Filed pursuant to General Instruction II.L of Form F-10
 File No. 333-254061
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 March 9, 2021 (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 MARCH 9, 2021
New Issue March 11, 2021
[MISSING IMAGE: LG_SPROTT-PN.JPG]
Sprott Physical Silver Trust
Up to U.S.$3,000,000,000
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 U.S.$3,000,000,000. 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, we entered into an amended and restated sales agreement dated October 21, 2020 (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 ITG 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 (the “Original Agreement”), between the Trust, the Manager and the U.S. Agents.
In accordance with the Amended and Restated Sales Agreement, and except as noted below, we may distribute trust units having an aggregate offering price of up to U.S.$3,000,000,000 through the Agents, as our agents for the distribution of the trust units. See “Plan of Distribution” beginning on page S-11 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 in the section entitled “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.
We estimate the total expenses of the offering, excluding the Agents’ fee, will be approximately U.S.$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 unit is sold under the offering.
No underwriter of the offering, and no person or company acting jointly or in concert with an underwriter, 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 securities that would result in the underwriter creating an over-allocation position in the trust units.

(Continued from cover)
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 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 or other existing trading markets 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. 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 units of the Trust 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 March 10, 2021, the last trading day prior to the date hereof, the closing prices of the units of the Trust on the NYSE Arca and the TSX were U.S.$9.43 and Cdn$11.90, respectively. On March 10, 2021, the total NAV of the Trust and the NAV per unit of the Trust were U.S.$3,356,177,048.58 and U.S.$9.4442, respectively.
For the purpose of calculating the U.S. dollar equivalent of the aggregate principal amount of trust units issued under this prospectus supplement, trust units denominated in or issued in, as applicable, a currency (the “Securities Currency”) other than U.S. dollars will be translated into U.S. dollars using the Bank of Canada daily exchange rate of U.S. dollars with the Securities Currency in effect as of 4:30 p.m. (Toronto time) on the business day before the issue of such trust units.
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 THESE TRUST UNITS OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
We are permitted, under a multi-jurisdictional disclosure system 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. We prepare our financial statements, which are incorporated by reference in this prospectus supplement, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, (“IFRS”). Our 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 we are 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 (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.
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 financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise noted herein, all references to “$”, “U.S.$”, “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.
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
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Prospectus dated March 9, 2021
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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 we incorporate 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. We have 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. We are 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 we have filed with the SEC. Each time we sell our securities under the accompanying prospectus we 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 March 10, 2021. 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 us and our 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. We believe that such information is accurate and that the sources from which it has been obtained are reliable. However, we cannot guarantee the accuracy of such information and we have 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 reports and other information with the SEC and with the securities regulatory authorities of each of the provinces and territories of Canada. Under a multijurisdictional disclosure system adopted by the United States and Canada, 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”.
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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”) (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”) (www.sedar.com).
FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES
Unless otherwise indicated, financial information in this prospectus supplement has been prepared in accordance with IFRS. The financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise noted herein, all references to “$”, “U.S.$”, “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,
2020
2019
Low
$ 0.6898 $ 0.7353
High
$ 0.7863 $ 0.7699
Average
$ 0.7461 $ 0.7537
End
$ 0.7854 $ 0.7699
On March 10, 2021, the daily average rate for United States dollars in terms of Canadian dollars, as quoted by the Bank of Canada was Cdn$1.00 = U.S.$0.7913.
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 Canada and 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:
(i)
our annual information form dated March 30, 2020 for the fiscal year ended December 31, 2019;
(ii)
our audited annual financial statements as at and for the fiscal years ended December 31, 2019 and 2018, together with the notes and the management report of fund performance thereto;
(iii)
our unaudited interim financial statements as at and for the nine months ended September 30, 2020 and 2019, together with the notes and the management report of fund performance thereto; and
(iv)
the Amended and Restated Sales Agreement.
The documents identified above as incorporated by reference into this prospectus supplement have been filed with the SEC as follows: (1) the annual information form has been filed as Exhibit 99.5 to the Trust’s
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annual report on Form 40-F filed with the SEC on March 31, 2020; (2) the annual financial statements have been filed as Exhibits 99.6, 99.7 and 99.8 to the Trust’s annual report on Form 40-F filed with the SEC on March 31, 2020; (3) the annual management report of fund performance has been filed as Exhibit 99.6 to the Trust’s annual report on Form 40-F filed with the SEC on March 31, 2020; (4) the unaudited interim financial statements and the interim management report of fund performance have been filed as Exhibit 99.1 to the Trust’s report on Form 6-K filed with the SEC on November 13, 2020; and (5) the Amended and Restated Sales Agreement has been filed as Exhibit 99.2 to the Trust’s report on Form 6-K filed with the SEC on October 22, 2020.
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 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 supplement and the accompanying 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 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 after the date of this prospectus supplement, such document or information shall be deemed to be incorporated by reference as an exhibit to the registration statement of which this prospectus supplement forms a part. In addition, we may incorporate by reference into this prospectus supplement other information from documents that we file with or furnish 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, 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 such jurisdictions.
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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 the United States federal securities laws.
In the United States, the Trust and the Trustee 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 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 this 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 annual information form, financial statements and management reports of fund performance and related notes 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 5 of the accompanying prospectus.
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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 acts as custodian on behalf of the Trust for the physical silver bullion owned by the Trust.
As of December 31, 2020, the Manager, together with its affiliates and related entities, had assets under management totaling approximately U.S.$17.4 billion, and provided management and investment advisory services to many entities, including private investment funds, the Sprott mutual funds, certain discretionary managed accounts, and management of certain companies through its subsidiary, Sprott Consulting LP. The Manager also acts as: (A) manager of (i) the Sprott Physical Gold and Silver 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 and silver bullion, (ii) the Sprott Physical Gold Trust, a 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 and (iii) the Sprott Platinum and Palladium Trust, a 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 (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.
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 “London 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
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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
The Trustee acts as custodian of the Trust’s assets other than physical silver bullion pursuant to the Trust Agreement. The Trustee has authority to delegate the performance of custody functions to sub-custodians who are members of its international custody network or, with the consent of the Manager, to other persons.
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 annual information form and the Trust’s financial statements and the related notes, incorporated by reference herein. See “Documents Incorporated by Reference”.
The “Risk Factors” beginning on page 13 of the accompanying prospectus are incorporated by reference in this prospectus supplement.
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 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 unaudited interim financial statements of the Trust as at and for the nine months ended September 30, 2020 and 2019, 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 in “Prior Sales”. On March 10, 2021, the total NAV of the Trust and the NAV per unit of the Trust were U.S.$3,356,177,048.58 and U.S.$9.4442, respectively, and there were a total of 355,368,076 units of the Trust issued and outstanding.
DESCRIPTION OF THE UNITS OF THE TRUST
The Trust is authorized to issue an unlimited number of units of the Trust 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 units that are qualified by this prospectus supplement. Each 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 units. Units are transferable and redeemable at the option of the unitholder in accordance with the provisions set forth in the Trust Agreement. All 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
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with the Trust. Units and fractions thereof are issued only as fully paid and non-assessable. Units have no preference, conversion, exchange or pre-emptive rights. Each whole unit of the Trust 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 units except (i) if the net proceeds per 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 means, 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 Original Agreement or the Amended and Restated Sales Agreement, as applicable.
Date
Price Per
Trust Unit
Number of Trust
Units Issued
02-06-20 $ 6.5646 121,706
02-18-20 $ 6.6231 1,205,564
02-24-20 $ 6.8894 750,000
03-02-20 $ 6.2526 579,862
03-17-20 $ 4.8326 232,042
03-19-20 $ 4.5930 849,000
03-20-20 $ 4.7645 950,000
03-23-20 $ 4.9234 2,528,600
03-24-20 $ 5.2133 2,285,140
03-25-20 $ 5.3490 1,263,000
03-26-20 $ 5.3964 482,541
03-27-20 $ 5.3545 862,644
03-30-20 $ 5.3835 74,440
03-31-20 $ 5.2764 778,712
04-01-20 $ 5.2300 266,600
04-02-20 $ 5.3583 1,388,274
04-03-20 $ 5.4202 287,538
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Date
Price Per
Trust Unit
Number of Trust
Units Issued
04-06-20 $ 5.4898 1,702,893
04-07-20 $ 5.6646 408,021
04-08-20 $ 5.6231 647,276
04-09-20 $ 5.7057 1,400,986
04-13-20 $ 5.7453 1,079,734
04-14-20 $ 5.8281 1,240,000
04-16-20 $ 5.7427 526,006
04-20-20 $ 5.6747 1,002,498
04-22-20 $ 5.5503 1,000,000
04-22-20 $ 5.5680 1,283,966
04-23-20 $ 5.6076 1,342,707
04-24-20 $ 5.6538 371,585
04-27-20 $ 5.6709 586,081
04-28-20 $ 5.6556 666,019
04-29-20 $ 5.6613 1,435,099
05-01-20 $ 5.5703 919,461
05-04-20 $ 5.5631 161,044
05-05-20 $ 5.5353 1,808,166
05-07-20 $ 5.5988 1,888,221
05-08-20 $ 5.7213 302,105
05-11-20 $ 5.7377 256,099
05-12-20 $ 5.7583 392,327
05-13-20 $ 5.7247 782,982
05-14-20 $ 5.7664 460,500
05-15-20 $ 6.0558 1,290,000
05-15-20 $ 6.0854 1,000,322
05-18-20 $ 6.2639 1,747,872
05-19-20 $ 6.3838 1,207,669
05-20-20 $ 6.4255 794,232
05-22-20 $ 6.3126 142,298
05-28-20 $ 6.3742 17,829
05-29-20 $ 6.4826 1,251,462
06-01-20 $ 6.6188 1,296,705
06-08-20 $ 6.4200 57,963
06-10-20 $ 6.4958 578,378
06-16-20 $ 6.4013 13,015
06-17-20 $ 6.4300 19,640
06-19-20 $ 6.4174 680,000
06-22-20 $ 6.5347 298,002
06-23-20 $ 6.5375 280,462
06-25-20 $ 6.4528 564,736
06-30-20 $ 6.6130 925,064
06-30-20 $ 6.6047 778,015
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Date
Price Per
Trust Unit
Number of Trust
Units Issued
07-02-20 $ 6.6310 467,206
07-06-20 $ 6.7000 750,000
07-06-20 $ 6.6905 1,107,894
07-07-20 $ 6.7232 262,310
07-08-20 $ 6.8341 1,768,674
07-09-20 $ 6.9326 301,337
07-10-20 $ 6.8668 414,017
07-13-20 $ 7.0200 350,000
07-13-20 $ 7.0251 1,930,078
07-14-20 $ 7.0164 335,000
07-15-20 $ 7.0813 925,000
07-17-20 $ 7.0671 835,000
07-21-20 $ 7.7498 2,105,131
07-22-20 $ 8.0733 3,457,522
07-24-20 $ 8.3091 764,015
07-27-20 $ 8.7509 5,126,569
07-29-20 $ 8.9681 128,850
07-31-20 $ 8.6266 1,807,822
08-04-20 $ 9.1000 250,000
08-04-20 $ 9.0432 2,205,765
08-05-20 $ 9.6099 797,500
08-06-20 $ 10.0400 250,000
08-06-20 $ 10.0890 1,557,987
08-10-20 $ 10.3880 1,300,000
08-12-20 $ 9.1333 1,900,000
08-13-20 $ 9.5200 1,420,000
08-17-20 $ 9.6683 662,666
08-28-20 $ 9.8548 92,513
08-31-20 $ 10.0432 975,344
09-28-20 $ 8.3580 402,000
09-29-20 $ 8.6326 143,747
10-01-20 $ 8.4841 617,804
10-07-20 $ 8.4054 171,662
10-09-20 $ 8.7076 820,000
11-05-20 $ 8.7465 1,600,000
11-05-20 $ 8.8401 195,800
12-01-20 $ 8.2685 51,200
12-28-20 $ 9.3933 75,000
01-04-21 $ 9.6330 826,124
01-04-21 $ 9.5899 391,000
01-12-21 $ 9.0644 251,840
01-28-21 $ 9.2307 2,761,000
01-28-21 $ 9.2617 1,161,100
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Date
Price Per
Trust Unit
Number of Trust
Units Issued
01-29-21 $ 9.8020 4,700
01-29-21 $ 9.6747 1,205,289
02-01-21 $ 10.5714 16,585,973
02-01-21 $ 10.6430 1,482,500
02-03-21 $ 9.7525 3,196,767
02-03-21 $ 9.7510 222,900
02-05-21 $ 9.6852 3,234,466
02-05-21 $ 9.6823 199,800
02-08-21 $ 9.8511 3,086,357
02-08-21 $ 9.8581 231,500
02-09-21 $ 9.8909 482,869
02-10-21 $ 9.8870 432,913
02-11-21 $ 9.8194 2,932,383
02-11-21 $ 9.8281 266,000
02-12-21 $ 9.7937 3,000,000
02-12-21 $ 9.8020 231,100
02-16-21 $ 9.9899 1,140,200
02-16-21 $ 9.9594 8,718,790
02-17-21 $ 9.8472 3,719,200
02-17-21 $ 9.8320 1,712,500
02-17-21 $ 9.8586 4,460,000
02-18-21 $ 9.8960 226,200
02-18-21 $ 9.9018 1,091,050
02-19-21 $ 9.8683 1,920,300
02-19-21 $ 9.8606 500,510
02-19-21 $ 9.8919 3,700,000
02-22-21 $ 9.9872 6,235,200
02-22-21 $ 9.8901 1,519,555
02-22-21 $ 9.9380 7,471,700
02-23-21 $ 10.1525 734,498
02-24-21 $ 10.0432 817,300
02-24-21 $ 10.0137 3,250,000
02-25-21 $ 10.0637 74,400
02-25-21 $ 10.0923 1,100,000
02-26-21 $ 9.8291 445,500
03-01-21 $ 9.7201 738,100
03-01-21 $ 9.7219 5,279,311
03-02-21 $ 9.6185 2,879,839
03-02-21 $ 9.6328 92,500
03-08-21 $ 9.1105 116,700
03-08-21 $ 9.1225 121,114
03-09-21 $ 9.2669 3,635,631
03-09-21 $ 9.2734 347,600
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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” and “PSLV.U”. The following table sets forth the high and low prices and monthly average trading volume for the trust units for each month during the 12-month period before the date of this prospectus supplement.
NYSE ARCA
TSX
Calendar Period
High ($)
Low ($)
Average
Volume(1)
High
(Cdn$)
Low
(Cdn$)
Average
Volume
February 2020 6.91 5.91 1,008,018.05 9.17 7.97 38,569.11
March 2020 6.35 4.34 2,997,403.36 8.80 6.26 159,004.95
April 2020 5.90 5.15 2,609,555.67 8.29 7.29 87,457.38
May 2020 6.51 5.51 2,698,820.55 9.00 7.74 155,708.25
June 2020 6.66 6.16 1,517,288.82 9.13 8.36 126,016.18
July 2020 9.03 6.53 4,081,488.68 12.04 8.94 336,655.45
August 2020 10.46 8.56 5,530,766.38 13.97 11.71 502,547.20
September 2020 10.25 7.75 2,810,946.62 13.49 10.39 224,615.67
October 2020 8.90 8.07 1,777,013.55 11.65 10.79 103,620.48
November 2020 9.00 7.73 1,893,007.10 11.75 10.01 182,733.86
December 2020 9.42 8.14 1,485,212.05 11.98 10.54 131,670.10
January 2021 9.81 8.6198 3,148,481.68 12.51 11.04 327,588.95
February 2021 11.08 9.41 13,781,711.53 14.10 12.07 1,699,718.74
March 1 – 10, 2021 9.86 8.84 8,791,724.88 12.50 11.21 581,756.00
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 U.S.$3,000,000,000 of trust units through the Agents in connection with this 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 us, 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. We will instruct the Agents as to the number of trust units to be sold by them. We 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, we 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. We estimate that the total expenses that we will incur for the offering (including fees payable to stock exchanges, securities regulatory authorities and our counsel and our auditors,
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but excluding compensation payable to the Agents under the terms of the Amended and Restated Sales Agreement) will be approximately U.S.$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 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 are 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 us.
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 our behalf, the Agents will be deemed to be an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and the compensation of the Agents will be deemed to be underwriting commissions or discounts. We have 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 us and our affiliates, for which services they may in the future receive customary fees. No underwriter of the “at-the-market distribution”, and no person or company acting jointly or in concert with an underwriter, may, in connection with the distribution, enter into any transaction that is intended to stabilize or maintain the market price of the securities or securities of the same class as the securities distributed under this prospectus supplement, including selling an aggregate number or principal amount of securities that would result in the underwriter creating an over-allocation position in the securities. 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
S-12

 
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 20 of the accompanying prospectus and “Material Tax Considerations — Backup Withholding and Information Reporting” beginning on page 24 of the accompanying prospectus. Notwithstanding the incorporation of the summary of material U.S. federal income tax considerations by reference to the accompanying prospectus, this prospectus supplement amends and restates the heading “Material Tax Consideration — Backup Withholding and Information Reporting — Foreign Account Tax Compliance Act.”
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 25 and 28, respectively, of the accompanying prospectus.
U.S. ERISA CONSIDERATIONS
The accompanying prospectus describes the U.S. Employee Retirement Income Security Act of 1974, as amended, or 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 32 of the accompanying prospectus.
AUDITORS
The audited annual statements of financial position of the Trust as at December 31, 2019 and 2018 and the statements of comprehensive income (loss), changes in equity and cash flows for its fiscal years ended December 31, 2019 and 2018, and the report of the auditors thereon, 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 Rules of Professional Conduct of the Chartered Professional Accountants of Ontario for the period under audit in respect of the Trust’s financial year ended December 31, 2019.
LEGAL MATTERS
Certain legal matters relating to the issue and sale of trust units offered hereby will be passed upon by Baker & McKenzie LLP on behalf of the Trust. Seward & Kissel LLP, New York, New York, is acting as
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special U.S. counsel to the Trust. Certain legal matters in connection with the offering will be passed upon for the Agents by Stikeman Elliott 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 Baker & McKenzie LLP, Seward & Kissel LLP, Stikeman Elliott LLP and Cooley 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. 333-254061) of which this prospectus supplement forms a part.
WHERE YOU CAN FIND MORE INFORMATION
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.
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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
New IssueMarch 9, 2021
[MISSING IMAGE: LG_SPROTT-PN.JPG]
Sprott Physical Silver Trust
U.S.$3,000,000,000
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 U.S.$3,000,000,000 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. 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, 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 National Instrument 44-102 — Shelf Distributions (“NI 44-102”).
The trust units are listed and posted for trading on NYSE Arca under the symbol “PSLV” and on the Toronto Stock Exchange (the “TSX”) under the symbols “PSLV” and “PSLV.U”. On March 8, 2021, the last trading day prior to the date hereof, the closing prices of the trust units on NYSE Arca and the TSX were U.S.$9.08 and Cdn$11.49, 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

(Continued from cover)
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.
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.
We are permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare this prospectus in accordance with Canadian disclosure requirements, which are different from those of the United States. We prepare our financial statements, which are incorporated by reference in this prospectus, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Our 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 we are 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 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.
See “Risk Factors” for a discussion of certain considerations relevant to an investment in the trust units offered hereby. In the opinion of Baker & McKenzie 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”) as 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 “$”, “U.S.$”, “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
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FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES
Unless otherwise indicated, financial information in this prospectus has been prepared in accordance with IFRS. The financial information of the Trust incorporated by reference herein is presented in U.S. dollars. Unless otherwise noted herein, all references to “$”, “U.S.$”, “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.
Years Ended
December 31,
2020
2019
Low
$ 0.6898 $ 0.7353
High
$ 0.7863 $ 0.7699
Average
$ 0.7461 $ 0.7537
End
$ 0.7854 $ 0.7699
On March 8, 2021, the daily average rate for United States dollars in terms of Canadian dollars, as quoted by the Bank of Canada was Cdn$1.00 = U.S.$0.7899.
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)
(b)
(c)
(d)
(e)
Any documents of the type referred to in the preceding paragraph with respect to the Trust or material change reports (other than confidential material change reports) or required to be incorporated by reference herein pursuant to National Instrument 44-101 — Short Form Prospectus Distributions, as well as all prospectus supplements disclosing additional or updated information, filed by the Trust with the securities
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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 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 31, 2020; (2) the Annual Financial Statements have been filed as Exhibits 99.6, 99.7 and 99.8 to the Trust’s annual report on Form 40-F filed with the SEC on March 31, 2020; (3) the Annual MRFP has been filed as Exhibit 99.6 to the Trust’s annual report on Form 40-F filed with the SEC on March 31, 2020; and (4) the Interim Financial Statements and the Interim MRFP have been filed as Exhibit 99.1 to the Trust’s Report on Form 6-K filed with the SEC on November 13, 2020.
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.
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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 reports and other information with the SEC and with the securities regulatory authorities of each of the provinces and territories of Canada. Under a multijurisdictional disclosure system adopted by the United States and Canada, 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.
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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 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.” 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, financial statements and management reports of fund performance and related notes 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
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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 under the symbol “SII”. See “Responsibility for Operation of the Trust — The Manager” in the AIF for further information.
As of December 31, 2020, the Manager, together with its affiliates and related entities, had assets under management totaling approximately U.S.$17.4 billion, and provided management and investment advisory services to many entities, including private investment funds, the Sprott mutual funds, certain discretionary managed accounts, and management of certain companies through its subsidiary, Sprott Consulting LP. 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 and (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 (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.
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
The Trustee, 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 the Silver Storage Agreement (as defined below). 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
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free: 1-855-943-8099). The Trustee’s office is located at 155 Wellington Street West, Street Level, 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, Street Level, Toronto, Ontario, Canada M5V 3L3.
Recent Developments
On June 24, 2016, the Trust entered into a Controlled Equity OfferingSM sales agreement (the “initial sales agreement”) with Cantor Fitzgerald & Co. (“CF&Co”) whereby the Trust may, in its sole discretion and subject to its operating and investment restrictions, offer and sell trust units through an “at-the-market offering” program. On January 29, 2020, the Trust, Manager, CF&Co and Virtu Americas LLC (“Virtu”) entered into an amendment agreement to the initial sales agreement (the “second sales agreement”) pursuant to which, among other things, Virtu became a sales agent of trust units. On October 21, 2020, the Trust, the Manager, CF&Co, Virtu and Virtu ITG Canada Corp. (“Virtu Canada”) entered into an amended and restated sales agreement (together with the initial sales agreement and the second sales agreement referred to as the “sales agreement”) pursuant to which, among other things, Virtu Canada became a sales agent of trust units subject to the terms and conditions of the sales agreement.
On June 4, 2018, the Manager, for and on behalf of the Trust, entered into a precious metal storage and custody agreement with the Mint (the “Silver Storage Agreement”), to replace the former version thereof, setting out the terms and conditions pursuant to which the Mint agrees to store the Trust’s physical silver bullion at the premises of the Mint and/or any other safe storage facility located in Canada or abroad used by the Mint, including the facility of a sub-custodian. The fees are currently: (a) storage fees per month — $1.60 per bar; (b) deposit fees — $5.00 per bar; (c) redemption fees — at the Mint’s discretion, up to a maximum of 2% of the value of the physical silver bullion as calculated by the Mint using the price of silver as published by the London Bullion Market Association (the “LBMA”) on the day of redemption, plus a $250.00 administrative fee; and (d) withdrawal and transfer fees — $5.00 per bar, plus a $50.00 administrative fee.
Effective March 20, 2020, after extensive review of other existing policies and procedures (the “Other Existing Policies”), the Manager removed a policy that prohibited 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 from investing in the Trust. The policy also prohibited any such decision-making person from investing in the Trust for that decision-making person’s benefit, directly or indirectly. The policy was removed after extensive discussions with the applicable regulatory entity after the Manager concluded that the Other Existing Policies made the removed policy redundant and that the Other Existing Policies afford the same protections that the removed policy was intended to provide.
On November 13, 2020, the Manager, on behalf of the Trust, amended the amended and restated trust agreement, dated February 27, 2015, to reflect a change related to the timing of delivery of physical bullion in connection with redemptions to avoid increased costs and decrease logistical demands.
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 “London Good Delivery” bars as defined by the 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
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arrangements arising from their illiquid nature (to the extent that any such assets are held, 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 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 March 8, 2021 was U.S.$3,182,999,608.
Redemption of Trust Units for Physical Silver Bullion
Unitholders whose trust units are redeemed for physical silver bullion will be entitled to receive a redemption price equal to 100% of the NAV of the redeemed 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 London Good Delivery bars or an integral multiple of one bar in excess thereof, plus applicable expenses. A “London 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 London 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 London Good Delivery bars held by the Trust at the time of redemption. A unitholder redeeming 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 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 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
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participant of CDS Clearing and Depository Services Inc. or The Depository Trust Company, 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 London Good Delivery bars will likely retain its London 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 an institution located in North America authorized to accept and hold London Good Delivery bars will no longer be deemed London 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 NYSE Arca or, if trading has been suspended on NYSE Arca, the 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 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, 119,942 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 6623% 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 6623% 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.
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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 London 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 London 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 of America 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 of 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 silver bullion held in London Good Delivery bar form may be stored with a custodian only if the physical silver bullion will remain London Good Delivery 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;
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(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 or 94.1 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 (the “SIFT Rules”).
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
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Type of Fee
Amount and Description
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 CF&Co, 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.
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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 and the Trust’s financial statements and the related notes. 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 recently experienced material increases in average daily trading volumes, potentially causing 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 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 recent increase in premium to NAV were to disappear.
Global events outside the Trust’s control, such as the COVID-19 pandemic, may adversely affect the Trust’s business, financial condition and result of operations.
The Trust cautions that current global uncertainty with respect to the spread of the coronavirus disease 2019 (COVID-19) and its effect on the broader global and local economy may have a significant negative effect on the Trust, such as decreasing 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 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.
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 and, depending on the size of an offering and other factors outside the control of the Trust, such as the amount of physical silver bullion available for purchase, the Manager estimates that it may take up to 20 business days to purchase all of the physical silver bullion the Trust will purchase in connection with an offering. 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
13

 
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 Mint business days, in the case of the Manager’s notice, and one Mint 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.
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 Interim Financial Statements, being the most recently filed financial statements of the Trust, other than: (i) changes as a result of changes in the price of silver; and (ii) as described in “Prior Sales”. On March 8, 2021, the total NAV of the Trust and the NAV per unit of the Trust were U.S.$3,182,999,608 and U.S.$9.0584, respectively, and there were a total of 351,384,845 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
14

 
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
Number of Trust
Units Issued
02-06-20 6.5646 121,706
02-18-20 6.6231 1,205,564
02-24-20 6.8894 750,000
03-02-20 6.2526 579,862
03-17-20 4.8326 232,042
03-19-20 4.5930 849,000
03-20-20 4.7645 950,000
03-23-20 4.9234 2,528,600
03-24-20 5.2133 2,285,140
03-25-20 5.3490 1,263,000
03-26-20 5.3964 482,541
03-27-20 5.3545 862,644
03-30-20 5.3835 74,440
03-31-20 5.2764 778,712
04-01-20 5.2300 266,600
04-02-20 5.3583 1,388,274
04-03-20 5.4202 287,538
04-06-20 5.4898 1,702,893
04-07-20 5.6646 408,021
04-08-20 5.6231 647,276
04-09-20 5.7057 1,400,986
04-13-20 5.7453 1,079,734
04-14-20 5.8281 1,240,000
04-16-20 5.7427 526,006
04-20-20 5.6747 1,002,498
04-22-20 5.5503 1,000,000
04-22-20 5.5680 1,283,966
04-23-20 5.6076 1,342,707
04-24-20 5.6538 371,585
04-27-20 5.6709 586,081
04-28-20 5.6556 666,019
04-29-20 5.6613 1,435,099
05-01-20 5.5703 919,461
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Date
Price Per
Trust Unit
Number of Trust
Units Issue
05-04-20 5.5631 161,044
05-05-20 5.5353 1,808,166
05-07-20 5.5988 1,888,221
05-08-20 5.7213 302,105
05-11-20 5.7377 256,099
05-12-20 5.7583 392,327
05-13-20 5.7247 782,982
05-14-20 5.7664 460,500
05-15-20 6.0558 1,290,000
05-15-20 6.0854 1,000,322
05-18-20 6.2639 1,747,872
05-19-20 6.3838 1,207,669
05-20-20 6.4255 794,232
05-22-20 6.3126 142,298
05-28-20 6.3742 17,829
05-29-20 6.4826 1,251,462
06-01-20 6.6188 1,296,705
06-08-20 6.4200 57,963
06-10-20 6.4958 578,378
06-16-20 6.4013 13,015
06-17-20 6.4300 19,640
06-19-20 6.4174 680,000
06-22-20 6.5347 298,002
06-23-20 6.5375 280,462
06-25-20 6.4528 564,736
06-30-20 6.6130 925,064
06-30-20 6.6047 778,015
07-02-20 6.6310 467,206
07-06-20 6.7000 750,000
07-06-20 6.6905 1,107,894
07-07-20 6.7232 262,310
07-08-20 6.8341 1,768,674
07-09-20 6.9326 301,337
07-10-20 6.8668 414,017
07-13-20 7.0200 350,000
07-13-20 7.0251 1,930,078
07-14-20 7.0164 335,000
07-15-20 7.0813 925,000
07-17-20 7.0671 835,000
07-21-20 7.7498 2,105,13
07-22-20 8.0733 3,457,522
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Date
Price Per
Trust Unit
Number of Trust
Units Issued
07-24-20 8.3091 764,015
07-27-20 8.7509 5,126,569
07-29-20 8.9681 128,850
07-31-20 8.6266 1,807,822
08-04-20 9.1000 250,000
08-04-20 9.0432 2,205,765
08-05-20 9.6099 797,500
08-06-20 10.0400 250,000
08-06-20 10.0890 1,557,987
08-10-20 10.3880 1,300,000
08-12-20 9.1333 1,900,000
08-13-20 9.5200 1,420,000
08-17-20 9.6683 662,666
08-28-20 9.8548 92,513
08-31-20 10.0432 975,344
09-28-20 8.3580 402,000
09-29-20 8.6326 143,747
10-01-20 8.4841 617,804
10-07-20 8.4054 171,662
10-09-20 8.7076 820,000
11-05-20 8.7465 1,600,000
11-05-20 8.8401 195,800
12-01-20 8.2685 51,200
12-28-20 9.3933 75,000
01-04-21 9.6330 826,124
01-04-21 9.5899 391,000
01-12-21 9.0644 251,840
01-28-21 9.2307 2,761,000
01-28-21 9.2617 1,161,100
01-29-21 9.8020 4,700
01-29-21 9.6747 1,205,289
02-01-21 10.5714 16,585,973
02-01-21 10.6430 1,482,500
02-03-21 9.7525 3,196,767
02-03-21 9.7510 222,900
02-05-21 9.6852 3,234,466
02-05-21 9.6823 199,800
02-08-21 9.8511 3,086,357
02-08-21 9.8581 231,500
02-09-21 9.8909 482,869
02-10-21 9.8870 432,913
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Date
Price Per
Trust Unit
Number of Trust
Units Issued
02-11-21 9.8194 2,932,383
02-11-21 9.8281 266,000
02-12-21 9.7937 3,000,000
02-12-21 9.8020 231,100
02-16-21 9.9899 1,140,200
02-16-21 9.9594 8,718,790
02-17-21 9.8472 3,719,200
02-17-21 9.8320 1,712,500
02-17-21 9.8586 4,460,000
02-18-21 9.8960 226,200
02-18-21 9.9018 1,091,050
02-19-21 9.8683 1,920,300
02-19-21 9.8606 500,510
02-19-21 9.8919 3,700,000
02-22-21 9.9872 6,235,200
02-22-21 9.8901 1,519,555
02-22-21 9.9380 7,471,700
02-23-21 10.1525 734,498
02-24-21 10.0432 817,300
02-24-21 10.0137 3,250,000
02-25-21 10.0637 74,400
02-25-21 10.0923 1,100,000
02-26-21 9.8291 445,500
03-01-21 9.7201 738,100
03-01-21 9.7219 5,279,311
03-02-21 9.6185 2,879,839
03-02-21 9.6328 92,500
03-08-21 9.1105 116,700
03-08-21 9.1225 121,114
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” and “PSLV.U”. The following table sets forth the high and low prices and monthly average trading volume for the trust units for each month during the 12-month period before the date of this prospectus.
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NYSE ARCA
TSX
Calendar Period
High ($)
Low ($)
Average
Volume(1)
High
(Cdn$)
Low
(Cdn$)
Average
Volume
February 2020 6.91 5.91 1,008,018.05 9.17 7.97 38,569.11
March 2020 6.35 4.34 2,997,403.36 8.80 6.26 159,004.95
April 2020 5.90 5.15 2,609,555.67 8.29 7.29 87,457.38
May 2020 6.51 5.51 2,698,820.55 9.00 7.74 155,708.25
June 2020 6.66 6.16 1,517,288.82 9.13 8.36 126,016.18
July 2020 9.03 6.53 4,081,488.68 12.04 8.94 336,655.45
August 2020 10.46 8.56 5,530,766.38 13.97 11.71 502,547.20
September 2020 10.25 7.75 2,810,946.62 13.49 10.39 224,615.67
October 2020 8.90 8.07 1,777,013.55 11.65 10.79 103,620.48
November 2020 9.00 7.73 1,893,007.10 11.75 10.01 182,733.86
December 2020 9.42 8.14 1,485,212.05 11.98 10.54 131,670.10
January 2021 9.81 8.6198 3,148,481.68 12.51 11.04 327,588.95
February 2021 11.08 9.41 13,781,711.53 14.10 12.07 1,699,718.74
March 1 – 8, 2021 9.86 8.84 9,325,306.50 12.50 11.21 594,745.33
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 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
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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 acting jointly or in concert with such an 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, including selling an aggregate number or principal amount of units that would result in the underwriter creating an over-allocation position in the securities.
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 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.
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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.
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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. We 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%
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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 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
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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.