Sprott

General

Issuance of units of a unit trust and mutual fund trust (listed on the TSX and NYSE Arca) which will invest substantially all its assets in platinum and palladium bullion (on approximately a 50/50 basis). Subject to a minimum redemption quantity of 25,000 units, the units may be redeemed on a monthly basis for bullion (with partial cash payments made based on 100% of NAV). They also may be redeemed on a monthly basis for cash (with notice required to be given by the 15th day of the month) for 95% of the lesser of the VWAP for the last five days of the month and the closing NAV for the month.

Canadian income taxation

There is no restriction on non-resident ownership of the Trust as platinum and palladium bullion are not taxable Canadian property. As the Trust does not intend to dispose of bullion except on physical redemption and to raise cash for incidental expenses, it expects to treat its bullion as capital property. The Trust should not be subject to SIFT tax as the mere holding of bullion as capital property (or as an adventure in the nature of trade) should not represent the use of such property in carrying on a business in Canada.

As the bullion is not taxable Canadian property, redemption gains should not be subject to withholding tax under s. 132(5.1) and 212(1)(c) - provided that the bullion is held on capital account.

US income taxation

The Trust is expected to be a PFIC.

Gains of US individuals on the sale of units may be taxable as long-term capital gains (at a maximum rate of 15% under current law - scheduled to increase to 20% for taxable years beginning after December 31, 2012), compared to a long-term capital gains tax rate of 28% applicable to the disposition of physical platinum and palladium bullion and other "collectibles" held for more than one year), provided that the US investor has held the units for more than one year prior to the sale and the US investor has made a timely and valid Qualified Election Fund election.

Commodity taxation

The palladium (whose purchase in Canada would be subject to HST) likely will be stored in Europe. Platinum will be stored at the Royal Canadian Mint. Unitholders who physically redeem are responsible for the HST/GST on the palladium received as well as for any out-of-province PST.