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