA and on entities that are deemed to hold the assets
of such plans (collectively, “ERISA Plans”), and on those persons who are fiduciaries with respect to ERISA Plans. Investments
by ERISA Plans are subject to ERISA’s general fiduciary requirements, including, but not limited to, the requirement of investment
prudence and diversification and the requirement that an ERISA Plan’s investments be made in accordance with the documents governing
the ERISA Plan.
Section
406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan as well as those
plans and accounts that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement
accounts, and entities that are deemed to hold the assets of such plans and accounts (together with ERISA Plans, the “Plans”)
and certain persons (“parties in interest” or “disqualified persons”) having certain relationships to
such Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA
and the Code.
Any
Plan fiduciary that proposes to cause a Plan to purchase the trust units should consult with his, her or its counsel regarding
the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code
to such an investment, and to confirm that such purchase will not constitute or result in a non-exempt prohibited transaction
or any other violation of an applicable requirement of ERISA or the Code.
Non-U.S.
plans, governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA),
while not subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of ERISA and Section
4975 of the Code, may nevertheless be subject to other federal, state, local or non-U.S. laws or regulations that are substantially
similar to the foregoing provisions of ERISA and the Code (“Similar Law”). Fiduciaries of any such plans should consult
with their counsel before purchasing the trust units to determine the need for, if necessary, and the availability of, any exemptive
relief under any Similar Law.
Under
ERISA and the U.S. Department of Labor’s “Plan Asset Regulations” at 29 C.F.R. §2510.3-101, as modified
by Section 3(42) of ERISA, when a Plan acquires an equity interest in an entity that is neither a “publicly-offered security”
nor a security issued by an investment company registered under the Investment Company Act of 1940, as amended, the Plan’s
assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is
established that either less than 25 percent of the total value of each class of equity interests in the entity is held by “benefit
plan investors” (as defined in Section 3(42) of ERISA), which we refer to as the “25 percent test”, or the entity
is an “operating company”, as defined in the Plan Asset Regulations. In order to be considered a “publicly offered
security,” the trust units must be (i) freely transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the Trust and of one another, and (iii) either (1) part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act or (2) sold to the Plan as part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of which the securities are a part is registered under
the Exchange Act within 120 days (or such later time as may be allowed by the SEC) after the end of the Trust’s fiscal year
during which the offering of such securities to the public occurred. It is anticipated that the Trust will not qualify as an “operating
company”, and the Trust does not intend to monitor investment by benefit plan investors in the Trust for purposes of satisfying
the 25 percent test. The Trust anticipates, however, that it will qualify for the exemption under the Plan Asset Regulations for
“publicly offered securities”, although there can be no assurance in that regard.
ELIGIBILITY
UNDER THE TAX ACT FOR INVESTMENT BY CANADIAN EXEMPT PLANS
In
the opinion of Stikeman Elliott LLP, counsel for the Trust, provided that either: (i) the Trust qualifies as a “mutual fund trust”
within the meaning of the Tax Act; or (ii) the trust units are listed on a “designated stock exchange” for purposes of the
Tax Act, the trust units, if issued on the date hereof, will be qualified investments under the Tax
Act and
the regulations thereunder for RRSPs, RRIFs, deferred profit sharing plans, RDSPs, RESPs, FHSAs, and TFSAs.
Notwithstanding
that the trust units may be qualified investments for RESPs, RDSPs, FHSAs, TFSAs, RRSPs and RRIFs, the subscriber of a RESP, the holder
of a RDSP, FHSA, or TFSA, as the case may be, or the annuitant under an RRSP or RRIF, as the case may be, will be subject to penalty
taxes in respect of the trust units if such properties are a “prohibited investment” for the RESP, RDSP, FHSA, TFSA, RRSP
or RRIF, as applicable. Trust units will not generally be a prohibited investment provided that the subscriber, holder or annuitant,
as applicable, deals at arm’s length with the Trust for purposes of the Tax Act and does not have a “significant interest”
in the Trust. Generally, a subscriber, holder or annuitant, as the case may be, will not have a “significant interest” in
the Trust unless the subscriber, holder, or annuitant, as the case may be, owns interests as a beneficiary under the Trust that have
a fair market value of 10% or more of the fair market value of the interests of all beneficiaries under the Trust, either alone or together
with persons and partnerships with which the subscriber, holder or annuitant, as the case may be, does not deal at arm’s length,
In addition, the trust units will not be a “prohibited investment” if such units are “excluded property” as defined
in the Tax Act for a trust governed by a RESP, RDSP, FHSA, TFSA, RRSP or RRIF.
AUDITORS
The
Financial Statements, incorporated in this prospectus by reference, have been audited by KPMG LLP, Chartered Professional Accountants,
Licensed Public Accountants, as stated in their report, which is incorporated herein by reference. KPMG LLP has advised the Trust
and the Manager that it was independent within the meaning of the relevant rules and related interpretations prescribed by the
relevant professional bodies in Canada and any applicable legislation or regulation and all relevant US professional and regulatory
standards for the period under audit in respect of the Trust’s financial year ended December 31, 2022.
LEGAL
MATTERS
Certain
legal matters relating to the trust units offered by this prospectus will be passed upon for us by Stikeman Elliott LLP, Toronto,
Ontario, Canada, with respect to matters of Canadian law, and Seward & Kissel LLP, New York, New York with respect to matters
of United States law. As of the date hereof, the “designated professionals” (as such term is defined in Form 51-102F2
— Annual Information Form) of each of Stikeman Elliott LLP and Seward & Kissel LLP, respectively, beneficially
own, directly or indirectly, less than 1% of any class of trust units issued by the Trust.
DOCUMENTS
FILED AS PART OF THE REGISTRATION STATEMENT
The
following documents have been filed or will be filed with the SEC as part of the registration statement of which this prospectus
forms a part: the documents listed under “Documents Incorporated by Reference”; consents of accountants and counsel;
and powers of attorney.
EXEMPTIONS
AND APPROVALS
The
Trust has obtained exemptive relief from the Canadian securities regulatory authorities for relief from NI 81 - 102 to permit (i)
the Trust to invest up to 100% of its assets, taken at market value at the time of purchase, in physical silver bullion; (ii)
the appointment of the Mint as custodian of the Trust’s physical silver bullion assets held in Canada; (iii) the Mint to
appoint Brinks, an entity not listed in NI 81-102, to act as a sub-custodian of the Trust’s physical silver bullion assets
held in Canada; (iv) purchases of trust units on the NYSE Arca and the TSX and redemption requests to be submitted directly to
the registrar and transfer agent of the Trust; (v) the redemption of trust units and payment upon redemption of trust units all
as described under “Sprott Physical Silver Trust — Business of the Trust — Redemption of Trust Units
for Physical Silver Bullion” and “Sprott Physical Silver Trust — Business of the Trust — Redemption of
Trust Units for Cash”; and (vi) the Trust to establish a record date for distributions in accordance with the policies of
the TSX and NYSE Arca. The Trust has also obtained exemptive relief from the requirement to file compliance reports or audit reports
in accordance with Appendix B-1 of NI 81 - 102.
Pursuant
to a decision of the Autorité des marchés financiers dated March 24, 2023, the Trust was granted a permanent exemption
from the requirement to translate into French this prospectus as well as the documents incorporated by reference therein and any
prospectus supplement to be filed in relation to an “at-the-market distribution”. This exemption is granted on the
condition that this prospectus and any prospectus supplement (other than in relation to an “at-the-market distribution”)
be translated into French if the Trust offers securities to Québec purchasers in connection with an offering other than
in relation to an “at-the-market distribution”.
SPROTT
PHYSICAL SILVER TRUST
Up
to US$1,000,000,000
Trust
Units
April
6, 2023