Exhibit 99.5



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TABLE OF CONTENTS

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|Cautionary Statement Regarding Forward-looking Statements |  | 2 
|--------------------------------------------------------- |  | --
|Currency                                                  |  | 2 
|The Trust                                                 |  | 2 
|Investment Restrictions and Operating Restrictions        |  | 3 
|Overview of the Gold Sector                               |  | 4 
|Description of Units                                      |  | 12
|Calculation of Net Asset Value                            |  | 15
|Market for the Units                                      |  | 19
|Redemption of Units                                       |  | 19
|Responsibility for Operation of the Trust                 |  | 23
|Principal Unitholders of the Trust                        |  | 41
|Trust Governance                                          |  | 41
|Fees and Expenses                                         |  | 42
|Distribution Policy                                       |  | 44
|Material Income Tax Considerations                        |  | 46
|Risk Factors                                              |  | 56
|Remuneration of Directors, Officers, Trustee and the IRC  |  | 65
|Material Contracts                                        |  | 65
|Legal and Administrative Proceedings                      |  | 65
|Termination of the Trust                                  |  | 65
|Exemptions and Approvals                                  |  | 66

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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Cautionary Statement Regarding Forward-Looking Statements

The
statements contained in this annual information form 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.

The
forward looking statements contained in this annual information form 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, but are not limited to,
those factors described under the heading "Risk Factors". Should one or more of these risks or uncertainties materialize, or should any of the Trust's assumptions prove incorrect, actual results may
vary in material respects from those projected in these forward looking statements. The Trust undertakes no obligation to update or revise any forward looking statements, whether as a result of new
information, future events or otherwise, except as may be required under applicable securities laws.

Currency

Unless
otherwise noted herein, all references to "$", "U.S.$" or "dollars" are to the currency of the United States and all references to "Cdn$" or "Canadian dollars" are to the currency of
Canada. On March 10, 2011, the noon rate of exchange as reported by the Bank of Canada for the conversion of U.S. dollars into Canadian dollars was U.S.$1.00 equals Cdn$0.9731 (Cdn$1.00
equals U.S.$1.0276).

The Trust

History and Development of the Trust

Sprott
Physical Gold Trust (the "Trust") was established on August 28, 2009 under the laws of the Province of Ontario, Canada, pursuant to a trust agreement between the Trust's settlor,
Sprott Asset Management LP (the "Manager") and RBC Dexia Investor Services Trust, as trustee (the "Trustee") dated as of August 28, 2009, as amended and restated as of
December 7, 2009 and as further amended and restated as of February 1, 2010 (the "Trust Agreement").

The
Trust was created to invest and hold substantially all of its assets in physical gold bullion. Many investors are unwilling to invest directly in physical gold bullion due to inconveniences such
as transaction, handling, storage, insurance and other costs that are typical of a direct investment in physical gold bullion. The Trust seeks to provide a secure, convenient and exchange-traded
investment alternative for investors interested in holding physical gold bullion without the inconvenience that is typical of a direct investment in physical gold bullion. The Trust invests primarily
in long-term holdings of unencumbered, fully allocated, physical gold bullion and will not speculate with regard to short-term changes in gold prices. The Trust does not
anticipate making regular cash distributions to unitholders.

On
March 3, 2010, the Trust closed its initial public offering with the sale of 40,000,000 units at $10.00 per unit, for gross proceeds of $400,000,000. On March 8, 2010, the
Trust issued 3,000,000 units for gross proceeds of $30,000,000 on the exercise by the underwriters of a portion of the over-allotment option of the initial public offering. On
March 25, 2010, the Trust issued 1,250,000 units for gross proceeds of $12,500,000 on the additional exercise by the underwriters of a portion of the over-allotment option of
the initial public offering.

On
May 26, 2010, the Trust issued 24,840,000 units at $11.25 per unit, for gross proceeds of $279,450,000 on the first follow-on offering of the units of the Trust.

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On
September 17, 2010, the Trust issued 24,500,000 units at $11.37 per unit, for gross proceeds of $278,565,000 on the second follow-on offering of the units of the Trust. On
September 24, 2010, the Trust issued 3,488,555 units at $11.37 per unit, for gross proceeds of $39,664,870 on the exercise by the underwriters of a portion of the
over-allotment option on the second follow-on offering.

The
Trust's office is located at Suite 2700, South Tower, Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada M5J 2J1. The Manager's office is located at Suite 2700,
South Tower, Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada M5J 2J1 and its telephone number is (416) 362-7172. RBC Dexia Investor Services Trust
("RBC Dexia"), the Trust's trustee, is located at 155 Wellington Street West, Street Level, Toronto, Ontario, Canada M5V 3L3. The custodian for the Trust's physical gold bullion,
the Royal Canadian Mint (the "Mint"), is located at 320 Sussex Drive, Ottawa, Ontario, Canada K1A 0G8, and the custodian for the Trust's assets other than physical gold bullion,
RBC Dexia, is located at 155 Wellington Street West, Street Level, Toronto, Ontario, Canada M5V 3L3.

Investment Restrictions 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 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 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. See "Responsibility for Operation of the
Trust  The Trustee  Unitholder Approval".

The
Investment and Operating Restrictions provide that the Trust:



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Overview of the Gold Sector

Introduction to the Gold Industry and its Participants

The
participants in the world gold market may be classified in the following sectors: the mining and producer sector, the banking sector, the official sector, the investment sector and the
manufacturing sector.

The
mining and producer sector includes mining companies that specialize in gold production, mining companies that produce gold as a by-product of other production (such as copper or
silver producers), scrap merchants and recyclers. The banking sector is composed of bullion banks that provide a variety of services to the gold market and its participants, thereby facilitating
interactions between other parties. Services provided by bullion banks include traditional banking products as well as physical gold purchases and sales, hedging and risk management, inventory
management for industrial users and consumers, mine financing, and gold deposit and loan instruments. The official sector includes the activities of the various central banking operations of
gold-holding countries. According to statistics released by the World Gold Council, central banks are estimated to have held approximately 30,546 tonnes of gold reserves as of
December 2010. Under the current Central Bank Gold Agreement (the "CBGA"), which was renewed by 19 central banks on August 7, 2009 and took effect on

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September 26,
2009, 19 central banks have agreed to sell, in total, not more than 400 tonnes per year in the aggregate, and not more than 2,000 tonnes over the life of the
five-year agreement. The investment sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large
hedge funds and mutual funds to day-traders on futures exchanges and retail level coin collectors. Finally, the manufacturing sector represents all the commercial and industrial users of
gold for whom gold is a daily part of their business. The jewellery industry is a large industrial user of gold. Other industrial users of gold include the electronics and dental industries.

Sources of Gold Supply

Sources
of gold supply include both mine production and recycling or mobilizing of existing above-ground stocks. The largest portion of gold supplied into the market annually is from gold mine
production. The second largest source of annual gold supply is from gold scrap, which is gold that has been recovered from jewellery and other fabricated products and converted back into marketable
gold. Sales by the official sector, which includes central banks, have outstripped official sector purchases since 2000, creating additional supply of gold into the marketplace. Net producer hedging
accelerates the sale of physical gold and can therefore impact, positively or negatively, supply in a given year.

Mine production

Mine
production includes gold produced from both primary deposits and secondary deposits, where the gold is recovered as a by-product metal from other mining activities. Since 2000, the
amount of new gold that is mined each year has been substantially lower than the level of physical demand. For example, during the ten years from 2000 to 2009 (2010 data not yet available) new mine
production was only 63% of the total demand for fabrication and retail investment. The shortfall in total supply has been met by additional supplies from existing above ground stocks, predominantly
coming from the recycling of fabricated gold products, official sector sales and net producer hedging.

Gold Scrap

Gold
scrap is gold that has been recovered from fabricated products, melted, refined and cast into bullion bars for subsequent resale into the gold market. The predominant source of gold scrap is
recycled jewellery, the supply of which is largely a function of price and economic circumstances. Other sources of gold scrap include electrical wiring and dental implants.

Official sector sales

Historically,
central banks, other governmental agencies and multi lateral institutions have retained gold as a strategic reserve asset. However, over the past two decades, the official sector has
been a net seller of gold to the private sector. According to Gold Fields Mineral Services Ltd., the official sector has supplied an average of 442 tonnes of gold per year from 2000 to
2009, inclusive. In 2010, however, the official sector once again became a net purchaser of gold for the first time since 1988. Gold's price performance, safe haven characteristics and concerns over
the safety of the major reserve currencies (the dollar, euro and yen) are the primary reasons for this shift. The official sector is expected to continue to play an important role in the
dynamics of the gold market.

Net producer hedging

Net
producer hedging creates incremental supply in the market by accelerating the timing of the sale of unmined gold. A mining company wishing to protect itself from the risk of a decline in the gold
price may elect to sell some or all of its anticipated production for delivery at a future date. A bullion dealer accepting such a transaction will finance it by borrowing an equivalent quantity of
gold (typically from a central bank), which is immediately sold into the market. The bullion dealer then invests the cash proceeds from that sale of gold and uses the yield on these investments to pay
the gold mining company the premium available on gold for future delivery (the "contango"). When the mining company delivers the gold it has contracted to sell to the bullion dealer, the dealer
returns the gold to the lender or rolls the loan forward in order to finance similar transactions in the future. While over time the hedging transactions involve no net increase in the supply of gold
to

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the
market, they do accelerate the timing of the sale of gold sold prior to production, which has an impact on the balance between supply and demand at any given time.

Sources of Gold Demand

Demand
for gold is driven primarily by demand for jewellery, which is used for adornment and, in much of the developing world, as an investment. Retail investment and industrial applications represent
increasingly important, though relatively small, components of overall demand. Retail investment is measured as customer purchases of bars and coins. Gold bonding wire and gold plated contacts and
connectors are the two most frequent uses of gold in industrial applications. Gold demand is widely dispersed throughout virtually all countries in the world. While there are seasonal fluctuations in
the levels of demand for gold (especially jewellery) in many countries, variations in the timing of such fluctuations in different countries mean that seasonal changes in demand do not have a
significant impact on the global gold price.

Jewellery

The
primary source of gold demand is gold jewellery. The motivation for jewellery purchases differs in various regions of the world. In the industrialized world, gold jewellery tends to be purchased
purely for adornment purposes, while gold's attributes as a store of value and a means of saving provide an additional motivation for jewellery purchases in much of the developing world. Price and
economic factors, such as available wealth and disposable income, are the primary factors in jewellery demand. Jewellery purchased purely for adornment purposes is generally of lower caratage or
purity, but with greater added value in terms of design input and improved finishes. In those parts of the world where the additional motivation of savings or investment applies to the purchase of
jewellery (such as Asia, the Indian subcontinent and the Middle East), gold jewellery is generally of higher caratage, and the purchase price more closely reflects the value of the gold contained in
each item.

Retail and institutional investment

Retail
and institutional investment demand covers coins and bars meeting the standards for investment gold adopted by the European Union, extended to include medallions of no less than 99% purity, and
bars or coins which are likely to be worn as jewellery in certain countries. Retail investment is measured as net purchases by the ultimate customer.

Electronics, dentistry and other industrial and decorative applications

Gold
bonding wire and gold plated contacts and connectors are the two most frequent uses of gold in electronics. Other uses include high-melting point gold alloy solders and gold thick
film pastes for hybrid circuits. In conservative and restorative dentistry, gold is generally alloyed with other noble metals and with base metals for inlay and onlay fillings, crown and bridgework
and porcelain veneered restorations. Increasingly, pure gold electroforming is being used for dental repairs. Other industrial applications of gold include the use of thin gold coatings on table and
enamel ware for decorative purposes and on glasses used in the construction and aerospace industries to reflect infrared rays. Small quantities are also used in various pharmaceutical applications,
including the treatment of arthritis, and in medical implants. Future applications for gold catalysts are in pollution control, clean energy generation and fuel cell technology. In addition, work is
under way on the use of gold in cancer treatment.

World Gold Supply and Demand and End-Use Consumption

Gold
is a physical asset that is primarily accumulated, rather than consumed. As a result, virtually all the gold that has ever been mined still exists today in one form or another.

The
following chart summarizes the historical supply and demand for gold and end-use gold consumption by source:

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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World Gold Supply and Demand (January 1,
2000  December 31, 2010)

|Supply (tonnes)               |                | 2000  |       | 2001  |       | 2002  |       | 2003  |       | 2004  |       | 2005  |       | 2006  |       | 2007  |       | 2008  |       | 2009  |       | 2010(1) |      
|----------------------------- | -------------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ------- | -----
|                             
|Mine production               |                | 2,620 |       | 2,646 |       | 2,618 |       | 2,623 |       | 2,494 |       | 2,549 |       | 2,483 |       | 2,473 |       | 2,409 |       | 2,584 |       | 2,652   |      
|Official sector net sales     |                | 479   |       | 520   |       | 547   |       | 620   |       | 479   |       | 663   |       | 365   |       | 484   |       | 232   |       | 30    |       |        |      
|Old gold scrap                |                | 620   |       | 749   |       | 874   |       | 986   |       | 881   |       | 902   |       | 1,133 |       | 982   |       | 1,316 |       | 1,672 |       | 1,654   |      
|Net producer hedging          |                |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       |        |      
|Implied net disinvestment     |                | 299   |       |      |       |      |       |      |       | 12    |       |      |       |      |       |      |       |      |       |      |       |        |      
|                             
|Total Supply                  |                | 4,018 |       | 3,915 |       | 4,038 |       | 4,228 |       | 3,866 |       | 4,115 |       | 3,981 |       | 3,939 |       | 3,957 |       | 4,285 |       | 4,306   |      
|                             
|                              | year-over-year |       | (4.5% | )     | (2.6% | )     | 3.1%  |       | 4.7%  |       | (8.6% | )     | 6.4%  |       | (3.3% | )     | (1.1% | )     | 0.5%  |       | 8.3%  |         | 0.5% 
|Mine Production %             |                | 65.2% |       | 67.6% |       | 64.8% |       | 62.0% |       | 64.5% |       | 61.9% |       | 62.4% |       | 62.8% |       | 60.9% |       | 60.0% |       | 61.5%   |      
|Demand (tonnes)               |                |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |         |      
|Fabrication                   |                |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |       |         |      
|                              | Jewellery      |       | 3,205 |       | 3,009 |       | 2,662 |       | 2,484 |       | 2,616 |       | 2,718 |       | 2,298 |       | 2,417 |       | 2,193 |       | 1,758 |         | 2,037
|                              | Other          |       | 557   |       | 474   |       | 481   |       | 515   |       | 555   |       | 581   |       | 650   |       | 672   |       | 696   |       | 658   |         | 702  
|                             
|Total Fabrication             |                | 3,762 |       | 3,483 |       | 3,143 |       | 2,999 |       | 3,172 |       | 3,299 |       | 2,948 |       | 3,089 |       | 2,889 |       | 2,415 |       | 2,740   |      
|                             
|Official sector net purchases |                |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       |      |       | 87      |      
|Bar Hoarding                  |                | 242   |       | 261   |       | 264   |       | 180   |       | 257   |       | 264   |       | 235   |       | 236   |       | 386   |       | 212   |       | 455     |      
|Net producer De-hedging       |                | 15    |       | 151   |       | 412   |       | 289   |       | 438   |       | 92    |       | 434   |       | 444   |       | 352   |       | 252   |       | 145     |      
|Implied net investment        |                |      |       | 20    |       | 220   |       | 760   |       |      |       | 459   |       | 365   |       | 169   |       | 330   |       | 1,406 |       | 879     |      
|                             
|Total Demand                  |                | 4,018 |       | 3,915 |       | 4,038 |       | 4,228 |       | 3,866 |       | 4,115 |       | 3,981 |       | 3,939 |       | 3,957 |       | 4,287 |       | 4,306   |      
|                             
|                              | year-over-year |       | (4.5% | )     | (2.6% | )     | 3.1%  |       | 4.7%  |       | (8.6% | )     | 6.4%  |       | (3.3% | )     | (1.1% | )     | 0.5%  |       | 8.3%  |         | 0.5% 
|                             

End-Use Gold Consumption (tonnes) (January 1, 2000 to
December 31, 2009)

|                              |                | 2000  |       | 2001  |       | 2002  |       | 2003  |       | 2004  |      | 2005  |      | 2006  |       | 2007  |      | 2008  |      | 2009  |       |  
|----------------------------- | -------------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ---- | ----- | ---- | ----- | ----- | ----- | ---- | ----- | ---- | ----- | ----- | -
|                             
|Jewellery Consumption         |                | 3,205 |       | 3,009 |       | 2,662 |       | 2,484 |       | 2,616 |      | 2,718 |      | 2,298 |       | 2,417 |      | 2,193 |      | 1,759 |       |  
|Industrial & Dental           |                | 451   |       | 363   |       | 358   |       | 382   |       | 414   |      | 433   |      | 462   |       | 465   |      | 439   |      | 373   |       |  
|Electronics                   |                | 283   |       | 197   |       | 206   |       | 233   |       | 262   |      | 282   |      | 308   |       | 311   |      | 293   |      | 246   |       |  
|Other Industrial & Decorative |                | 99    |       | 97    |       | 83    |       | 82    |       | 85    |      | 89    |      | 93    |       | 96    |      | 91    |      | 74    |       |  
|Dentistry                     |                | 69    |       | 69    |       | 69    |       | 67    |       | 68    |      | 62    |      | 61    |       | 58    |      | 56    |      | 53    |       |  
|Identifiable Investment       |                | 166   |       | 357   |       | 344   |       | 341   |       | 482   |      | 601   |      | 676   |       | 686   |      | 1,177 |      | 1,319 |       |  
|Bar hoarding                  |                | 242   |       | 261   |       | 264   |       | 180   |       | 257   |      | 264   |      | 235   |       | 236   |      | 386   |      | 187   |       |  
|Official Coin                 |                | 77    |       | 83    |       | 97    |       | 107   |       | 115   |      | 111   |      | 129   |       | 135   |      | 187   |      | 229   |       |  
|Medals & Imitation Coin       |                | 29    |       | 29    |       | 26    |       | 26    |       | 26    |      | 37    |      | 59    |       | 73    |      | 70    |      | 57    |       |  
|Other Retail Investment       |                | -181  |       | -15   |       | -47   |       | -11   |       | -49   |      | -18   |      | -8    |       | -11   |      | 213   |      | 230   |       |  
|Investment in ETFs            |                |      |       |      |       | 3     |       | 39    |       | 133   |      | 208   |      | 260   |       | 253   |      | 321   |      | 617   |       |  
|                             
|Total                         |                | 3,822 |       | 3,729 |       | 3,363 |       | 3,207 |       | 3,512 |      | 3,753 |      | 3,435 |       | 3,568 |      | 3,809 |      | 3,451 |       |  
|                             
|                              | year-over-year |       | (2.3% | )     | (2.4% | )     | (9.8% | )     | (4.6% | )     | 9.5% |       | 6.9% |       | (8.5% | )     | 3.9% |       | 6.8% |       | (9.4% | )
|                             

Source: The Gold Fields Mineral Services Ltd. Gold Survey 2010 Update 2

The following are some of the characteristics of the gold market:



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Operation of the Gold Market

The
global trade in gold consists of Over-the-Counter ("OTC"), transactions in spot, forwards, and options and other derivatives, together with exchange traded futures
and options.

Over-the-Counter Market

The
OTC gold market includes spot, forward and option and other derivative transactions conducted on a principal-to-principal basis. While this is a global 24-hour
per day market, its main centers are London, New York and Zurich. Ten members of the London Bullion Market Association (the "LBMA"), the London based trade association that acts as the
coordinator for activities conducted on behalf of its members and other participants in the London bullion market, act as OTC market makers, and most OTC market trades are cleared through London. The
LBMA plays an important role in setting OTC gold trading industry standards. The LBMA's "London Good Delivery Lists" identify approved refiners of gold. In the OTC market, gold that meets the
specifications for weight, dimensions, fineness (or purity), identifying marks (including the assay stamp of an LBMA-acceptable refiner) and appearance set forth in "The Good
Delivery Rules for Gold and Silver Bars" published by the LBMA are "London Good Delivery Bars." A London Good Delivery Bar (typically called a "400 ounce bar") must contain between 350 and
430 fine troy ounces of gold (1 troy ounce = 31.1034768 grams), be of a minimum fineness (or purity) of 995 parts per 1000 (99.5%), be of good appearance and
be easy to handle and stack. The fine gold content of a gold bar is calculated by multiplying the gross weight of the bar by the fineness of the bar.

London Bullion Market

Although
the market for physical gold is distributed globally, most OTC market trades are cleared through London. In addition to coordinating market activities, the LBMA acts as the principal point of
contact between the market and its regulators. A primary function of the LBMA is its involvement in the promotion of refining standards by maintenance of the "London Good Delivery Lists," which are
the lists of LBMA accredited smelters and assayers of gold. The LBMA also coordinates market clearing and vaulting, promotes good trading practices and develops standard documentation.

Twice
daily during London trading hours there is a "fix" which provides reference gold prices for that day's trading. These are referred to as the morning (A.M.) London fix and afternoon (P.M.) London
fix. Many long-term contracts will be priced on the basis of either the morning (A.M.) or afternoon (P.M.) London fix, and market participants will usually refer to one or the other of
these prices when looking for a basis for valuations. The London fix is the most widely used benchmark for daily gold prices and is quoted by various financial information sources.

Futures Exchanges

The
most significant gold futures exchanges are the COMEX, operated by Commodities Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc., and the Tokyo Commodity
Exchange ("TOCOM"). The COMEX is the largest exchange in the world for trading metals futures and options and has been trading gold since 1974, while the TOCOM has been trading gold since 1982.

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Market Regulation

The
global gold markets are overseen and regulated by both governmental and self-regulatory organizations. In addition, certain trade associations have established rules and protocols for
market practices and participants. In the United Kingdom, responsibility for the regulation of the financial market participants, including the major participating members of the LBMA, falls
under the authority of the United Kingdom's Financial Services Authority ("FSA"), as provided by the Financial Services and Markets Act 2000 (the "FSM Act"). Under the FSM Act, all
U.K.-based banks, together with other investment firms, are subject to a range of requirements, including fitness and properness, capital adequacy, liquidity, and systems and controls. The FSA is
responsible for regulating investment products, including derivatives, and those who deal in investment products. Regulation of spot, commercial forwards, and deposits of gold and silver not covered
by the FSM Act is provided for by The London Code of Conduct for Non-Investment Products, which was established by market participants in conjunction with the Bank of England.

Participants
in the U.S. OTC market for gold are generally regulated by their existing market regulators. For example, participating banks are regulated by the banking authorities. In the
United States, Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the
United States.
The CFTC regulates market participants and has established rules designed to prevent market manipulation, abusive trade practices and fraud. The CFTC requires that any trader holding an open position
of more than 100 lots (i.e., 10,000 ounces) in any one contract month on COMEX must declare his or her identity, the nature of his or her business (hedging, speculative, etc.) and the
existence and size of his or her positions.

Market
integrity on the TOCOM is preserved by the TOCOM's authority to perform financial and operational surveillance on its members' trading activities, scrutinize positions held by members and large
scale customers, and monitor the price movements of futures markets by comparing them with cash and other derivative markets' prices. To act as a Futures Commission Merchant Broker, which is a
required certification for a broker that intends to trade in commodities and commodity futures, a broker must obtain a license from Japan's Ministry of Economy, Trade and IndustryMETI. METI
establishes the rules for operation of TOCOM and administers the exchange and its members through legal requirements and various supervisory functions.

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Historical Price Movement and Analysis

Fluctuations
in the price of gold are expected to influence the price of the units. Investors should be aware of the historical movements in gold prices and understand what events and forces may have
caused these movements to occur. The following chart displays the historical performance of gold from August 1971 (when the U.S. abandoned the gold standard) until
December 31, 2010.

GRAPHIC

Historical Total Returns (Compounded Annual Returns)

|                             |  | 1-Year |  | 3-Year |   | 5-Year |  | 10-Year |     | 20-Year |     | 30-Year |     | 39-Year | 
|---------------------------- |  | ------ |  | ------ | - | ------ |  | ------- | --- | ------- | --- | ------- | --- | ------- | 
|                            
|Gold                         |  | 29.5%  |  | 19.4%  |   | 22.4%  |  | 18.0%   |     | 6.8%    |     | 3.0%    |     | 9.4%    | 
|S&P 500 Index(1)             |  | 15.1%  |  | (2.9%  | ) | 2.3%   |  | 1.4%    |     | 9.1%    |     | n/a     | (2) | n/a (2) | 
|S&P/TSX Composite Index(1)   |  | 17.6%  |  | 2.1%   |   | 6.5%   |  | 6.6%    |     | 9.8%    |     | 9.1%    |     | 10.2%   | 
|MSCI EAFE Index(1)           |  | 8.2%   |  | (6.5%  | ) | 2.9%   |  | 3.9%    |     | 6.2%    |     | 9.7%    |     | 10.3%   | 
|S&P/TSX Global Gold Index(1) |  | 26.7%  |  | 11.4%  |   | 11.5%  |  | n/a     | (2) | n/a     | (2) | n/a     | (2) | n/a (2) | 
|                            

Source: Bloomberg, December 31, 2010

An investment in the Trust will not replicate the performance of spot gold prices, due to the fees and expenses associated with the Trust.

Beginning
in March of 2001, the price of gold has shown an upward trend. A rapid economic slowdown occurred in the world economy, while stock markets in the United States and other key
countries were falling. In addition, the rapid sequence of interest rate cuts in the United States reduced the risk/reward ratio that had previously been experienced by speculators who had been
trading in the gold market from the short side. Lower interest rates reduced the available contango, and this reduction, combined with steady prices, meant that such trades became increasingly
unattractive. After the first quarter of 2001, some mining companies started to reduce their hedge books,

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reducing
the amount of gold coming onto the market. Political uncertainties and the continuing economic downturn after the attacks of September 11, 2001 added to demand for gold investments.

More
recently, the upward price trend has reflected concerns over the global economy, equity markets and increased inflation concerns. Speculative activity also contributed to the increases in the
gold price. However, risk-averse investors have generally remained in the gold market.

The Rationale for Investing in Gold

Gold
ownership may help to protect a portfolio from inflation, deflation, stagflation, systemic failure, financial collapse and currency devaluation. Investors may purchase gold because of the view
that, unlike other investments, gold's tangible physical properties, negative correlation to other asset classes and use as an inflation hedge provide a way to reduce the risk of a portfolio.

Unlike
traditional stocks, bonds and money market instruments, gold is an asset whose price generally is independent of earnings, future growth or promised payments due to its certain physical and
tangible properties. These properties allow gold to be converted into other goods and investments, which may provide investors with more immediate liquidity than alternative investments. Unlike
paper-backed assets, gold cannot be created at will. Many investors also see gold as a store of value in times of uncertainty and market duress because it generally is independent of country, industry
and company specific issues.

Historically Strong Performance Relative to Other Asset Classes

Gold
has performed well over time, when compared to the returns of broader indices, such as the S&P 500, the S&P/TSX Composite Index, the MSCI EAFE Index and the Global Gold Index. Over the
39 years from August 1971 until December 31, 2010
and the 30-year, 20-year, and 10-year period ended December 31, 2010 the price of gold has grown at compounded annual rates of 9.4%, 3.0%, 6.8%, and 18.0%,
respectively. Gold has also outperformed over more recent time periods, growing 29.5% in the past year while the S&P 500 Index is up 15.1% over the same time period.

Low Correlation with Other Asset Classes

Gold's
low historical correlation with other major asset classes has been held to offer an investor the opportunity to diversify across a portfolio's risk spectrum. Over the long term, gold has
historically retained value more effectively than other asset categories because gold is typically a stronger inflationary hedge. Although gold is a commodity and an investment asset, it tends to move
independently of other key asset classes and commodities, especially during times of crisis.

Gold
as an investment has demonstrated a sustained, long term low or negative correlation to the S&P 500 index, widely regarded as the standard for measuring the performance of
large-cap U.S. companies. The following table displays gold's correlation with various equity indices (a value of 1 would indicate a perfect correlation and a value of
-1 would indicate a perfect inverse correlation):

Correlation of Gold Relative to Other Asset Classes(1)

|Asset Class          |  | Index(2)                  |  | 1-Year |  | 3-Year |  | 5-Year |   | 10-Year |     | 20-Year |     | 30-Year |     | 39-Year | 
|-------------------- |  | ------------------------- |  | ------ |  | ------ |  | ------ | - | ------- | --- | ------- | --- | ------- | --- | ------- | 
|                    
|U.S. Equity          |  | S&P 500 Index             |  | 0.60   |  | 0.30   |  | (0.30  | ) | 0.39    |     | 0.40    |     | n/a     | (3) | n/a (3) | 
|Canadian Equity      |  | S&P/TSX Composite Index   |  | 0.86   |  | 0.44   |  | 0.20   |   | 0.80    |     | 0.74    |     | 0.66    |     | 0.71    | 
|International Equity |  | MSCI EAFE Index           |  | 0.47   |  | 0.16   |  | (0.29  | ) | 0.60    |     | 0.64    |     | 0.55    |     | 0.64    | 
|Global Gold Equity   |  | S&P/TSX Global Gold Index |  | 0.97   |  | 0.86   |  | 0.77   |   | n/a     | (3) | n/a     | (3) | n/a     | (3) | n/a (3) | 
|                    

Source: Bloomberg, December 31, 2010

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Use as an inflation and U.S. dollar hedge

Historically,
gold has been viewed as an effective hedge against a decrease in the value of the U.S. dollar and inflation. Gold has maintained its long-term value, as measured by
purchasing power, more effectively than most currencies and fixed assets. In 1971, the U.S. moved away from the gold standard. As gold prices have generally increased during times of
U.S. dollar decline and during inflationary periods, gold may provide a hedge against money creation and purchasing power erosion.

Historically,
there is an approximate one-for-one relationship between the price of gold and the general price level in the United States, where a one percent rise in
U.S. inflation has resulted in a corresponding one percent rise in the long-term price of gold. However, short-run gold prices have demonstrated much more volatility,
and tend to fluctuate in response to any number of changes in the supply and demand forces, along with a number of other factors. These factors include political and financial shocks, as well as
short-run changes in the U.S. inflation rate, inflation volatility, credit risk, the U.S. dollar trade weighted exchange rate, the gold lease rate and the relative beta
for gold.

Quantitative Easing

Quantitative
easing describes monetary policy used to stimulate an economy where interest rates are either at or close to zero Normally, a central bank stimulates the economy indirectly by lowering
interest rates. When it cannot lower interest rates any further, it can attempt to seed the financial system with new money through quantitative easing.

In
practical terms, the central bank purchases financial assets, including treasuries and corporate bonds, from financial institutions (such as banks) using money it has created. The creation of this
new money is intended to seed the increase in the overall money supply through deposit multiplication by encouraging lending by these institutions and reducing the cost of borrowing, thereby
stimulating the economy.

Quantitative
easing results in the creation of additional money by the central bank through an increase of the credit in the central bank's own bank account. Many economists believe that quantitative
easing strategies could trigger higher inflation than desired, or even hyperinflation, if improperly used and if too much money is created. As noted above, gold represents an inflationary hedge that
investors may seek as a protection against such inflation or hyperinflation.

During
the global financial crisis of 2008-2009, the U.S. Federal Reserve and the Bank of England announced policies that represented a form of "quantitative easing" in order to
counter the effects of the crisis. The U.S. Federal Reserve recently announced an extension of its quantitative easing program in November 2010 that will see the program last until
June 2011. The U.S. Federal Reserve will expand its holdings of securities and intends on purchasing a further $600 billion of long-term treasury securities by the end
of Q2 2011 (~$75 billion worth per month).

Description of Units

General

The
Trust is authorized to issue an unlimited number of units in one or more classes and series of a class. Currently, the Trust has issued only one class or series of units. Each unit of a class or
series of a class represents an undivided ownership interest in the net assets of the Trust attributable to that class or series of a class of units. Units are transferable and redeemable at the
option of the unitholder in accordance with the provisions set forth in the Trust Agreement. All units of the same class or series of a class have equal rights and privileges with respect to all
matters, including voting, receipt of distributions from the Trust, liquidation and other events in connection with the Trust. Units and fractions thereof are issued only as fully paid and
non-assessable. Units have no preference, conversion, exchange or pre-emptive rights. Each whole unit of 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 additional units of the class except (i) if the net proceeds per unit to be received by the Trust are not less than 100% of the most recently calculated NAV per 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.

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Meetings of Unitholders

Each
unitholder is entitled to one vote for each whole unit held by the unitholder. Meetings of unitholders will be held by the Manager or the Trustee at such time and on such day as the Manager or
the Trustee may from time to time determine for the purpose of considering the matters required to be placed before such meetings in accordance with the Trust Agreement or applicable laws and for the
transaction of such other related matters as the Manager or the Trustee determines. Unitholders holding units representing in aggregate not less than 50% of the value of the net assets of the Trust as
determined in accordance with the Trust Agreement may requisition a meeting of unitholders by giving a written notice to the Manager or the Trustee setting out in detail the reason(s) for calling and
holding such a meeting. The Trustee will, upon the written request of the Manager or the unitholders holding units representing in aggregate not less than 50% of the value of the net assets of the
Trust as determined in accordance with the Trust Agreement, requisition a meeting of unitholders, provided that in the event of a request to call a meeting of unitholders made by such unitholders the
Trustee will not be obligated to call any such meeting until it has been satisfactorily indemnified by such unitholders against all costs of calling and holding such meeting. Unless otherwise required
by applicable securities laws or stock exchange rules, the Trust need only hold meetings of unitholders as described above and is not required to hold annual or other periodic meetings.

Meetings
of unitholders will be held at the principal office of the Trust or elsewhere in the municipality in which its office is located or, if the Manager so determines, at any other place in
Canada. Notice of the time and place of each meeting of unitholders will be given not less than 21 days before the day on which the meeting is to be held to each unitholder of record at
4:00 p.m., Toronto time, on the day on which the notice is given. Notice of a meeting of unitholders will state the general nature of the matters to be considered by the meeting. A meeting of
unitholders may be held at any time and place without notice if all the unitholders entitled to vote thereat are present in person or represented by proxy or, if those not present or represented by
proxy waive notice of, or otherwise consent to, such meeting being held.

A
quorum for the transaction of business at any meeting of unitholders will be at least two unitholders holding not less than 5% of the outstanding units on such date present in person or represented
by proxy and entitled to vote thereat. The chairman at a meeting of unitholders may, with the consent of the meeting and subject to such conditions as the meeting may decide, adjourn the meeting from
time to time and from place to place.

At
any meeting of unitholders every person will be entitled to vote who, as of the end of the business day immediately preceding the date of the meeting, is entered in the register of the Trust,
unless in the notice of meeting and accompanying materials sent to unitholders in respect of the meeting a record date is established for persons entitled to vote thereat. The Trust is permitted to
establish a record date for distributions in accordance with the policies of the TSX and NYSE Arca pursuant to the Exemptive Relief. See "Exemptions and Approvals".

For
the purpose of determining the unitholders who are entitled to receive notice of and to vote at any meeting or any adjournment thereof, or for the purpose of any action other than as provided in
the Trust Agreement for valuation, computation and distribution of net income and net realized capital gains, any other additional distributions, and taxes, the Manager may fix a date not more than
60 days nor fewer than 30 days prior to the date of any meeting of unitholders or other action as a record date for the determination of unitholders entitled to receive notice of and to
vote at such meeting, or any adjournment thereof, or to receive such distributions or to be treated as unitholders of record for purposes of such other action, and any unitholder who was a unitholder
at the time so fixed will be entitled to receive notice of and to vote at, such meeting, or any adjournment thereof, or to be treated as a unitholder of record for purposes of such other action, even
though he or she has since that date disposed of his or her units and no unitholder becoming such after that date will be entitled to receive notice of and to vote at such meeting, or any adjournment
thereof, or to be treated as a unitholder of record for purposes of such other action.

At
any meeting of unitholders, any unitholder entitled to vote thereat may vote by proxy and a proxy need not be a unitholder, provided that no proxy may be voted at any meeting unless it has been
placed on file with the Manager, or with such other agent of the Trust as the Manager may direct, prior to the commencement of such meeting. If approved by the Manager, proxies may be solicited naming
the Manager as proxy and the cost of such solicitation will be paid out of the property of the Trust. When any unit is held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such unit, but if more than one of them is present at

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such
meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote will not be received in respect of such unit. The instrument
appointing any proxy will be in such form and executed in such manner as the Manager may from time to time determine.

At
any meeting of unitholders every question will, unless otherwise required by the Trust Agreement or applicable laws, be determined by an ordinary resolution on the question which must be approved
by the vote, in person or by proxy, of unitholders holding units representing in aggregate not less than 50% of the value of the net assets of the Trust as determined in accordance with the Trust
Agreement. See "Responbility for Operation of the Trust  The Trustee  Unitholder Approval".

Subject
to the provisions of the Trust Agreement or applicable laws, any question at a meeting of unitholders will be decided by a show of hands unless a poll thereon is required or demanded. Upon a
show of hands every person who is present and entitled to vote will have one vote. If demanded by any unitholder at a meeting of unitholders or required by applicable laws, any question at such
meeting will be decided by a poll. Upon a poll each person present will be entitled, in respect of the units which the unitholder is entitled to vote at the meeting upon the question, to one vote for
each whole unit held and the result of the poll so taken will be the decision of the unitholders upon the said question.

A
resolution in writing forwarded to all unitholders entitled to vote on such resolution at a meeting of unitholders and signed by the requisite number of unitholders required to obtain approval of
the matter addressed in such resolution is as valid as if it had been passed at a meeting of unitholders in accordance with the Trust Agreement.

Any
resolution passed in accordance with the Trust Agreement will be binding on all unitholders and their respective heirs, executors, administrators, other legal representatives, successors and
assigns, whether or not such unitholder was present or represented by proxy at the meeting at which such resolution was passed and whether or not such unitholder voted against such resolution.

Unitholder Liability

The
Trust Agreement provides that no unitholder will be held to have any personal liability as a unitholder and that there will be no resort to the unitholder's private property for satisfaction of
any obligation or claim arising out of or in connection with any contract or obligation of any of the Trust, the Manager or the Trustee or any obligation that a unitholder would otherwise have to
indemnify the Trustee for any personal liability incurred by the Trustee as such, but rather, only the Trust's assets are intended to be liable and subject to levy or execution for such satisfaction.
If the Trust acquires any investments subject to existing contractual obligations, the Manager, or the Trustee on the direction of the Manager, as the case may be, will use its best efforts to have
any obligations modified so as to achieve disavowal of contractual liability. Further, the Trust Agreement provides that the Manager will cause the operations of the Trust to be conducted, with the
advice of counsel, in such a way and in such jurisdictions as to avoid, as far as possible, any material risk of liability on the unitholders of claims against the Trust and will, to the extent it
determines to be possible and reasonable, including the cost of premiums, cause the Trust to carry insurance for the benefit of the unitholders in such amounts as it considers adequate to cover any
such foreseeable non-contractual or non-excluded contractual liability.

Unitholder Reporting

The
Manager will forward to unitholders a copy of the audited annual financial statements of the Trust within 90 days of each fiscal year-end as well as unaudited interim financial
statements of the Trust, which will be reviewed by the Trust's auditors, within 60 days of the end of each interim period. Within 45 days of the end of each fiscal quarter, the Manager
will make also available to unitholders an unaudited quarterly summary of the assets of the Trust and the value of net assets of the Trust as of the end of such quarter.

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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Calculation of Net Asset Value

The
calculation of the value of net assets of the Trust is the responsibility of the Manager, who may consult with the Trust's valuation agent, the Mint, the Trust's custodians and the auditors.
Pursuant to a valuation services agreement, the Manager appointed RBC Dexia as valuation agent to calculate the value of the net assets of the Trust and the Class Net Asset Value
(as hereinafter defined) for each class or series of a class of units as of 4:00 p.m., Toronto time, on each business day.

Pursuant
to the Trust Agreement, the value of the net assets of the Trust will be determined for the purposes of subscriptions and redemptions as of the valuation time on each business day in
U.S. dollars. The value of the net assets of the Trust determined on the last day of each year that is also a valuation date of the Trust will include all income, expenses of the Trust or any
other items to be accrued to December 31 of such year and since the last calculation of the NAV or the Class Net Asset Value per unit (as hereinafter defined), for the purpose of the
distribution of net income and net realized capital gains of the Trust to unitholders.

The
value of the net assets of the Trust as of the valuation time on each business day is the amount obtained by deducting from the aggregate fair market value of the assets of the Trust as of such
date an amount equal to the fair value of the liabilities of the Trust (excluding all liabilities represented by outstanding units, if any) as of such date. The value of net assets per unit is
determined by dividing the value of the net assets of the Trust on a date by the total number of units then outstanding on such date. Subject to directions from the Manager as required, the value of
the net assets of the Trust as of the valuation time on a date is determined by the Trust's valuation agent in accordance with the following:



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Calculation of Class Net Asset Value and Class Net Asset Value per Unit



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For
the purposes of the foregoing disclosure the following capitalized terms have the meanings set forth below:

"Net
change in non-portfolio assets" on a date means:



"Proportionate
share", when used to describe (i) an amount to be allocated to any one class or series of a class of the Trust, means the total amount to be allocated to all classes or series of
classes of the Trust multiplied by a fraction, the numerator of which is the Class Net Asset Value of such class or series of a class and the denominator of which is the value of the net assets of the
Trust at such time, and (ii) a unitholder's interest in or share of any amount, means, after an allocation has been made to each class or series of a class as provided in clause (i),
that allocated amount multiplied by a fraction, the numerator of which is the number of units of that class or series of a class registered in the name of that unitholder and the denominator of which
is the total number of units of that class or series of a class then outstanding (if such unitholder holds units of more than one class or series of a class, then such calculation is made in
respect of each class or series of a class and aggregated).

The
calculation of the value of the net assets of the Trust and the NAV for each class or series of a class of units as of the valuation time on each valuation date is for the purposes of determining
subscription prices and redemption values of units and not for the purposes of accounting in accordance with IFRS. The value of the net assets of the Trust calculated in this manner will be used for
the purpose of calculating the Manager's and other service providers' fees and will be published net of all paid and payable fees.

Suspension of Calculation of Net Asset Value Per Unit

During
any period in which the right of unitholders to request a redemption of their units for physical gold bullion and/or cash is suspended, the Manager, on behalf of the Trust, will direct the
Trust's valuation agent to suspend the calculation of the value of the net assets of the Trust, the NAV, the Class Net Asset Value and the net asset value per unit for each class or series of a class
of units. During any such period of suspension, the Trust will not issue or redeem any units. As noted in "Redemption of Units  Suspension of Redemptions," in
the event of any such suspension or termination thereof, the Manager will issue a press release announcing the suspension or the termination of such suspension, as the case may be.

Reporting of Net Asset Value

The
value of the net assets of the Trust and the NAV is updated on a daily basis or as determined by the Manager in accordance with the Trust Agreement and is made available as soon as practicable at
no cost on the Trust's website (www.sprottphysicalgoldtrust.com) or by calling the Manager at (416) 943-6707 or toll free at
1-866-299-9906 (9:00 a.m. to 5:00 p.m., Toronto time). Information contained in, or connected to, the Manager's website is not incorporated into, and
does not form part of, this annual information form.

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Market for the Units

The
Trust's units are traded on NYSE Arca and the TSX under the symbol "PHYS" and "PHY.U", respectively. The units traded on an "if, as and when" basis from February 26, 2010 until
March 2, 2010. Regular trading commenced on March 3, 2010 upon closing of the Trust's initial public offering. Purchases of units can be made on the NYSE ARCA and the TSX pursuant to the
Exemptive Relief. See "Exemptions and Approvals".

Redemption of Units

Subject
to the terms of the Trust Agreement and the Manager's right to suspend redemptions in the circumstances described below, units may be redeemed at the option of a unitholder in any month for
physical gold bullion or cash. All redemptions will be determined using U.S. dollars, regardless of whether the redeemed units were acquired on the NYSE Arca or the TSX. Redemption requests
will be processed on the last business day of the applicable month.

Redemptions for Physical Gold Bullion

Unitholders
whose units are redeemed for physical gold bullion will be entitled to receive a redemption price equal to 100% of the NAV of the redeemed units on the last day of the month on which the
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 one London
Good Delivery bar or an integral multiple thereof, plus applicable expenses. A "London Good Delivery bar" weighs between 350 and 430 troy ounces (generally, most bars weigh between 390 and
410 troy ounces). Any fractional amount of redemption
proceeds in excess of a London Good Delivery bar or an integral multiple 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
units for physical gold bullion may be limited by the sizes of London Good Delivery bars held by the Trust at the time of redemption. A unitholder redeeming units for gold 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 gold bullion for units that are
being redeemed and the applicable gold storage in-and-out fees. For delivery in the continental U.S. and Canada, delivery expenses are currently estimated to be $5 per troy
ounce at current rates. Current gold storage in-and-out fees are approximately $5 per bar with a minimum charge of $50.

Procedure to Redeem for Physical Gold Bullion

A
unitholder that owns a sufficient number of units who desires to exercise redemption privileges for physical gold bullion must do so by instructing his, her or its broker, who must be a direct or
indirect participant of DTC or CDS, to deliver to the Trust's transfer agent, Equity Transfer & Trust Company (the "Transfer Agent") on behalf of the unitholder a written notice,
(the "Gold Redemption Notice"), of the unitholder's intention to redeem units for physical gold bullion (the Transfer Agent is permitted to directly accept redemption requests pursuant
to the Exemptive Relief. See "Exemptions and Approvals"). A Gold Redemption Notice must be received by the Trust's transfer agent no later than 4:00 p.m., Toronto time, on the 15th day
of the month in which the Gold 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 Gold Redemption Notice
received after such time will be processed in the next month. Any Gold Redemption Notice must include a valid signature guarantee to be deemed valid by the Trust.

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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Except
as provided under "Redemption of Units  Suspension of Redemptions" below, by instructing a broker to deliver to the Trust's transfer agent a Gold
Redemption Notice, the unitholder will be deemed to have irrevocably surrendered his, her or its units for redemption and appointed such broker to act as his, her or its exclusive settlement agent
with respect to the exercise of such redemption privilege and the receipt of payment in connection with the settlement of obligations arising from such exercise.

Once
a Gold Redemption Notice is received by the Trust's transfer agent, the transfer agent, together with the Manager, will determine whether such Gold Redemption Notice complies with the applicable
requirements, is for an amount of gold that is equal to at least one London Good Delivery bar in the Trust's inventory at the Mint plus applicable expenses, and contains delivery instructions that are
acceptable to the armored service transportation carrier. If the Trust's transfer agent and the Manager determine that the Gold Redemption Notice complies with all applicable requirements, it will
provide a notice to such redeeming unitholder's broker confirming that the Gold Redemption Notice was received and determined to be complete.

Any
Gold Redemption Notice delivered to the Trust's transfer agent regarding a unitholder's intent to redeem units that the transfer agent or the Manager, in their sole discretion, determines to be
incomplete, not in proper form, not duly executed or for an amount of physical gold bullion less than at least one London Good Delivery bar held by the Trust at the Mint, or in an amount that cannot
be satisfied based on the bar sizes of physical gold bullion owned by the Trust will for all purposes be void and of no effect, and the redemption privilege to which it relates will be considered for
all purposes not to have been exercised thereby. If the Trust's transfer agent and the Manager determine that the Gold Redemption Notice does not comply with the applicable requirements, the transfer
agent will provide a notice explaining the deficiency to the unitholder's broker.

If
the Gold Redemption Notice is determined to have complied with the applicable requirements, the Trust's transfer agent and the Manager will determine on the last business day of the applicable
month the amount of physical gold bullion and the amount of cash that will be delivered to the redeeming unitholder. Also on the last business day of the applicable month, the redeeming unitholder's
broker will deliver the redeemed units to CDS or DTC, as the case may be, for cancellation.

Because
London Good Delivery bars vary in weight from 350 to 430 troy ounces, the Trust's transfer agent and the Manager have some discretion on the amount of physical gold bullion the
redeeming unitholder will receive based on the weight of gold bars owned by the Trust and the amount of cash necessary to cover the expenses associated with the redemption and delivery that must be
paid by the redeeming unitholder. Once such determination has been made, the Trust's transfer agent will inform the broker
through which the unitholder has delivered its Gold Redemption Notice of the amount of physical gold bullion and cash that the redeeming unitholder will receive.

Based
on instructions from the Manager, the Mint will release the requisite amount of physical gold bullion from its custody to the armored transportation service carrier. See "Redemption of
Units  Transporting the Gold from the Mint to the Redeeming Unitholder." As directed by the Manager, any cash to be received by a redeeming unitholder in
connection with a redemption of units for physical gold bullion will be delivered or caused to be delivered by the Manager to the unitholder's brokerage account within 10 business days after
the month in which the redemption is processed. The Trust is permitted to pay the redemption price later than three business days after calculating the NAV per unit pursuant to the Exemptive Relief.
See "Exemptions and Approvals".

Transporting the Gold from the Mint to the Redeeming Unitholder

A
unitholder redeeming units for physical gold bullion will receive the physical gold bullion from the Mint. Physical gold bullion received by a unitholder as a result of a redemption of units will be
delivered by armored transportation service carrier pursuant to delivery instructions provided by the unitholder to the Manager. The armored transportation service carrier will be engaged by or on
behalf of the redeeming unitholder. Such physical gold bullion can be delivered (i) to an account established by the unitholder at an institution located in North America authorized to accept
and hold London Good Delivery bars; (ii) in the United States, to any physical address (subject to approval by the armored transportation service carrier); (iii) in Canada, to any
business address (subject to approval by the armored transportation service carrier); and (iv) outside of the United States and Canada, to any address approved by the armored
transportation service carrier. Physical gold bullion delivered to an institution located in North America authorized to accept and hold London Good Delivery bars will likely retain its London Good
Delivery status while in the custody of such institution; physical gold bullion delivered pursuant to a unitholder's

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delivery
instruction to a destination other an institution located in North America authorized to accept and hold London Good Delivery bars will no longer be deemed London Good Delivery once received
by the unitholder.

Costs
associated with the redemption of units and the delivery of physical gold bullion will be borne by the redeeming unitholder, and current rates are estimated to be $5 per troy ounce for delivery
to addresses in the continental United States and Canada. Also, the redeeming unitholder will be responsible for reimbursing the Trust for in-and-out fees charged to the
Trust by the Mint, currently $5 per bar plus an administrative fee of $50. Unitholders interested in redeeming units for physical gold should contact the Manager for current costs associated with the
delivery of gold pursuant to the unitholder's delivery instructions.

The
armored transportation service carrier will receive physical gold bullion in connection with a redemption of units approximately 10 business days after the end of the month in which the
redemption notice is processed. Once the physical gold bullion representing
the redeemed units has been placed with the armored transportation service carrier, the Mint will no longer bear the risk of loss of, and damage to, such physical gold bullion. In the event of a loss
after the physical gold bullion has been placed with the armored transportation service carrier, the unitholder will not have recourse against the Trust or the Mint.

Example of a Redemption for Physical Gold Bullion

In
the following example of a redemption of units for physical gold bullion, we have assumed the following:

|Date that the Gold Redemption Notice was received in good order by the Trust's transfer agent |  | June 12          | 
|--------------------------------------------------------------------------------------------- |  | ---------------- | 
|Date by which the Gold Redemption Notice must be received to be processed in that month       |  | June 15          | 
|Number of units redeemed                                                                      |  | 42,000 units     | 
|NAV on June 30                                                                                |  | $10.00           | 
|Price of gold per troy ounce on June 30                                                       |  | $1,000           | 
|Amount of physical gold bullion represented by each unit                                      |  | 1/100 troy ounce | 
|Delivery fee per troy ounce                                                                   |  | $5               | 
|In-and-out fee per bar charged by the Mint                                                    |  | $5               | 
|Administrative fee charged by the Mint                                                        |  | $50              | 

The
Gold Redemption Notice is received by the Trust's transfer agent before June 15, so the redemption will be processed in the month ending June 30 (for purposes of this example,
we have assumed that June 15, June 30 and July 1 are business days). The Trust's
transfer agent and the Manager review the Gold Redemption Notice and determine that (i) it complies with all applicable requirements and (ii) the number of units redeemed is equal to
420 troy ounces of gold, which is sufficient in amount for one London Good Delivery bar plus expected expenses. For purposes of estimating the amount of physical gold bullion to be received by
the redeeming unitholder, the Manager estimates the expenses at approximately $2,000; at $1,000 per troy ounce, such expenses equal approximately 2 ounces. Therefore, the Manager determines
that the redeeming unitholder will receive approximately 418 troy ounces of physical gold bullion and notifies the Mint that a redemption of approximately 418 troy ounces is scheduled.
The transfer agent then sends a notice to the redeeming unitholder's broker that the Gold Redemption Notice has been received and determined to be complete.

The
Mint reviews the list of London Good Delivery bars owned by the Trust and stored at the Mint. The Mint then determines that there are two bars that fall into the desired range, one weighing
400 troy ounces and one weighing 410 troy ounces, and informs the Manager of the available bars.

The
Manager then determines the delivery and in-and-out expenses for a gold bar weighing 410 troy ounces, which are $5 × 410 plus $5, plus $50, for a
total of $2,105. Since the redemption request is for an amount equal to 420 troy ounces of gold, the redeeming unitholder will receive one London Good Delivery bar weighing 410 troy
ounces plus cash in an amount equal to 10 troy ounces of gold at NAV less delivery and in-and-out expenses, which equals $10,000 less $2,105, or $7,895. The London Good
Delivery bar weighing 410 troy ounces

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will
be received by the armored transportation service carrier within 10 business days of June 30, and the $7,895 in cash will be delivered to the redeeming unitholder's brokerage
account.

On
June 30, the redeeming unitholder's broker will deliver 42,000 units to CDS or DTC and, on July 1, the Trust's transfer agent will observe the newly adjusted CDS or DTC
position and cancel the 42,000 redeemed units.

Redemptions for Cash

Unitholders
whose units are redeemed for cash will be entitled to receive a redemption price per unit equal to 95% of the lesser of (i) the volume-weighted average trading price of the units
traded on the NYSE Arca or, if trading has been suspended on the NYSE Arca, the trading price of the 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 units as of 4:00 p.m., Toronto time, on the last day of such month on which the NYSE
Arca is open for trading. The redemption price is permitted to be less than 100% of the NAV per unit pursuant to the Exemptive Relief. See "Exemptions and Approvals." Cash redemption proceeds will be
transferred to a redeeming unitholder approximately three business days after the end of the month in which such redemption request is processed by the Trust.

Procedure to Redeem for Cash

To
redeem units for cash, a unitholder must instruct the unitholder's broker to deliver a notice to redeem units for cash (the "Cash Redemption Notice") to the Trust's transfer agent
(the Transfer Agent is permitted to accept redemption requests pursuant to the Exemptive Relief. See "Exemptions and Approvals"). A Cash Redemption Notice must be received by the Trust's
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.

Except
as provided under "Redemption of Units  Suspension of Redemptions" below, by instructing a Broker to deliver to the Transfer Agent a Cash Redemption
Notice, the unitholder will be deemed to have irrevocably surrendered his, her or its units for redemption and appointed such Broker to act as his, her or its exclusive settlement agent with respect
to the exercise of such redemption privilege and the receipt of payment in connection with the settlement of obligations arising from such exercise.

Any
Cash Redemption Notice delivered to the Trust's transfer agent regarding a unitholder's intent to redeem units that the Trust's transfer agent or the Manager determines to be incomplete, not in
proper form or not duly executed will for all purposes be void and of no effect and the redemption privilege to which it relates will be considered for all purposes not to have been exercised thereby.
For each Cash Redemption Notice, the Trust's transfer agent will notify the redeeming unitholder's broker that such Cash Redemption Notice has been deemed insufficient or accepted and duly processed,
as the case may be.

Upon
receipt of the Cash Redemption Notice, the Trust's transfer agent and the Manager will determine on the last business day of the applicable month the amount of cash that will be delivered to the
redeeming unitholder. Also on the last business day of the applicable month, the redeeming unitholder's broker will deliver the redeemed units to CDS or DTC, as the case may be, for cancellation.

Canadian Tax Implications of Redemption

Pursuant
to the Trust Agreement, the Manager, in its sole discretion, may allocate and, where applicable, designate to a unitholder who has redeemed units during a year an amount equal to any net
income or net realized capital gains realized by the Trust for the year as a result of the disposition of any of the Trust's property to satisfy the Gold Redemption Notice or the Cash Redemption
Notice, as the case may be, given by such unitholder or such other amount that is determined by the Manager to be reasonable. See "Material Income Tax Considerations."

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Suspension of Redemptions

The
Manager, on behalf of the Trust, may suspend the right of unitholders to request a redemption of their units or postpone the date of delivery or payment of the redemption proceeds (whether
physical gold bullion and/or cash, as the case may be) with the prior approval of Canadian securities regulatory authorities having jurisdiction, where required, for any period during which the
Manager determines that conditions exist which render impractical the sale of assets of the Trust or which impair the ability of the Manager to determine the value of the assets of the Trust or the
redemption amount for the units.

In
the event of any such suspension, the Manager will issue a press release announcing the suspension and will advise the Trustee, the Trust's valuation agent and any other agents appointed by the
Manager, as applicable. The suspension may apply to all requests for redemption received prior to the suspension, but as for which payment has not been made, as well as to all requests received while
the suspension is in effect. All unitholders making such requests will be advised by the Manager of the suspension and that the redemption will be effected at a price determined on the first valuation
date that the net asset value per unit is calculated following the termination of the suspension. All such unitholders will have, and will be advised that during such suspension of redemptions that
they have, the right to withdraw their requests for redemption. The suspension will terminate in any event on the first business day on which the condition giving rise to the suspension has ceased to
exist or when the Manager has determined that such condition no longer exists, provided that no other condition under which a suspension is authorized then exists, at which time the Manager will issue
a press release announcing the termination of the suspension and will advise the Trustee, the Trust's valuation agent and any other agents appointed by the Manager, as applicable. Subject to
applicable Canadian and U.S. securities laws, any declaration of suspension made by the Manager, on behalf of the Trust, will be conclusive.

Suspension of Calculation of Net Asset Value Per Unit

During
any period in which the right of unitholders to request a redemption of their units for physical gold bullion and/or cash is suspended, the Manager, on behalf of the Trust, will direct the
Trust's valuation agent to suspend the calculation of the value of the net assets of the Trust, the NAV, the Class Net Asset Value and the net asset value per unit for each class or series of a class
of units. During any such period of suspension, the Trust will not issue or redeem any units. In the event of any such suspension or
termination thereof, the Manager will issue a press release announcing the suspension or the termination of such suspension, as the case may be.

Responsibility for Operation of the Trust

The Manager

Pursuant
to the Trust Agreement and the management agreement between the Trust and Sprott Asset Management LP dated February 24, 2010 (the "Management Agreement"), the Manager
acts as the manager of the Trust. The Manager is a limited partnership formed and organized under the laws of the Province of Ontario, Canada, pursuant to theLimited
Partnerships Act(Ontario) by declaration dated September 17, 2008. The general partner of the Manager is Sprott Asset Management GP Inc., which is a
corporation incorporated under the laws of the Province of Ontario, Canada, on September 17, 2008. The general partner 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
listed on the TSX under the symbol "SII." Pursuant to an internal corporate reorganization of Sprott Inc. completed on June 1, 2009, the Manager acquired the assets related to Sprott
Asset Management Inc.'s portfolio management business.

As
of December 31, 2010, the Manager, together with its affiliates and related entities, had assets under management totaling approximately Cdn$8.5 billion, of which approximately
Cdn$1.7 billion are in gold bullion, and provided management and investment advisory services to many entities, including private investment funds, the Sprott Mutual Funds, the Sprott
discretionary managed accounts, and management of certain companies through its subsidiary, Sprott Consulting LP. The Manager also acts as manager for the Sprott Gold Bullion Fund, a Canadian
public mutual fund that invests in physical gold bullion.

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GRAPHIC

---

The registered office of the Manager is located at the Royal Bank Plaza, South Tower, Suite 2700, P.O. Box 27, Toronto, Ontario,
M5J 2J1. Further contact information of the Manager is as follows:



The
names, places of residence and present positions held by the directors and officers of the Manager and/or of Sprott Asset Management GP Inc., the general partner of the Manager
(the "GP"), are listed below.

|Name and Municipality of Residence           |  | Position with the Manager and/or the GP                                                                                                           |  | Principal Occupation                                                                                                   | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | 
|                                            
|Eric Steven Sprott
Oakville, Ontario         |  | Chief Executive Officer, Chief Investment Officer and Senior Portfolio Manager of the Manager, and Director and Chief Executive Officer of the GP |  | Chief Executive Officer, Chief Investment Officer and Senior Portfolio Manager of the Manager; Chairman of Sprott Inc. | 
|                                            
|Steven Rostowsky
Thornhill, Ontario          |  | Chief Financial Officer of the Manager, and Director and Chief Financial Officer of the GP                                                        |  | Chief Financial Officer of the Manager and Sprott Inc.                                                                 | 
|                                            
|James Robert Fox
Toronto, Ontario            |  | President of the Manager and Director of the GP                                                                                                   |  | President of the Manager; Registered Representative of Sprott Private Wealth LP                                        | 
|                                            
|Peter James Hodson
Kitchener, Ontario        |  | Senior Portfolio Manager of the Manager; Chairman and Director of the GP                                                                          |  | Senior Portfolio Manager of the Manager                                                                                | 
|                                            
|Kirstin Heath McTaggart
Mississauga, Ontario |  | Chief Compliance Officer of the Manager and Director of the GP                                                                                    |  | Chief Compliance Officer of both the Manager and Sprott Private Wealth LP                                              | 
|                                            

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|Allan Jacobs
Toronto, Ontario    |  | Senior Portfolio Manager and Director of Small Cap Investments of the Manager and Director of the GP |  | Senior Portfolio Manager and Director of Small Cap Investments of the Manager | 
|-------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- | 
|                                
|John Ciampaglia
Caledon, Ontario |  | Chief Operating Officer of the Manager                                                               |  | Chief Operating Officer of the Manager                                        | 
|                                

Each
of the directors and officers has worked for Sprott Asset Management LP (or Sprott Asset Management Inc., the manager of the Trust prior to June 1, 2009) for the past
five years except for Steven Rostowsky, Allan Jacobs and John Ciampaglia.

Mr. Rostowsky
was the Chief Financial Officer and Chief Compliance Officer of Guardian Group of Funds Ltd. from July 2001 to January 2005. He was the Senior
Vice-President, Finance and Administration at the Investment Dealers Association of Canada from January 2005 to March 2008.

Mr. Jacobs
was the head of Canadian Small Cap Equities and Portfolio Manager at Sceptre Investment Counsel Limited from April 1993 to August 2007.

Mr. Ciampaglia
was a Senior Executive at Invesco Trimark from 2001 to March 2010.

Duties and Services Provided by the Manager

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 units. The internet address of the website is www.sprottphysicalgoldtrust.com. 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 annual
information form.

Management
of the Trust is overseen by Eric Sprott, Charles Oliver and Jamie Horvat. Messrs Oliver and Horvat joined the Manager's predecessor in January 2008 with a focus on the Sprott
Gold and Precious Minerals Fund and currently also manage the Sprott Opportunities Hedge Fund LP, the Sprott Opportunities RSP Fund, the Sprott Opportunities Offshore Fund, Ltd., the
Sprott Opportunities Capital Fund, L.P., the Sprott Global Equity Fund and the Sprott All Cap Fund. The long-time experience in the gold industry of the Manager, its predecessor,
Sprott Asset Management Inc., and its affiliates has permitted them to gain an extensive knowledge base in the business of gold, including buying, selling, valuing, pricing, securing or storing
gold or gold-related assets. All physical gold bullion purchased by the Trust is or will be London Good Delivery bars. Based on compliance procedures established by the Manager over time,
once the Trust has agreed to purchase gold bars and the order is executed, on delivery each bar is individually checked against its serial number.

Powers and Duties of the Manager

Pursuant
to the Trust Agreement and Management Agreement, the Manager has the full authority and exclusive power to manage and direct the business and affairs of the Trust including, without
limitation, to provide the Trust with all necessary investment management services and all clerical, administrative and operational services.

In
particular, the Manager has the following responsibilities with respect to the Trust:



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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

---



The
Trust may terminate immediately the Management Agreement if the Manager is, in the opinion of the Trustee, in material default of its obligations under Management Agreement or 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 pursuant to the Trust Agreement. In addition, the Trust may terminate immediately the Management Agreement where (i) the Manager has been declared bankrupt or insolvent or has entered
into liquidation or winding-up, whether compulsory or voluntary (and not merely a voluntary liquidation for the purposes of amalgamation or reconstruction); (ii) the Manager
makes a general assignment for the benefit of its creditors or otherwise acknowledges its insolvency; or (iii) the assets of the Manager have become subject to seizure or confiscation by any
public or governmental authority.

The
Manager has the right to resign as Manager of the Trust by giving notice in writing to the Trustee and the unitholders not less than 90 days prior to the date on which such resignation is
to take effect. Such resignation will take effect on the date specified in such notice. Notwithstanding the foregoing, no approval of, or notice to, unitholders is required to be provided by the
Manager if a change in manager is the result of a reorganization of the current Manager which does not result in a change of control of the then current Manager. The Manager will appoint a successor
manager of the Trust, and, unless the successor manager is an affiliate of the Manager, such appointment must be approved by unitholders holding units representing in aggregate not less than 50% of
the value of the net assets of the Trust as determined in accordance with the Trust Agreement. If, prior to the effective date of the Manager's resignation, a successor manager is not appointed or the
unitholders do not approve of the appointment of the successor manager as required under the Trust Agreement, the Trust will be terminated and dissolved upon the effective date of resignation of the
Manager and, after providing for the liabilities of the Trust, the property of the Trust will be distributed to the unitholders in accordance with the provisions of the Trust Agreement and the Trustee
and the Manager will continue to act as trustee and manager, respectively, of the Trust until such property of the Trust has been so distributed. See "Termination of the Trust."

Standard of Care and Indemnification of the Manager

The
Manager is required to exercise the powers and discharge the duties of its office honestly, in good faith and in the best interests of the Trust and in connection therewith will exercise the
degree of care, diligence and skill that a reasonably prudent professional manager would exercise in comparable circumstances.

The
Manager may employ or engage, and rely and act on information or advice received from auditors, underwriters, other distributors, brokers, depositories, the Mint, custodians, electronic data
processors, advisors, lawyers and others and will not be responsible or liable for the acts or omissions of such persons or for any other matter, including any loss or depreciation in the value of the
net assets of the Trust or any particular asset of the Trust, provided that the Manager acted in good faith in accordance with its standard of care set out in the Trust Agreement in relying on such
information or advice. All information provided by the Manager to the Trust or the Trustee will be complete, accurate, and contain no misrepresentations; however, the Manager will be entitled to
assume that any information received from the Trustee, the Mint, the custodian, or any sub-custodian, or their respective authorized representatives associated with the
day-to-day operation of the Trust is accurate and complete and no liability will be incurred by the Manager as a result of any error in such information or

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any
failure to receive any notices required to be delivered pursuant to the Trust Agreement, except to the extent that any such information provided to, or failure to receive any notices by, the
Manager arises or results from the Manager's failure to comply with the terms of the Trust Agreement or the Management Agreement in providing any required directions or information related thereto.

The
Manager will not be required to devote its efforts exclusively to or for the benefit of the Trust and may engage in other business interests and may engage in other activities similar or in
addition to those relating to the activities to be performed for the Trust. In the event that the Manager, its partners, employees, associates and affiliates or any of them now or hereafter carry on
activities
competitive with those of the Trust or buy, sell or trade in assets and portfolio securities of the Trust or of other investment funds, none of them will be under any liability to the Trust or to the
unitholders for so acting.

The
Manager, its affiliates and agents, and their respective directors, partners, officers and employees will at all times be indemnified and held harmless by the Trust from and against all legal
fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with the Manager's services provided to the Trust pursuant to the Trust Agreement and the
Management Agreement, provided that the Trust has reasonable grounds to believe that the action or inaction that caused the payment of the legal fees, judgments and amounts paid in settlement was in
the best interests of the Trust and provided that such person or entities will not be indemnified by the Trust where: (i) there has been negligence, willful misconduct, willful neglect,
default, bad faith or dishonesty on the part of the Manager or such other person or entity; (ii) a claim is made as a result of a misrepresentation contained in this or in any prospectus or
like offering document of the Trust or any document filed in connection with the Trust's periodic filing requirements distributed or filed in connection with the issue of the units or applicable
securities laws; or (iii) the Manager has failed to fulfill its standard of care or its other obligations in accordance with applicable laws or the provisions as set forth in the Trust
Agreement and the Management Agreement, unless in an action brought against the Manager or such persons or entities they have achieved complete or substantial success as a defendant.

Conflicts of Interest of the Manager

The
Manager is responsible for the management, administration and investment management of the portfolio held by the Trust. The Manager provides, and may in the future provide, management and/or
investment advisory services to other corporations, limited partnerships or other investment funds or managed accounts in addition to the Trust including, without limitation, the Sprott Gold Bullion
Fund. In the event that the Manager elects to undertake such activities and other business activities in the future, the Manager and its principals may be subject to conflicting demands in respect of
allocating management time, services and other functions. The Manager and its principals and affiliates endeavor to treat each client, investment pool and managed account fairly and not to favor one
client, investment pool or managed account over another.

In
executing its duties on behalf of the Trust, the Manager is subject to the provisions of the Trust Agreement, the Management Agreement and the Manager's Code of Ethics (a copy of which is
available for review upon request at the offices of the Manager), which provide that the Manager will execute its duties in good faith and with a view to the best interests of the Trust and its
unitholders.

Regulation of the Manager

The
Manager is registered with the Ontario Securities Commission as a portfolio manager and as an exempt market dealer. The Manager's operations are subject to the rules, regulations and policies of
the Canadian Securities Administrators. The distribution of the securities of the various investment funds managed by the Manager is also subject to regulation under the securities legislation of
those jurisdictions where such funds are sold.

The
Manager is subject to regulations that cover all aspects of the securities business, including sales methods, trading practices, use and safekeeping of funds and securities, capital structure,
record keeping, conflicts of interest and the conduct of directors, officers and employees. The Ontario Securities Commission has jurisdiction over the Manager and its activities and is empowered to
conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension of registration of the Manager or its directors,
officers or employees. The Manager is also subject to rules respecting the maintenance of minimum regulatory

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working
capital and insurance. The Manager regularly reviews its policies, practices and procedures to ensure that they comply with current regulatory requirements and employees are routinely updated
on all relevant legal requirements.

The
Manager is also subject to Canadian federal and provincial privacy laws regarding the collection, use, disclosure and protection of client information. ThePersonal
Information Protection and Electronic Documents Act(Canada) ("PIPEDA"), which is the Canadian federal privacy legislation governing the private sector, requires that
organizations only use personal information for purposes that a reasonable person would consider appropriate in the circumstances and for the purposes for which it is collected. The Trust complies
with the applicable requirements of PIPEDA and all applicable provincial personal information laws. The Manager, on behalf of the Trust, collects personal information directly from the investors or
through their financial advisor and/or dealer in order to provide such investor with services in connection with their investment, to meet legal and regulatory requirements and for any other purposes
to which such investor may consent.

The
Manager does not sell, lease, barter or otherwise deal with personal information collected by it with third parties. The Manager carefully safeguards all personal information collected and
retained by it and, to that end, restricts access to personal information to those employees and other persons who need to know the information to enable the Manager to provide its services. Employees
are responsible for ensuring the confidentiality of all personal information they may access. Annually, each of the Manager's employees is required to sign a code of conduct, which contains policies
on the protection of personal information.

The Trustee

Pursuant
to the Trust Agreement, RBC Dexia is the trustee of the Trust. The Trustee is a trust company existing under the laws of Canada.

In
general, the Trustee, subject only to the specific limitations contained in the Trust Agreement, has the full, absolute, and exclusive power, control and authority over the Trust's property to do
all such acts and things as it, in its sole judgment and discretion deems necessary or incidental to, or desirable for, the carrying out of any of the purposes of the Trust or conducting the business
of the Trust, including varying the investments of the Trust in accordance with the investment objectives, strategies or restrictions of the Trust.

Specifically,
the Trustee has and may exercise, at any time and from time to time, the following powers and authorities which may or may not be exercised by it in its sole judgment and discretion, and
in such manner and upon such terms and conditions as it may from time to time deem proper:



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The
exercise of any one or more of the foregoing powers or any combination thereof from time to time will not exhaust the rights of the Trustee to exercise such power or powers or combination of them
thereafter from time to time.

The
following powers set forth above can be exercised by the Trustee only on the direction of the Manager: subsections (b), (c), (e), (f), (g), (h), (i), (j) as applicable, (k), (l),
(n), and (q), and with respect to subsection (n), to the extent that the Trustee is required to execute any documents relating to such investments which the Trustee did not negotiate or in
respect to which the Trustee is not responsible under the Trust Agreement, upon an indemnity being provided from the Manager acceptable to the Trustee in the circumstances.

The
Trustee may, in its sole discretion, appoint, employ, invest in, contract or deal with any individual, firm, partnership, association, trust or body corporate with which it may be directly or
indirectly affiliated or in which it may be directly or indirectly interested, whether on its own account or for the account of another (in a fiduciary capacity or otherwise) and, without
limiting the foregoing, the Trustee may:



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all
without being liable to account therefor and without being in breach of the trust established under the Trust Agreement.

Standard of Care and Indemnification of the Trustee

Pursuant
to the Trust Agreement, the Trustee is required to exercise the powers and discharge the duties of its office honestly and in good faith and in connection therewith exercise the degree of
care, diligence and skill that a reasonably prudent Canadian trust company would exercise in comparable circumstances.

The
Trust Agreement provides that the Trustee will:



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The
Trustee may rely and act upon any statement, report or opinion prepared by or any advice received from the Trust's auditors, solicitors or other professional advisors of the Trust and will not be
responsible nor held liable for any loss or damage resulting from so relying or acting if the advice was within the area of professional competence of the person from whom it was received, the Trustee
acted in good faith in relying thereon and the professional advisor was aware that the Trustee was receiving the advice in its capacity as Trustee of the Trust and the Trustee acted in good faith in
relying thereon.

In
addition, the Trustee will in no way be responsible for, nor incur any liability based on, the action or failure to act or for acting pursuant to or in reliance on instructions of the Manager, any
custodian of the physical gold bullion (if not the Trustee), any custodian of the other assets of the Trust (if not the Trustee), the Trust's valuation agent (if not the Trustee),
the Trust's registrar and transfer agent (if not the Trustee), or any person or organization to whom its responsibilities are delegated pursuant to the Trust Agreement.

The
Trustee will not be liable to the Trust or to any unitholder for any loss or damage relating to any matter regarding the Trust, including any loss or diminution in the value of the net assets of
the Trust or to any particular asset of the Trust, except to the extent
that the Trustee does not meet its standard of care described above. In no event will the Trustee be liable for indirect, consequential or special damages including, but not limited to, loss of
reputation, good will or business.

Except
to the extent that any such claim has been directly caused by the negligence, willful misconduct or dishonesty on the part of the Trustee, its affiliates, nominees or agents or any of their
respective directors, officers and employees or the Trustee's failure to meet its standard of care set forth above, the Trustee, its affiliates, nominees and agents and each of their respective
directors, officers and employees will at all times be indemnified and held harmless by the Trust and to the extent that the property of the Trust is insufficient for such purpose, by the Manager,
from and against:



The
commencement of formal legal proceedings will not be a precondition for indemnification under the Trust Agreement.

Except
to the extent that any such claim, cost, charge or expense has been directly caused by the negligence, willful misconduct or dishonesty on the part of the Trustee, its affiliates, nominees or
agents or any of their respective directors, officers and employees or the Trustee's failure to meet its standard of care set forth above, with respect to any references in the Trust Agreement to
(i) distributions being at the discretion of the Trustee acting on the direction of the Manager or (ii) the Trustee having the power to vary the investments of the Trust in accordance
with the Trust's investment objective, strategy, and investment and operating restrictions, together with any duties, obligations or responsibilities related thereto, referred to herein as the
additional trustee duties, the Manager agrees that:



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that
arise or result from any conflict between such additional trustee duties and the Trustee's defined duties, obligations and responsibilities as set out in the Trust Agreement (excluding such
additional trustee duties) and agreed upon by the Manager.

From
time to time, in order to provide services to the Manager pursuant to the Trust Agreement, the Trustee may be required to engage sub-custodians in certain markets that the Trustee has
identified as being high risk and designated as "Designated Markets" in the Trust Agreement. The Trust Agreement contains a list of such Designated Markets, which the Trustee may amend from time to
time, subject to the Manager's ability to raise any concerns about markets to be added to such list. Currently, the list contains the following four Designated Markets: Argentina, Nigeria, the Russian
Federation, and Vietnam. Pursuant to the Trust Agreement, a Designated Market is a market where the risks of engaging a sub-custodian are significantly greater than they would be in more
established markets. Under the Trust Agreement, the Trustee is responsible for the negligence and wrongful acts of its sub-custodians. However, where the Trustee engages a
sub-custodian in a Designated Market, the Trustee will not be responsible for the negligence or wrongful acts of such sub-custodians and such negligence or wrongful acts will
not be considered to be a breach by the Trustee of its standard of care or negligence for the purposes of the Trust Agreement. Notwithstanding the aforementioned, the Trustee has agreed that it will
continue to accept responsibility for the selection and on-going monitoring of its sub-custodians in all markets, except Designated Markets, in accordance with its standard of
care. The Manager has agreed that it and any investment manager the Manager engages for the Trust will be responsible for apprising themselves of the specific risks to the Trust involved in the
investment and reinvestment of the Trust's property in all markets in which such property is located from time to time. The Trustee currently does not intend to engage sub-custodians in
these markets.

Resignation or Removal of the Trustee and Successor Trustees

The
Trustee or any successor trustee may resign as Trustee of the Trust created by the Trust Agreement by giving notice to the unitholders and to the Manager not less than ninety days prior to the
date when such resignation takes effect. Such resignation will take effect on the date specified in such notice unless at or prior to such date a successor trustee is appointed by the Manager in which
case such resignation will take effect immediately upon the appointment of such successor trustee.

The
Trustee may be removed by the Manager at any time by notice to the Trustee and the unitholders not less than ninety days prior to the date that such removal is to take effect, provided a successor
trustee is appointed or the Trust is terminated and dissolved in accordance with the Trust Agreement.

In
the event that the Trustee resigns or is removed or becomes incapable of acting or if for any cause a vacancy occurs in the office of Trustee, a successor trustee will forthwith be appointed by the
Manager to fill such vacancy. Following such appointment of a successor trustee, the Trustee will execute and deliver such documents as the Manager may reasonably require for the conveyance of any
Trust assets (other than the Trust's physical gold bullion) held in the Trustee's name to the successor trustee, and will account to the Manager for all of the Trust assets which the Trustee retains
as trustee and will thereupon be discharged as trustee.

In
the event that the Manager fails to appoint a successor to the Trustee, the Trust will be terminated and dissolved upon the effective date of the resignation or removal of the Trustee and, after
providing for liabilities of the Trust, the Trust's asset will be distributed to the unitholders pro rata. The Trustee will continue to act as trustee of the Trust until such Trust assets have
been so distributed. Fees and expenses of the Trustee will be a charge, to the extent permitted by applicable law, on the assets of the Trust or the interests of the unitholders to secure payment
thereof. See "Termination of the Trust".

Amendments to the Trust Agreement

Any
provision of the Trust Agreement may be amended, deleted, expanded or varied by the Manager, with the approval of the Trustee, upon notice to unitholders, if the amendment, in the opinion of
counsel for either the Trustee or the Manager, does not constitute a material change and does not relate to any of the matters specified below under "Unitholder Approval." Notwithstanding the
foregoing, no amendment may be made which adversely affects the pecuniary value of the interest of any unitholder or restricts any protection provided to the Trustee or impacts the responsibilities of
the Trustee under the Trust Agreement.

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The
Trust Agreement may also be amended by the Manager without the approval of or notice to unitholders for the following purposes:



Unitholder Approval

Certain
matters relating to the Trust require approval by the unitholders. Such approval may be given at a meeting duly called for that purpose pursuant to the Trust Agreement or by written
resolution. Any provision of the Trust Agreement may be amended, deleted, expanded or varied with the approval of the unitholders for the following purposes by resolution passed by an ordinary
resolution, which must be approved by the vote, in person or by proxy, of unitholders holding units representing in aggregate not less than 50% 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 units representing in aggregate not less than 50% of the value of the net assets of the Trust as determined in accordance with the Trust Agreement, other than
items (i), and (ii), which require approval of unitholders by an extraordinary resolution, which must be approved by the vote, in person or by proxy, of unitholders holding 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 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:



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Any
reorganization or transfer of assets pursuant to clause (vii) or (viii) above, including a transaction approved by the independent review committee pursuant to
clause (vii)(B), must satisfy the following criteria:



In
addition, any material amendment, modification or variation in the provisions of or rights attaching to a particular class or series of a class of units must be approved by an extraordinary
resolution of the unitholders of that class or series of class of units, as the case may be.

The
consent of the Trustee is required to any amendment if the amendment restricts any protection provided to the Trustee or impacts the responsibilities of the Trustee under the Trust Agreement.

The
auditors of the Trust may not be changed by the Manager unless the independent review committee has approved the change of auditors in accordance with applicable Canadian securities legislation,
and written notice will be sent to unitholders and the Trustee no later than 60 days before the effective date of the change of auditors.

Notice
of any amendment to the Trust Agreement will be given in writing to unitholders, and any such amendment will take effect on a date specified therein and not less than 60 days after
notice of the amendment is given to unitholders, except that the Manager and the Trustee may agree that any amendment will become effective at an earlier date if in the opinion of the Manager and the
Trustee an earlier date is desirable, provided such amendment does not adversely affect the rights, privileges or interests of any unitholder.

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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Custodians

Custodian for the Trust's Physical Gold Bullion

The
Mint acts as custodian of the physical gold bullion owned by the Trust pursuant to a precious metals storage agreement (the "Precious Metals Storage Agreement") between the Manager, for and
on behalf of the Trust, and the Mint. The Mint is permitted to act as the custodian for such purposes pursuant to the Exemptive Relief. See "Exemptions and Approvals". The Mint is a Canadian Crown
corporation responsible for the minting and distribution of Canada's circulation coins. An ISO 9001-2000 certified company, the Mint offers a wide range of specialized, high quality
coinage products and related services on an international scale. For its services under the Precious Metals Storage Agreement, which has a term of three
years, the Mint receives a fee, currently $15.00 per bar per month. Such fee is subject to increase following a 30-day written notice to that effect in the event of changes in economic
conditions that increase the Mint's operating costs. Transportation of physical gold bullion to or from the Mint by way of armored transportation service carrier is subject to a separate agreement
between the Manager and the Mint, pursuant to which the Trustee is obligated to reimburse the Mint for such transportation costs (except in connection with a redemption of units for physical gold
bullion by a unitholder, in which case such costs will be borne by the redeeming unitholder).

Under
the Precious Metals Storage Agreement, upon written notice from the Manager to the Mint of the Manager's intention to have any of the Trust's physical gold bullion delivered to the Mint
(the "initial notice"), the Mint receives such physical gold bullion based on a list provided by the Manager in such written notice that specifies the amount, weight, type, assay
characteristics and value, and serial number of the London Good Delivery bars. After verification, the Mint issues a "Receipt of Deposit" that confirms the bar count and the total weight in fine
ounces. The Mint reserves the right to refuse delivery in the event of storage capacity limitations. In the event of a discrepancy arising during the verification process, the Mint will promptly
notify the Manager. The Mint keeps the Trust's physical gold bullion specifically identified as the Trust's property and keeps it on a labeled shelf or physically segregated pallets at all times. The
Mint provides a monthly inventory statement, which the Manager reconciles with the Trust's records of its physical gold bullion holdings. The Manager has the right to audit the physical storage of the
Trust's physical gold bullion at the Mint upon request on any Mint business day (which means any day other than a Saturday, Sunday or a holiday observed by the Mint) during the Mint's regular business
hours, provided that such audit does not interrupt the routine operation of the Mint's facility.

Upon
the Mint's receipt and taking into possession and control of any of the Trust's physical gold bullion, whether through physical delivery or a transfer of the physical gold bullion from a
different customer's account at the Mint, the Mint's liability commences with respect to such physical gold bullion. The Mint bears all risk of physical loss of, or damage to, physical gold bullion of
the Trust in the Mint's custody, except in the case of circumstances or causes beyond the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate of the
Manager, acts or omissions or the failure to cooperate by any third party, fire or other casualty, act of God, strike or labour dispute, war or other violence, or any law, order or requirement of any
governmental agency or authority, and has contractually agreed to replace or pay for lost, damaged or destroyed physical gold bullion in the Trust's account while in the Mint's care, custody and
control. The Mint's liability terminates with respect to any physical gold bullion upon termination of the Precious Metals Storage Agreement, whether or not the Trust's physical gold bullion remains
in the Mint's possession and control, upon transfer of such physical gold bullion to a different customer's account at the Mint, as requested by the Manager, or at the time such physical gold bullion
is remitted to the armored transportation service carrier pursuant to delivery instructions provided by the Manager on behalf of a redeeming unitholder.

In
the event of physical loss, damage or destruction of the Trust's physical gold bullion in the Mint's custody, care and control, the Manager must give written notice to the Mint within five Mint
business days after the discovery of any such loss, damage or destruction, but, in the case of loss or destruction of the Trust's physical gold bullion, in any event no more than 30 days after
the delivery by the Mint to the Trust of an inventory statement in which the discrepancy first appears. The Mint will, at its option, either (i) replace, or restore to its original state in the
event of partial damage, as the case may be, the Trust's physical gold bullion that was lost, destroyed or damaged within five Mint business days from the date the Mint becomes aware of said loss or
destruction, based on the advised weight and assay characteristics provided in the initial notice or (ii) compensate the Trust, through the Manager, for the monetary value of the Trust's
physical gold bullion that was lost or destroyed, within five Mint business days from the date the Mint becomes aware of said loss or destruction, based on the advised weight and assay characteristics
provided in the initial notice and the market value of such physical gold bullion that was lost or destroyed, using the first

38

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available
afternoon (P.M.) London fix of the LBMA from the date the Mint becomes aware of said loss or destruction. If such notice is not given in accordance with the terms of the Precious Metals
Storage Agreement, all claims against the Mint will be deemed to have been waived. In addition, no action, suit or other proceeding to recover any loss, damage or destruction may be brought against
the Mint unless notice of such loss, damage or destruction has been given in accordance with the terms of the Precious Metals Storage Agreement and unless such action, suit or proceeding shall have
been commenced within 12 months from the time such notice is sent to the Mint. The Mint will not be responsible for any special, incidental, consequential, indirect or punitive losses or
damages (including lost profits or lost savings), except as a result of gross negligence or willful misconduct by the Mint and whether or not the Mint had knowledge that such losses or damages might
be incurred.

The
Mint operates pursuant to theRoyal Canadian Mint Act(Canada) and is a Canadian Crown corporation. Crown corporations are "agents of Her Majesty
the Queen" and, as such, their obligations generally constitute unconditional obligations of the Government of Canada. A Crown corporation may be sued for breach of contract or for wrongdoing in tort
where it has acted on its own behalf or on behalf of the Crown. However, a Crown corporation may be entitled to immunity if it acts as agent of the Crown rather than in its own right and on its own
behalf. Although the Mint has entered into the Precious Metals Storage Agreement on its own behalf and not on behalf of the Crown, a court may determine that, when acting as custodian of the Trust's
physical gold bullion, the Mint acted as agent of the Crown, and that the Mint may be entitled to immunity of the Crown. Consequently, a unitholder may not be able to recover for any losses incurred
as a result of the Mint's acting as custodian of the Trust's physical gold bullion. See "Risk Factors  Under Canadian law, the Trust and unitholders may have
limited recourse against the Mint." The Precious Metals Storage Agreement does not establish a principal and agent relationship, partnership or joint venture between the Mint and the Manager nor does
it establish a contractual relationship between the Mint and the unitholders.

The
Mint reserves the right to reject physical gold bullion delivered to it if the physical gold bullion contains a hazardous substance or if the physical gold bullion is or becomes unsuitable or
undesirable for metallurgical, environmental or other reasons.

The
Manager is not responsible for any losses or damages to the Trust arising out of any action or inaction by the Trust's custodians or any sub-custodian holding the assets of
the Trust.

The
Manager, with the consent of the Trustee, has the authority to change the custodial arrangement described above including, but not limited to, the appointment of a replacement custodian and/or
additional custodians. The Manager may terminate the custodial relationship with the Mint by giving written notice to the Mint of its intent to terminate the Precious Metals Storage
Agreement if:



The
Mint carries such insurance as it deems appropriate for its businesses and its position as custodian of the Trust's physical gold bullion and will provide the Trust with at least 30 days'
notice of any cancellation or termination of such coverage. Based on information provided by the Mint, the Manager believes that the insurance carried by the Mint, together with its status as a
Canadian Crown corporation with its obligations generally constituting unconditional obligations of the Government of Canada, provides the Trust with such protection in the event of loss or theft of
the Trust's physical gold bullion stored at the Mint that is consistent with the protection afforded under insurance carried by other custodians that store gold commercially. In addition, if the Mint
were to become a private enterprise, the Manager on behalf

39

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of
the Trust will make a determination whether the Mint should remain the custodian of the Trust's physical gold bullion in light of applicable circumstances, such as the level of insurance carried by
the Mint after such privatization, the availability of other custodians and the risk in moving the Trust's physical gold bullion to another custodian.

Custodian for the Trust's Assets Other Than Physical Gold Bullion

RBC
Dexia acts as the custodian of the Trust's assets other than physical gold bullion pursuant to the Trust Agreement. As compensation for the custodial services rendered to the Trust, RBC Dexia
receives such fees as mutually agreed upon with the
Manager from time to time, currently approximately $4,000 per year. These fees are paid by the Trust out of the cash reserve held for ongoing expenses and cash redemptions. RBC Dexia is responsible
for the safekeeping of all of the assets of the Trust delivered to it and acts as the custodian of such assets. The Manager, in accordance with applicable law and with the consent of the Trustee, has
the authority to change the custodial arrangement described above including, but not limited to, the appointment of a replacement custodian and/or additional custodians. RBC Dexia carries such
insurance as it deems appropriate for its businesses and its position as custodian of the Trust's assets. The Trust Agreement does not require RBC Dexia to carry insurance in connection with any
claims the Trust or unitholders may have against RBC Dexia in its capacity as custodian of the Trust's assets.

Auditors

The
auditors of the Trust are Ernst & Young LLP, Chartered Accountants, Licensed Public Accountants, and their principal office is located at Ernst & Young Tower, 222 Bay
Street, Toronto, Ontario, Canada, M5K 1J7. The auditors will annually audit the financial statements of the Trust to determine whether they fairly represent, in all material respects, the
Trust's financial position, results of operations and changes in equity and cash flows in accordance with IFRS. The auditors will also attend a count of the physical gold bullion owned by the Trust on
an annual basis.

Transfer Agent And Registrar

Pursuant
to a transfer agent, registrar and disbursing agent agreement dated February 24, 2010, Equity Transfer & Trust Company was appointed as the transfer agent and registrar for the
units. Equity Transfer & Trust Company's principal office is located at 200 University Avenue, Suite 400, Toronto, Ontario, Canada, M5H 4H1.

Valuation Agent

RBC
Dexia has been appointed as valuation agent of the Trust pursuant to a valuation services agreement between the Trust and RBC Dexia as valuation agent dated February 24, 2010. The valuation
agent is responsible for providing valuation services to the Trust and calculates the value of the net assets of the Trust and NAV pursuant to the terms of the valuation services agreement. See
"Calculation of Net Asset Value."

In
carrying out its duties as valuation agent, the valuation agent is required to exercise the powers and discharge the duties of its office honestly and in good faith and, in connection therewith,
must exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Except
to the extent any liability arises directly out of the negligence, willful misconduct or lack of good faith of the valuation agent, the valuation agent is not be liable for any act or omission
in the course of, or connected with, rendering the services under the valuation services agreement or for loss to, or diminution of, the Trust's property. In no event will the valuation agent be
liable for any consequential or special damages including, but not limited to, loss of reputation, goodwill or business. The Manager will indemnify and hold harmless the valuation agent, its
affiliates and agents, and their respective directors, officers, and employees from and against all taxes, duties, charges, costs, expenses, damages, claims, actions, demands and any other liability
whatsoever to which any such persons or entities may become subject, including legal fees, judgments and amounts paid in settlement in respect of anything done or omitted to be done in connection with
the valuation services provided under the valuation services agreement, except to the extent incurred as a result of the negligence, willful misconduct or lack of good faith of the indemnified party.
Notwithstanding the foregoing, the liability of the valuation agent under the valuation services

40

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agreement
will in no event exceed the aggregate amount of fees received by the valuation agent from the Manager with respect to the services provided during the immediately preceding
twelve months.

The
valuation services agreement provides that it may be terminated by either party without penalty at any time by providing to the other party 60 days' prior written notice of such termination
unless the parties mutually agree in writing to a different period. Either party may terminate the valuation services agreement immediately upon notice in the event that either party is declared
bankrupt or will be insolvent, the assets or the business of either party become liable to seizure or confiscation by a public or governmental authority, or the Manager's power and authority to act on
behalf of, or to represent, the Trust has been revoked, terminated or is otherwise no longer in full force and effect.

The
valuation agent receives fees for the valuation services provided to the Trust.

Principal Unitholders of the Trust

The
following table sets forth, as of the date of this annual information form, information with respect to the beneficial ownership of the Trust's units by:



Beneficial
ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the units. Other than Eric Sprott, there are no persons
known to the Manager to beneficially own more than 5% of the issued and outstanding units.

|Name and Address of Beneficial Owner                                             |  | Units Beneficially Owned |    
|-------------------------------------------------------------------------------- |  | ------------------------ | ---
|                                                                                
|
|Named Executive Officers and Directors of the Manager's General Partner          |  |                          |    
|Eric S. Sprott(1)                                                                |  | 8,000,000                | (2)
|Kirstin H. McTaggart(1)                                                          |  | *                        |    
|James Fox                                                                        |  | *                        |    
|All Executive Officers and Directors of the Manager's General Partner as a Group |  | 8,020,941                |    
|                                                                                

Trust Governance

Generally

The
Manager has established appropriate policies, procedures and guidelines to ensure the proper management of the Trust. The systems implemented monitor and manage the business and sales practices,
risks and internal conflicts of interest relating to the Trust while ensuring compliance with regulatory and corporate requirements.

Independent Review Committee

In
accordance with applicable Canadian securities legislation, the Manager has established an independent review committee (the "IRC") for all mutual funds and non-redeemable
investment funds managed by the Manager or any of its affiliates, which includes the Trust. The independent review committee is composed of three members, each of whom is independent of the Manager
and its affiliates, and free from any interest and any business or other relationship which could, or could be reasonably perceived to, materially interfere with the exercise of an independent review
committee member's judgment.

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The
Manager refers all conflict of interest matters to the independent review committee for its review and/or approval. The Manager has established a written charter for the independent review
committee, which includes its mandate, responsibilities and functions, and the written policies and procedures it will follow when performing its functions, including dealing with conflict of interest
matters. The Manager maintains records in respect of these matters and provides assistance to the independent review committee in carrying out its functions. The independent review committee conducts
regular assessments and provides reports, at least annually, to
the Trust and to unitholders in respect of its functions. The report prepared by the independent review committee is made available on the Trust's website (www.sprottphysicalgoldtrust.com) or, at a
unitholder's request, sent to the unitholder at no cost.

The
independent review committee:



All
fees and expenses of the independent review committee incurred in connection with its duties with respect to the Trust are paid by the Trust and the independent review committee has the authority
to retain, at the expense of the Trust, independent counsel or other advisors if the independent review committee deems it appropriate to do so. The members of the independent review committee are
indemnified by the Trust, except in cases of willful misconduct, bad faith, negligence or breach of their standard of care.

The
current members of the IRC and their principal occupations are as follows:

|Name and Municipality of Residence        |  | Principal Occupation | 
|----------------------------------------- |  | -------------------- | 
|                                         
|Lawrence A. Ward
Toronto, Ontario, Canada |  | Consultant           | 
|W. William Woods
Toronto, Ontario, Canada |  | Consultant           | 
|Eamonn McConnell
Toronto, Ontario, Canada |  | Consultant           | 
|                                         

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, including filing and listing
fees and the expenses of any registrar and transfer agent, which fees the Trust is permitted to pay pursuant to the Exemptive Relief. (See "Exemptions and Approvals"). 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 units for physical gold bullion.

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Fees and Expenses Payable by the Trust

|Type of Fee              |  | Amount and Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                        
|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 
|Management Fee:          |  | The Trust pays the Manager a monthly management fee equal to 1/12 of 0.35% of the value of net assets of the Trust (determined in accordance with the Trust Agreement), plus any applicable Canadian taxes. The management fee
is calculated and accrued daily and payable monthly in arrears on the last day of each month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|Operating Expenses:      |  | Except as otherwise described in this annual information form and subject to the expense cap described below, the Trust is responsible for all costs and expenses incurred in connection with the on-going 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 Dexia as custodian, any sub-custodians, the registrar, the transfer agent and the valuation agent of the
Trust; transaction and handling costs for the physical gold bullion; storage fees for the physical gold bullion; custodian settlement fees; counterparty fees; legal, audit, accounting, bookkeeping and record keeping fees and expenses; costs and
expenses of reporting to unitholders and conducting unitholder meetings; printing and mailing costs; filing and listing fees payable to applicable securities regulatory authorities and stock exchanges; other administrative expenses and costs incurred
in connection with the Trust's continuous disclosure public filing requirements and investor relations; any applicable Canadian taxes payable by the Trust or to which the Trust may be subject; interest expenses and borrowing costs, if any; brokerage
expenses and commissions; costs and expenses relating to the issuance of units; costs and expenses of preparing financial and other reports; any expenses associated with the implementation and on-going operation of the independent review committee of
the Trust; costs and expenses arising as a result of complying with all applicable laws; and any expenditures incurred upon the termination of the Trust. | 
|Other Fees and Expenses: |  | The Trust is responsible for the fees and expenses of any action, suit or other proceedings in which, or in relation to which, the Trustee, the Manager, the Mint, RBC Dexia as custodian, any sub-custodians, the valuation agent, the registrar and
transfer agent or the underwriters for this offering and/or any of their respective officers, directors, employees, consultants or agents is entitled to indemnity by the Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|Expense Cap:             |  | The Manager has contractually agreed that, if the expenses of the Trust, including the management fee, at the end of any month exceed an amount equal to 1/12 of 0.65% of the value of net assets of the Trust, the management
fee payable to the Manager for such month will be reduced by the amount of such excess up to the gross amount of the management fee earned by the Manager from the Trust for such month. Any such reduction in the management fee will not be carried
forward or payable to the Manager in future months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|                         |  | In calculating the expenses of the Trust for purposes of the expense cap, the following will be excluded: any applicable taxes payable by the Trust or to which the Trust may be subject; and any extraordinary expenses of the Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|                        

The Trust has retained cash from the net proceeds of each offering of units in an amount not exceeding 3% of the net proceeds of 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 gold bullion to replenish this cash reserve to meet its expenses
and cash redemptions.

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Fees and Expenses Payable Directly by Unitholders

|Type of Fee                    |  | Amount and Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                              
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|Redemption and Delivery Costs: |  | Except as set forth below, there are no redemption fees payable upon the redemption of units for cash. However, if a unitholder chooses to receive physical gold bullion upon redemption of 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 gold bullion for units that are being redeemed and the applicable gold storage in-and-out
fees. See "Redemption of Units  Redemptions for Physical Gold Bullion." | 
|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 units.                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|                              

Distribution Policy

Distribution of Net Income and Net Realized Capital Gains to Unitholders

As
of the last business day of each fiscal year or such other time as the Manager otherwise determines, the Manager will determine the net income and net realized capital gains in accordance with the
Trust Agreement. The initial distribution policy of the Trust will be to make an annual distribution of such net income and net realized capital gains, if any, to unitholders through a distribution of
additional units. The Trust does not anticipate making regular cash distributions to unitholders. All distributions are at the discretion of the Trustee, acting on the direction of the Manager.

Distributions,
if any, of net income or net realized capital gains will generally be made to unitholders who were unitholders of record as of 5:00 p.m., Toronto time, on the last business day
prior to any relevant distribution date. The amounts to be paid to a unitholder will be the amount of net income or net realized capital gains determined pursuant to the Trust Agreement divided by the
total number of units outstanding at 5:00 p.m., Toronto time, on the distribution date multiplied by the number of units held by such unitholder as of 5:00 p.m., Toronto time, on the
applicable distribution date. Notwithstanding the foregoing, the Manager may adopt a method of allocating an appropriate proportion of net income and net realized capital gains to unitholders that
redeemed units during the year. All distributions, if declared and paid, will be calculated and, if a cash distribution, paid in United States currency.

It
is the intention that the total amount due and payable in any year will not be less than the amount necessary to ensure that the Trust will not be liable for income tax under Part I of the
Tax Act for such year after taking into account the Trust's entitlement to a capital gains refund, if any. The Manager may direct that such distribution or payment will be due and payable by
the Trust in cash or in additional units. Where distributions are payable in additional units, the Trust's registrar or transfer agent, acting on the direction of the Manager, may round up or round
down the number of units in order to avoid the Trust issuing fractional units. Any additional units that are issued in this manner will be of the same class or series of a class at a price equal to
the NAV as of the valuation time on the applicable distribution date, and the units will be immediately consolidated so that the number of outstanding units following the distribution will equal the
number of units outstanding prior to the distribution.

Notwithstanding
the foregoing paragraph, where Canadian tax is required to be withheld in respect of a unitholder's share of a distribution paid in units, the consolidation will result in such
unitholder holding that number of units equal to the product of (i) the sum of the number of units held by such unitholder prior to the distribution and the number of units received by such
unitholder in connection with the distribution (net of the total of the number of whole or fractional units withheld by the Trust to satisfy the Trust's withholding obligations and the number
of whole or fractional units withheld pursuant to the Trust Agreement on account of the reasonable expenses incurred in respect of the sale of such units withheld on account of withholding taxes), and
(ii) a quotient, the numerator of which is the aggregate number of units outstanding prior to the distribution, and the denominator of which is the aggregate number of units that would be
outstanding following distribution and before the consolidation if no withholding were required in respect of any part of the distribution payable to any unitholders. Such unitholder will be required
to surrender the certificates, if any, representing such unitholder's original units in exchange for a certificate representing such unitholder's post-consolidation units.

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Additional Distributions, Designations, Determinations, Allocations and Elections

In
addition to any distributions made to unitholders as described above, on the direction of the Manager, the Trust will at such times and in such manner as directed by the Manager make such
additional distributions of monies or properties of the Trust including, without restriction, returns of capital, in such amounts per unit, payable at such time or times and to unitholders of record
on such distribution date, as from time to time may be determined by the Manager, and make such designations, determinations, allocations and elections for tax purposes of amounts or portions of
amounts which it has received, paid, declared payable or allocated to unitholders and of expenses incurred by the Trust and of tax deductions of which the Trust may be entitled, as the Manager may, in
its sole discretion, determine.

Withholding Taxes

The
Manager will deduct or withhold from distributions payable to any unitholder all amounts required by applicable law to be withheld from such distributions, whether such distributions are in the
form of cash, additional units or otherwise. In the event of a distribution in the form of additional units, the Manager may sell units of such unitholder to pay such withholding taxes and to pay all
reasonable expenses in respect of such sale and the Manager will have the power of attorney of such unitholder to do so. Any such sale will be made in compliance with applicable law on any stock
exchange on which the units are then listed and upon such sale, the affected unitholder will cease to be the holder of such units. In the event that the net proceeds of any such sale of a unitholder's
units exceed the statutory withholding required and the reasonable expenses incurred in respect of such sale, the Manager will remit such excess to the unitholder.

Income Tax Statements

On
or before March 31 in each year, or in the case of a leap year on or before March 30 in such year, if applicable, or as otherwise required, the Manager will prepare and deliver or
make available electronically, or cause to be prepared and delivered or be made available electronically, to unitholders information pertaining to the Trust, including all distributions, designations,
determinations, allocations and elections, which is required by the Tax Act or which is necessary to permit unitholders to complete their individual income tax returns for the
preceding year.

In
the event that amounts that were allocated, distributed or paid to unitholders as capital gains or as non-taxable payments are, for any reason, subsequently determined (including as a
result of an assessment or reassessment by any taxation authorities) to have been fully includible in the taxable income of the Trust for the relevant fiscal year, then the Manager shall have the
discretion to declare that all or part of such amounts shall be retroactively deemed to have been allocated, distributed and paid to unitholders out of the income of the Trust, and the Manager may
issue new or amended tax reporting slips to the relevant unitholders or former unitholders to report any such distributions to them.

Within
45 days from the end of each taxable year of the Trust, the Manager will provide or cause to be provided to unitholders all information necessary to enable unitholders or beneficial
owners of units, as applicable, to elect to treat the Trust as a QEF within the meaning of Section 1295 of the U.S. Internal Revenue Code for U.S. federal income tax purposes and
to comply with any reporting or other requirements incident to such election, including, but not limited to, providing or causing to be provided to unitholders or beneficial owners of units, as
applicable, a completed "PFIC Annual Information Statement" as required by U.S. Treasury Regulations Section 1.1295-1(g). The Manager will comply and cause the Trust to
comply with all applicable requirements of the U.S. Treasury Regulations necessary to enable unitholders or beneficial owners of units, as applicable, to elect to treat the Trust as
a QEF.

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|Sprott Physical Gold Trust |  | March 11, 2011
|-------------------------- |  | --------------

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Unclaimed Interest, Dividends or Distributions

In
the event that the Trust's registrar or transfer agent holds interest, dividends or other distributions which are unclaimed or which cannot be paid for any reason, the Trust's registrar or transfer
agent will not be under any obligation to invest or reinvest the same but will administer such unclaimed amounts as directed by the Manager in accordance with applicable laws. Any unitholder making a
claim in respect of any amount payable pursuant to the Trust Agreement is required to give notice in writing of such claim to the Trust's registrar or transfer agent and/or the Manager no later than
the second anniversary of the date on which the amount was payable. Such notice must set out the basis for the claim, the amount claimed and the specific grounds for the claim. The Trust's registrar
or transfer agent will, unless otherwise required by applicable law, pay over to the Trust any such amounts which have been held for more than six years. The Trust will indemnify and save harmless the
Trust's registrar or transfer agent, as applicable, in respect of any claim made for such amounts.

Material Income 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 units. This discussion
does not purport to deal with the tax consequences of owning 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 and investors that own, actually or under applicable constructive ownership rules, 10% or more of the 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 units.
This discussion deals only with holders who purchase units in connection with an offering and hold the 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 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, 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 units that is a U.S. citizen or resident for U.S. 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 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 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 you are a partner in a partnership holding the units, we suggest that you
consult your tax advisor.

Distributions

As
discussed under "Distribution Policy," the Trust does not anticipate making regular cash distributions to unitholders. Subject to the PFIC discussion below, any distributions made by the Trust with
respect to the 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

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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 units on a dollar-for-dollar basis and thereafter as gain from the disposition of units. Since the Trust will be a PFIC, as
described below, dividends paid on the units to a U.S. Holder who is an individual, trust or estate, or 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 (currently through taxable years ended before or on December 31, 2012). Any dividends generally will be
treated as foreign source income for U.S. foreign tax credit limitation purposes.

Redemption of Units

As
described under "Redemption of Units," a U.S. Holder may have units redeemed for cash or physical gold bullion. Under Section 302 of the Code, a U.S. Holder generally will be
treated as having sold his, her or its units (rather than having received a distribution on the units) upon the redemption of 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 QEF election, a
mark-to-market election or makes no election and therefore is subject to the Default PFIC Regime (as defined below).

Passive Foreign Investment Company 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 units, either:



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 gold bullion is expected to be treated as passive income for this purpose. Since substantially all of the Trust's assets will consist of physical gold bullion and the Trust
expects to derive substantially all of its income from the sales of physical gold 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 units, or (3) makes no election and therefore is subject to the
Default PFIC Regime (as defined below). 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 favourable 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 units without a corresponding distribution of cash or other property. For
taxable years beginning on or after March 18, 2010, a U.S. Holder of interests in a PFIC, such as the Trust, is required to file an annual information return containing information
regarding the PFIC as required by applicable Treasury Regulations.

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 units, or an Electing Holder,
will not be subject to the Default PFIC Regime (as defined below) for any taxable year. We will refer to an Electing Holder that is a U.S. Individual Holder as a
Non-Corporate Electing Holder. A U.S. Holder who does not make a timely QEF election would be subject to the Default PFIC Regime for taxable years during his, her or its holding
period in which a QEF election was not in effect, unless such U.S. Holder makes a special "purging" election. A U.S. Holder who does not make a timely QEF election is encouraged to
consult such U.S. Holder's tax advisor regarding the availability of such purging election.

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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 gold bullion by the Trust if the Trust has held the gold bullion for more than one year. Otherwise such gain
generally will be treated as ordinary income.

If
any holder redeems his, her or its units for physical gold bullion (regardless of whether the holder requesting redemption is a U.S. Holder or an Electing Holder), the Trust will be treated
as if it sold physical gold bullion for its fair market value in order to redeem the holder's 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 gold 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 holder redeems units for cash and
the Trust sells physical gold bullion to fund the redemption (regardless of whether the holder 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 gold bullion, which will be taxable as described above even though the Trust's sale of
physical gold bullion is not attributable to any action on the Electing Holder's part. An Electing Holder's adjusted tax basis in the 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 units and
will not be taxed again once distributed. Any other distributions generally will be treated as discussed above under "Material Income 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 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 units. Such gain or loss will be treated as long-term
capital gain or loss if the Electing Holder's holding period in the 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 15% (scheduled to
increase to 20% for taxable years beginning after December 31, 2012). 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 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 gold 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 gold
bullion for more than one year. The Electing Holder's adjusted tax basis in the 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 gold bullion or cash received upon redemption over the Electing Holder's adjusted tax
basis in the 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 units are treated as marketable stock, a U.S. Holder would be allowed to make a
mark-to-market election with respect to the units, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and
related Treasury Regulations. The units will be treated as marketable stock for this purpose if they are regularly traded on a qualified exchange or other market. The 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

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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 units at the end of the taxable year over such U.S. Holder's adjusted tax basis in the 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 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 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 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 Income 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 units would be treated as ordinary income,
and any loss realized on the sale, exchange, redemption or other disposition of the 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 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 units), and (2) any gain realized on the sale, exchange, redemption or other disposition of the units.

Under
the Default PFIC Regime:



Any
distributions other than "excess distributions," by the Trust to a Non-Electing Holder will be treated as discussed above under "Material Income Tax
Considerations  Material U.S. Federal Income Tax Considerations  U.S. Federal Income Taxation of
U.S. Holders  Distributions."

These
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 units. If a Non-Electing Holder who is an individual dies while owning the units, such Non-Electing Holder's successor generally would not receive a
step-up in tax basis with respect to the units.

Foreign Taxes

Distributions,
if any, by the Trust may be subject to Canadian withholding taxes. 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.

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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, units generally
will be subject to information reporting and backup withholding, currently at the rate of 28%, 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 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 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 units in an offering. U.S. Holders also may be required to file Form TD F 90-22.1 (Report of
Foreign Bank and Financial Accounts) with respect to their investment in the Trust. Pursuant to Section 6038D of the Code, U.S. Holders may be required to file an annual information
return with the IRS with respect to their investment in the Trust. In addition, pursuant to recently enacted legislation effective as of January 1, 2013, the Trust may be required to enter into
an agreement with the IRS to disclose certain information about its U.S. Holders to the IRS. We suggest that U.S. Holders consult their own tax advisors with respect to any applicable
filing requirements.

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 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 units
as capital property. Units will generally be considered capital property to a unitholder unless the unitholder holds the units in the course of carrying on a business of trading or dealing in
securities or has acquired the 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 units as capital property may be entitled to have their 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 that is a "financial institution", that is a "specified financial institution" or that has elected to determine its Canadian tax results in
accordance with the "functional currency" rules, or an interest in which is a "tax shelter investment" (as all such terms are defined in the Tax Act). In addition, this summary does not
address the deductibility of interest by a unitholder who has borrowed to acquire units. All such unitholders should consult with their own tax advisors.

This
description is also based on the assumption (discussed below under "Material Income 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 Canada Revenue Agency ("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. 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 units. Moreover, the income and other tax consequences of
acquiring, holding or disposing of units will vary depending on a taxpayer's particular

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circumstances. Accordingly, this summary is of a general nature only and is not intended to constitute legal or tax advice to any unitholder or prospective purchaser of units. You should consult with
your own tax advisors about tax consequences of an investment in units based on your particular circumstances.

For
the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of 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 at noon 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 and that the Trust will
validly elect under the Tax Act to be a mutual fund trust from the date it was established. The Manager expects that the Trust will meet the requirements necessary for it to qualify as a mutual
fund trust no later than the closing of an offering and at all times thereafter and will elect to be deemed a mutual fund trust throughout its first taxation year.

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" (or if certain Tax Proposals
released on September 16, 2004 are enacted as proposed, "taxable Canadian property" within the meaning of the Tax Act and certain other types of "specified property"). Physical gold
bullion is not "taxable Canadian property" or "specified 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 units (the "minimum distribution requirements"). In this connection, the Manager intends to cause the
Trust to qualify as a unit trust throughout the life of the Trust and to cause the Trust's undertaking to conform 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 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

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all
the circumstances. In the view of Canadian counsel, the holding by the Trust of physical gold bullion with no intention of disposing of such bullion except in specie on a redemption of
units likely would not represent an adventure in the nature of trade so that a disposition, on a redemption of units, of physical gold 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 gold bullion and does not
anticipate that the Trust will sell its physical gold 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 gold 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.

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 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.

On
October 31, 2003, the Canadian Department of Finance announced a tax proposal relating to the deductibility of losses under the Tax Act (the "October Proposal"). Under the
October Proposal, a taxpayer will be considered to have a loss from a business or property for a taxation year only if, in that year, it is reasonable to assume that the taxpayer will realize a
cumulative profit from the business or property during the time that the taxpayer has carried on, or can reasonably be expected to carry on, the business or has held, or can reasonably be expected to
hold, the property. Profit, for this purpose, does not include capital gains or capital losses. If the October Proposal were to apply to the Trust, certain losses of the Trust or a unitholder could be
limited. On February 23, 2005, the Canadian Minister of Finance announced that an alternative proposal to replace the October Proposal would be released for comment. No such alternative
proposal has been released as of the date hereof. There can be no assurance that such alternative proposal will not adversely affect the Trust or a unitholder.

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 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
gold 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 gold bullion as capital property (or as an adventure in the nature of trade)

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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 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 units), the Canadian unitholder
generally will be required to reduce the adjusted cost base of a unit to the Canadian unitholder by such amount. To the extent that the adjusted cost base of a 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 unit and the Canadian unitholder's adjusted cost base in respect of the unit
will be increased by the amount of such deemed capital gain to zero.

Upon
the actual or deemed disposition of a 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
unit exceed (or are exceeded by) the aggregate of the adjusted cost base of the 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 unit, when a unit is acquired, the cost of the newly acquired unit will be averaged with the adjusted cost base of all units owned by the Canadian unitholder as
capital property that were acquired before that time. For this purpose, the cost of 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 units. A consolidation of units following a distribution paid in the form of additional units will not be regarded as a disposition of units and
will not affect the aggregate adjusted cost base to a Canadian unitholder of 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.

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|Sprott Physical Gold Trust |  | March 11, 2011
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If,
at any time, the Trust delivers physical gold bullion to any Canadian unitholder upon a redemption of a Canadian unitholder's units, the Canadian unitholder's proceeds of disposition of the units
will generally be equal to the aggregate of the fair market value of the distributed physical gold bullion and the amount of any cash received, less any capital gain or income realized by the Trust on
the disposition of such physical gold bullion and allocated to the Canadian unitholder. The cost of any physical gold bullion distributed by the Trust in specie will generally be equal to the
fair market value of such physical gold bullion at the time of the distribution. Pursuant to the Trust Agreement, the Trust has the authority to distribute, allocate and designate any income or
taxable capital gains of the Trust to a Canadian unitholder who has redeemed 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 gold bullion to a unitholder who has redeemed units for such physical gold bullion, and any
taxable capital gain or income realized by it before, at or after the redemption on selling physical gold 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 will generally 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 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.

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 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 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 (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 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 Canada United States Income Tax Convention, as amended (the "Treaty"), a Non-Canadian
unitholder who is 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 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" (as defined in the Tax Act and under the Tax Proposals) 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) otherwise 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 units or any part thereof, the amount generally will reduce the adjusted cost base of the units held by such Non-Canadian unitholder.

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(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
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 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 units. Such capital gain will not
be subject to tax under the Tax Act, unless the units represent "taxable Canadian property" (as defined in the Tax Act and under the Tax Proposals) to such
Non-Canadian unitholder. The Non-Canadian unitholder's adjusted cost base in respect of units will, immediately after the realization of such capital gain, be zero.

A
disposition or deemed disposition of a 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 unit does not constitute "taxable Canadian property" of the Non-Canadian unitholder for purposes of the Tax Act. 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 units were owned by or belonged to
one or more of the Non-Canadian unitholder and persons with whom the Non-Canadian unitholder did not deal at arm's length; and (ii) the units derived directly or
indirectly more than 50% of their fair market value from any combination of "Canadian resource properties" (whose definition in the Tax Act does not include gold bullion), real or immovable
property situated in Canada, timber resource properties or options or interests in such properties or the 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 gold bullion, the units should not be taxable Canadian property.

Even
if units held by a Non-Canadian unitholder were "taxable Canadian property", a capital gain from the disposition of 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 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 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 Income Tax Considerations  Canadian Taxation of Unitholders  Unitholders Resident in Canada" relating to
the Canadian tax consequences in respect of a disposition of a unit.

The
Manager anticipates that the Trust generally will treat gains as a result of dispositions of physical gold bullion as capital gains (see above under " Material
Canadian Federal Income Tax Considerations  Canadian Taxation of the Trust") and that it anticipates that when the Trust distributes physical gold bullion on the
redemption of 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 Income Tax Considerations  Canadian
Taxation of the Trust" generally will be designated as taxable capital gains of such unitholders. 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
gold 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 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 Net Asset Value for all unitholders, including non-residents of Canada.

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Risk Factors

You should considercarefullythe risks described below before making an investment decision. You should also refer to the other
information of the Trust including the Trust's financial statements and the related note.

The value of the units relates directly to the value of the gold held by the Trust, and fluctuations in the price of gold could materially adversely affect an investment in
the units.

The
principal factors affecting the value of the units are factors that affect the price of gold. Gold bullion is tradable internationally and its price is generally quoted in U.S. dollars. The
price of the units depends on, and typically fluctuates with, the price fluctuations of gold. The price of gold may be affected at any time by many international, economic, monetary and political
factors, many of which are unpredictable. These factors include, without limitation:



Changing
tax, royalty, land and mineral rights ownership and leasing regulations in gold producing countries can also have an impact on market functions and expectations for future gold supply. This
can affect both share prices of gold mining companies and the relative prices of other commodities, which are both factors that may affect investor decisions in respect of investing in gold.

An investment in the Trust will yield long-term gains only if the value of gold increases in an amount in excess of the Trust's expenses.

The
Trust does not actively trade gold to take advantage of short-term market fluctuations in the price of gold or generate other income. Accordingly, the Trust's long-term
performance is dependent on the long-term performance of the price of gold. As a result, an investment in the Trust will yield long-term gains only if the value of gold
increases in an amount in excess of the Trust's expenses.

A redemption of units for cash will yield a lesser amount than selling the units on the NYSE Arca or the TSX, if such a sale is possible.

Because
the cash redemption value of the units is based on 95% of the lesser of (i) the volume-weighted average trading price of the units traded on the NYSE Arca or, if trading has been
suspended on the NYSE Arca, the trading price of the units traded on the TSX, for the last five days on which such exchange is open for trading for the month in which the redemption request is
processed and (ii) the NAV of the redeemed 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, redeeming the units for cash will generally yield a lesser amount than selling the units on the NYSE Arca or the TSX, assuming such a sale is possible. You should
consider the manner in which the cash redemption value is determined before exercising your right to redeem your units for cash.

If a unitholder redeems units for physical gold bullion and requests to have the gold delivered to a destination other than an institution authorized to accept and hold London
Good Delivery gold bars, the physical gold bullion will no longer be deemed London Good Delivery once it has been delivered.

London
Good Delivery bars have the advantage that a purchaser generally will accept such bars as consisting of the indicated number of troy ounces of at least .995 fine gold without assaying or
otherwise testing them. This provides London Good Delivery bars with added liquidity as a sale of such bars can be completed more easily than the sale of physical gold bullion that is not London Good
Delivery. The Trust will only purchase London Good Delivery bars, and the physical gold bullion owned by the Trust will retain its status as London Good Delivery bars while it is stored at the Mint.
If a unitholder redeems units for physical gold bullion and has the gold delivered to an institution authorized to accept and hold London Good Delivery gold bars through an armored transportation
service carrier that is eligible to transport London Good Delivery gold bars, it is likely that the gold will retain its London Good Delivery status while in the custody of that institution.

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However,
if the redeeming unitholder instructs that gold be delivered to a destination other than such an institution, the physical gold bullion delivered to the unitholder will no longer be deemed
London Good Delivery once it has been delivered pursuant to the redeeming unitholder's delivery instructions, which may make a future sale of such gold more difficult.

The Trust may conduct further offerings of units from time to time, at which time it will offer units at a price that will be above NAV at the time of the offering but that may
be below the trading price of units on the NYSE Arca or TSX at that time.

The
Trust may conduct further offerings of units from time to time. Under the provisions of the Trust Agreement, the net proceeds to the Trust of any offering must be above NAV at the time of the
offering. Follow-on offerings of securities of issuers that are traded on an exchange usually are priced below the trading price of such securities at the time of an offering to induce
investors to purchase securities in the follow-on offering rather than through the exchange on which such securities are traded. Consequently, the price to the public at which such units
are offered likely will be below the trading price of units of the Trust on the NYSE Arca or TSX at the time of the offering, which may have the effect of lowering the trading price of units
immediately after the pricing of such follow-on offering. In addition, if and as long as the trading price of the units is below NAV, it is unlikely that the Trust will be able to conduct
a further offering of units, because the Trust Agreement governing the Trust provides such units would have to be offered at a price above the trading price of units.

The international gold bullion market has experienced historically high trading prices in the past three years, and there can be no assurance that this historically high
trading price of gold will be sustained.

Prices
in the international gold bullion market have been near historically high levels in the past three years. The Trust anticipates that the price of physical gold bullion going forward and, in
turn, the future value of net assets of the Trust, will be dependent upon factors such as global physical gold bullion supply and demand, investors' inflation expectations, exchange rate volatility
and interest rate volatility. An adverse development with regard to one or more of these factors may lead to a decrease in physical gold bullion currency trading prices. A decline in prices of
physical gold bullion would decrease the value of net assets of the Trust and the NAV.

Any sale of gold by the Trust to pay expenses and to cover certain cash redemptions will reduce the amount of gold represented by each unit on an ongoing basis irrespective of
whether the trading price of the units rises or falls in response to changes in the price of gold.

Each
outstanding unit represents an equal, fractional, undivided ownership interest in the net assets of the Trust attributable to the units. As the Trust does not expect to generate any net income
and will sell physical gold bullion over time on an as-needed basis to pay for its ongoing expenses and to cover certain redemptions, the amount of gold represented by each unit will and
the NAV may, gradually decline over time. This is true even if additional units are issued in future offerings of units by the Trust from time to time, as the amount of gold acquired by the proceeds
of any such future offering of units will proportionately reflect the amount of gold represented by such units. Assuming a constant gold price, the trading price of the units is expected to gradually
decline relative to the price of gold as the amount of gold represented by the units gradually declines. The units will only maintain their original value if the price of gold increases enough to
offset the Trust's expenses.

Investors
should be aware that, assuming no purchases of physical gold bullion are made by the Trust as a result of further offerings of units by the Trust, the gradual decline in the amount of
physical gold bullion held by the Trust will occur regardless of whether the trading price of the units rises or falls in response to changes in the price of gold.

The sale of the Trust's physical gold bullion to pay expenses or to cover certain redemptions at a time of low gold prices could adversely affect the value of the net assets of
the Trust.

The
Manager will sell physical gold bullion held by the Trust to pay Trust expenses or to cover certain redemptions on an as-needed basis irrespective of then-current gold
prices, and no attempt will be made to buy or sell physical gold bullion to protect against or to take advantage of fluctuations in the price of gold. Consequently, the Trust's physical gold bullion
may be sold at a time when the gold price is low. Sales of physical gold bullion at relatively lower gold prices will require the sale of more physical gold bullion, which in turn will have an adverse
effect on the value of the net assets of the Trust and the NAV.

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The Trust does not insure its assets and there may not be adequate sources of recovery if its gold is lost, damaged, stolen or destroyed.

The
Trust does not insure its assets, including the physical gold bullion stored at the Mint. Consequently, if there is a loss of assets of the Trust through theft, destruction, fraud or otherwise,
the Trust and unitholders will need to rely on insurance carried by applicable third parties, if any, or on such third party's ability to satisfy any claims against it. The amount of insurance
available or the financial resources of a responsible third party may not be sufficient to satisfy the Trust's claim against such party. Also, unitholders are unlikely to have any right to assert a
claim directly against such third party; such claims may only be asserted by the Trustee on behalf of the Trust. In addition, if a loss is covered by insurance carried by a third party, the Trust,
which is not a beneficiary on such insurance, may have to rely on the efforts of the third party to recover its loss. This may delay or hinder the Trust's ability to recover its loss in a timely
manner or otherwise.

A
loss with respect to the Trust's gold that is not covered by insurance and for which compensatory damages cannot be recovered would have a negative impact on the NAV and would adversely affect an
investment in the units. In addition, any event of loss may adversely affect the operations of the Trust and, consequently, an investment in the units.

If there is a loss, damage or destruction of the Trust's physical gold bullion in the custody of the Mint and the Trust does not give timely notice, all claims against the Mint
will be deemed waived.

In
the event of loss, damage or destruction of the Trust's physical gold bullion in the Mint's custody, care and control, the Trust must give written notice to the Mint within five Mint business days
(a Mint business day means any day other than a Saturday, Sunday or a holiday observed by the Mint) after the discovery by the Trust of any such loss, damage or destruction, but in any event no
more than 30 days after the delivery by the Mint to the Trust of an inventory statement in which the discrepancy first appears. 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.

RBC Dexia, the Mint, the Trustee and other service providers engaged by the Trust may not carry adequate insurance to cover claims against them by
the Trust.

RBC
Dexia, the Mint, the Trustee and other service providers engaged by the Trust maintain such insurance as they deem adequate with respect to their respective businesses and their positions as
custodian, trustee or otherwise of the Trust. Unitholders cannot be assured that any of the aforementioned parties will maintain any insurance with respect to the Trust's assets held or the services
that such parties provide to the Trust and, if they maintain insurance, that such insurance is sufficient to satisfy any losses incurred by them in respect of their relationship with the Trust. In
addition, none of the Trust's service providers is required to include the Trust as a named beneficiary of any such insurance policies that are purchased. Accordingly, the Trust will have to rely on
the efforts of the service provider to recover from their insurer compensation for any losses incurred by the Trust in connection with such arrangements.

All redemptions will be determined using U.S. dollars, which will expose redeeming non-U.S. unitholders to
currency risk.

All
redemptions will be determined using U.S. dollars. All redeeming unitholders will receive any cash amount to which the unitholder is entitled in connection with the redemption in
U.S. dollars, and will be exposed to the risk that the exchange rate between the U.S. dollar and the other currency in which the unitholder generally operates will result in a lesser
redemption amount than the unitholder would have received if the redemption amount had been calculated and delivered in such other currency. In addition, because any cash as a result of the redemption
will be delivered in U.S. dollars, the redeeming unitholder may be required to open or maintain an account that can receive deposits of U.S. dollars.

In the event the Trust's physical gold bullion is lost, damaged, stolen or destroyed, recovery may be limited to the market value of the gold at the time the loss
is discovered.

If
there is a loss due to theft, loss, damage, destruction or fraud or otherwise with respect to the Trust's physical gold bullion held by one of the Trust's custodians and such loss is found to be
the fault of such custodian, the Trust may not be able to recover more than the market value

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of
the gold at the time the loss is discovered. If the market value of gold increases between the time the loss is discovered and the time the Trust receives payment for its loss and purchases
physical gold bullion to replace the losses, less physical gold bullion will be acquired by the Trust and the value of the net assets of the Trust will be negatively affected.

A redeeming unitholder that suffers loss of, or damage to, its physical gold bullion during delivery from the Mint will not be able to claim damages from the Trust or
the Mint.

If
a unitholder exercises its option to redeem units for physical gold bullion, the unitholder's physical gold bullion will be transported by an armored transportation service carrier engaged by or on
behalf of the redeeming unitholder. Because ownership of the physical gold bullion will transfer to such unitholder at the time the Mint surrenders the physical gold bullion to the armored
transportation service carrier, the redeeming unitholder will bear the risk of loss from the moment the armored transportation service carrier takes possession of the physical gold bullion on behalf
of such unitholder. In the event of any loss or damage in connection with the delivery of the physical gold bullion after such time, such unitholder will not be able to claim damages from the Trust or
the Mint but will need to bring a claim against the armored transportation service carrier.

Because the Trust primarily invests in physical gold bullion, an investment in the Trust may be more volatile than an investment in a more broadly diversified
portfolio.

The
Trust is primarily invested at all times in physical gold bullion. As a result, the Trust's holdings are not diversified. Accordingly, the NAV may be more volatile than another investment vehicle
with a more broadly diversified portfolio and may fluctuate substantially over time. An investment in the Trust may be deemed speculative and is not intended as a complete investment program. An
investment in units should be considered only by persons financially able to maintain their investment and who can bear the risk of loss associated with an investment in the Trust. Investors should
review closely the objective and strategy, the investment and operating restrictions and the redemption provisions of the Trust as outlined herein and familiarize themselves with the risks associated
with an investment in the Trust.

Under Canadian law, the Trust and unitholders may have limited recourse against the Mint.

The
Mint is a Canadian Crown corporation. A Crown corporation may be sued for breach of contract or for wrongdoing in tort where it has acted on its own behalf or on behalf of the Crown. However, a
Crown corporation may be entitled to immunity if it acts as agent of the Crown rather than in its own right and on its own behalf. The Mint has entered into the Precious Metals Storage Agreement
relating to the custody of the Trust's physical gold bullion on its own behalf and not on behalf of the Crown; nevertheless, a court may determine that, when acting as custodian of the Trust's
physical gold bullion, the Mint acted as agent of the Crown and, accordingly, that the Mint may be entitled to immunity of the Crown. Consequently, the Trust or a unitholder may not be able to recover
for any losses incurred as a result of the Mint's acting as custodian of the Trust's physical gold bullion.

A notice of redemption is irrevocable.

In
order to redeem units for cash or gold, a unitholder must provide a notice of redemption to the Trust's transfer agent. Except when redemptions have been suspended by the Manager, once a notice of
redemption has been received by the transfer agent, it can no longer be revoked by the unitholder under any circumstances, though it may be rejected by the transfer agent if it does not comply with
the requirements for a notice of redemption. See "Redemption of Units".

The Mint may become a private enterprise, in which case its obligations will not constitute the unconditional obligations of the Government
of Canada.

In
the past, there has been speculation regarding whether the Government of Canada might privatize the Mint. The Mint will not remain a Crown corporation if the Government of Canada privatizes the
Mint. If the Mint were to become a private entity, its obligations would no longer generally constitute unconditional obligations of the Government of Canada and, although it would continue to be
responsible for and bear the risk of loss of, and damage to, the Trust's physical gold bullion that is in its custody, there would be no assurance that the Mint would have the resources to satisfy
claims of the Trust against the Mint based on a loss of, or damage to, the Trust's physical gold bullion in the custody of the Mint.

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The Trust may terminate and liquidate at a time that is disadvantageous to unitholders.

If
the Trust is required to terminate and liquidate or the Manager determines to terminate and liquidate the Trust, such termination and liquidation could occur at a time which is disadvantageous to
unitholders, such as when gold prices are lower than the gold prices at the time when unitholders purchased their units. In such a case, when the Trust's physical gold bullion is sold as part of the
Trust's liquidation, the resulting proceeds distributed to unitholders will be less than if gold prices were higher at the time of sale. In certain circumstances, the Manager has the ability to
terminate the Trust without the consent of unitholders. The Manager's interests may differ from those of the unitholders, and the Manager may terminate the Trust at a time that is not advantageous for
the unitholder. See "Termination of the Trust" for more information about the termination of the Trust, including when the termination of the Trust may be triggered by events outside the direct
control of the Manager, the Trustee or the unitholders.

The units may trade at a price which is at, above or below the NAV, and any discount or premium in the trading price relative to the NAV may widen as a result of
non-concurrent trading hours between the COMEX, the NYSE Arca and the TSX.

Units
may trade in the market at a premium or discount to the NAV. This risk is separate and distinct from the risk that the NAV may decrease.

The
amount of the discount or premium in the trading price relative to the NAV may be influenced by non-concurrent trading hours between the COMEX division of the New York
Mercantile Exchange, which is the U.S. exchange on which gold for physical delivery is traded, and the NYSE Arca and the TSX. While the units will trade on the NYSE Arca and the TSX until
4:00 p.m. Eastern time, liquidity in the global gold market will be reduced after the close of the COMEX division of the New York Mercantile Exchange at 1:30 p.m. Eastern time. As
a result, during this time, trading spreads, and the resulting premium or discount to the NAV may widen.

The Trust may suspend redemptions, which may affect the trading price of the units.

In
certain circumstances, the Manager, on behalf of the Trust, may suspend the right of unitholders to request a redemption of their units or postpone the date of delivery or payment of the redemption
proceeds of the Trust (whether physical gold bullion and/or cash, as the case may be) with the prior approval of Canadian securities regulatory authorities having jurisdiction, where required. Such
circumstances include any period during which the Manager determines that conditions exist which render impractical the sale of assets of the Trust or which impair the ability of the Manager to
determine the value of the assets of the Trust or the redemption amount for the units. See "Redemption of Units  Redemption of Physical Gold Bullion" and
"Redemption for Cash". This may affect the trading price of the units at a time when an investor wishes to sell its units on the NYSE Arca or the TSX. Accordingly, units may not be an appropriate
investment for investors who seek immediate liquidity.

Future governmental decisions may have significant impact on the price of physical gold bullion.

Generally,
gold prices reflect the supply and demand of available physical gold bullion. Governmental decisions, such as the executive order issued by the President of the United States in 1933
requiring all persons in the United States to deliver physical gold bullion to the Federal Reserve or the abandonment of the gold standard by the United States in 1971, have been viewed
as having significant impact on the supply and demand of physical gold bullion and the price of physical gold bullion. Future governmental decisions may have an impact on the price of physical gold
bullion, and may result in a significant decrease or increase in the value of the net assets of the Trust and the NAV.

The market for units and the liquidity of units may be adversely affected by competition from other methods of investing in gold.

The
Trust competes with other financial vehicles, including traditional debt and equity securities issued by companies in the gold industry and other securities backed by or linked to gold, direct
investments in gold and investment vehicles similar to the Trust. Market and financial conditions, and other conditions beyond the Manager's control, may make it more attractive to invest in other
financial vehicles or to invest in gold directly, which could limit the market for the units and reduce the liquidity of the units and, accordingly, the price received for sales of units on the NYSE
Arca or the TSX.

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Crises may motivate large-scale sales of gold, which could decrease the price of gold and adversely affect an investment in the units.

The
possibility of large-scale distress sales of gold in times of crisis may have a negative impact on the price of gold and adversely affect an investment in the units. For example, the 2008
financial credit crisis resulted in significantly depressed prices of gold due to forced sales and deleveraging from institutional investors such as hedge funds and pension funds. Crises in the future
may impair gold's price performance which would, in turn, adversely affect an investment in the units.

The Trust may be forced to sell physical gold bullion earlier than anticipated.

The
Trust has retained cash from the net proceeds of its offerings in an amount not in excess of 3% of the net proceeds of the offerings in order to provide available funds for expenses. If the
Trust's expenses are higher than estimated, the Trust may need to sell physical gold bullion earlier than anticipated to meet its expenses. Such accelerated sales may result in a reduction of the NAV
and the trading price of the units.

Unitholders do not have the protections associated with ownership of units in an investment company registered under the U.S. Investment Company Act of 1940, as amended
or the protections afforded by the Commodity Exchange Act.

The
Trust is not registered as an investment company under the Investment Company Act of 1940, as amended, and is not required to register under such act. Consequently, unitholders do not have the
regulatory protections provided to investors in investment companies. The Trust does not and will not hold or trade in commodity futures contracts regulated by the Commodity Exchange Act of 1936, as
administered by the U.S. Commodity Futures Trading Commission, (the "CFTC"). Furthermore, the Trust is not a commodity pool for purposes of the Commodity Exchange Act, and none of the
Manager, the Trustee or the underwriters is subject to regulation by the CFTC as a commodity pool operator or a commodity trading advisor in connection with the units. Consequently, unitholders do not
have the regulatory protections provided to investors in Commodity Exchange Act-regulated instruments or commodity pools.

Substantial sales of gold by the official sector could adversely affect an investment in the units.

The
official sector consists of central banks, other governmental agencies and multi-lateral institutions that buy, sell and hold gold as part of their reserve assets. The official sector holds a
significant amount of gold, some of which is static, meaning that it is held in vaults and is not bought, sold, leased or swapped or otherwise available in the open market. Several central banks and
multi-lateral institutions have sold portions of their gold reserves in recent years, with the result being that the official sector, taken as a whole, has been a net supplier of gold to the open
market. In the event that future economic, political or social conditions or pressures require members of the official sector to liquidate their gold assets all at once or in an uncoordinated manner,
the demand for gold may not be sufficient to accommodate the sudden increase in the supply of gold to the market. Consequently, the price of gold may decline which may adversely affect an investment
in the units.

The Manager and its affiliates also manage other funds that invest in physical gold bullion and other assets that may be held by the Trust, and conflicts of interest by the
Manager or its affiliates may occur.

The
Manager is responsible for the day-to-day business and operation of the Trust and, therefore, exercises significant control over the Trust. The Manager may have different
interests than the unitholders and consequently may act in a manner that is not advantageous to unitholders at any particular time.

The
Manager and its general partner, the general partner's directors and officers, and their respective affiliates and associates may engage in the promotion, management or investment management of
other accounts, funds or trusts that invest primarily in physical gold bullion. The Manager currently manages 23 mutual funds and hedge funds, approximately half of which include physical gold
bullion as part of their portfolios. One of these mutual funds, a Canadian public mutual fund called the Sprott Gold Bullion Fund, has an investment objective and strategy to hold physical gold
bullion, similar to the Trust. Although officers, directors and professional staff of the Manager devote as much time to the Trust as is deemed appropriate to perform their duties, the staff of the
Manager may have conflicts in allocating their time and services among the Trust and the other accounts, funds or trusts managed by the Manager.

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The Trust's obligation to reimburse the Trustee, the Manager, the underwriters or certain parties related to them for certain liabilities could adversely affect an investment
in the units.

Under
certain circumstances, the Trust might be subject to significant indemnification obligations in favor of the Trustee, the Manager, or an underwriter as a result of an offering or certain parties
related to them. The Trust does not carry any insurance to cover such potential obligations and, to the Manager's knowledge, none of the foregoing parties are insured for losses for which the Trust
has agreed to indemnify them. Any indemnification paid by the Trust would reduce the value of net assets of the Trust and, accordingly, the NAV.

Unitholders are not entitled to participate in management of the Trust.

Unitholders
are not entitled to participate in the management or control of the Trust or its operations, except to the extent of exercising their right to vote their units when applicable. Unitholders
do not have any input into the Trust's daily activities.

The rights of unitholders differ from those of shareholders of a corporation.

Because
the Trust is organized as a trust rather than a corporation, the rights of unitholders are set forth in the Trust Agreement rather than in a corporate statute. This means that unitholders do
not have the statutory rights normally associated with the ownership of shares in an Ontario corporation. For example, the Trust is not subject to minimum quorum requirements, is not required to hold
annual meetings, and has no officers or directors. Unitholders have the right to vote on matters brought before unitholders in accordance with the Trust Agreement but do not have a right to elect the
Manager, though unitholders do have the right to remove the Manager in certain circumstances. In addition, unitholders do not have the right to bring "oppression" or "derivative" suits.

The investment objective and restrictions of the Trust and the attributes of a particular class or series of a class of units may be changed by way of an extraordinary
resolution of all unitholders and unitholders of such class or series of a class of units, respectively.

The
investment objective and restrictions of the Trust and the attributes of a particular class or series of a class of units may be changed with the approval, in person or by proxy, of all
unitholders and unitholders holding units of that class or series of a class, as the case may be, representing in aggregate not less than 662/3% of the value of the net assets of the
Trust or that class or series of a class of the Trust, respectively, 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 units representing in aggregate not less than 662/3% of the value of the
net assets of the Trust or of that class or series of a class of the Trust, as determined in accordance with the Trust Agreement. Such changes to the investment objective or restrictions of the Trust
or the attributes of the units may be more favorable or less favorable to you than the investment objective or restrictions of the Trust or the attributes of the units, as the case may be, as
described in this prospectus. The value of the units sold hereby may decrease as a result of such changes.

Substantial redemptions of units may affect the liquidity and trading price of units and increase thepro rataexpenses
per unit.

Substantial
redemptions of units could result in a decrease in the trading liquidity of the units and increase the amount of Trust expenses allocated to each remaining unit. Such increased expenses
may reduce the value of the net assets of the Trust, the NAV and the trading price of the units.

Fluctuation in foreign exchange rates may have an adverse effect on the Trust and on the trading price of the units.

The
Trust maintains its accounting records, purchases gold and reports its financial position and results in U.S. dollars. Because certain of the Trust's expenses are paid in Canadian dollars,
an increase in the value of the Canadian dollar would increase the reported expenses of the Trust that are payable in Canadian dollars, which could result in the Trust being required to sell more
physical gold bullion to pay its expenses. Further, such appreciation could adversely affect the Trust's reported financial results, which may have an adverse effect on the trading price of
the units.

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The Trust expects to be a passive foreign investment company, which may have adverse U.S. federal income tax consequences to U.S. Holders who do not make certain
elections.

Based
on its method of operation, the Trust expects to be treated as a passive foreign investment company (a "PFIC"), for U.S. federal income tax purposes. Therefore, a
U.S. Holder of the units (as defined under "Material Income Tax
Considerations  Material U.S. Federal Income Tax Considerations") that does not make a QEF election or a mark-to-market election
with respect to the units generally will be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any
gain from the disposition of the units as if the excess distribution or gain had been recognized ratably over the U.S. Holder's holding period for the units. A U.S. Holder generally may
mitigate these U.S. federal income tax consequences by making a QEF election, or, to a lesser extent, a mark-to-market election. See "Material Income Tax
Considerations  Material U.S. Federal Income Tax Considerations" for a more comprehensive discussion of the U.S. federal income tax consequences to
U.S. Holders arising from the Trust's status as a PFIC and the procedures for making a QEF election or a mark-to-market election.

A U.S. Holder that makes a QEF election with respect to his, her or its units may be required to include amounts in income for U.S. federal income tax purposes if
any holder redeems units for cash or physical gold bullion.

As
noted below and described in detail under "Material Income Tax Considerations  Material U.S. Federal Income Tax Considerations", a U.S. Holder,
as defined below, generally may mitigate the U.S. federal income tax consequences under the PFIC rules of holding units of the Trust by making a QEF election. A U.S. Holder that makes a
QEF election must report each year for U.S. federal income tax purposes his, her or itspro ratashare of the Trust's ordinary earnings
and the Trust's net capital gain, if any, regardless of whether or not distributions were received from the Trust by the U.S. Holder. If any holder redeems units for physical gold bullion
(regardless of whether the holder requesting redemption is a U.S. Holder or has made a QEF election), the Trust will be treated as if it sold the physical gold bullion for its fair market
value. As a result, all the U.S. Holders who have made a QEF election will be required to currently include in their income theirpro ratashare of the Trust's gain from such deemed disposition (which generally will be taxable to non-corporate U.S. Holders at a maximum rate of 28% under current law if the Trust has
held the physical gold bullion for more than one year), even though such deemed disposition is not attributable to any action on their part. If any holder redeems units for cash and the Trust sells
physical gold bullion to fund the redemption (regardless of whether the holder requesting redemption is a U.S. Holder or has made a QEF election), all the U.S. Holders who have made a
QEF election similarly will include in their income theirpro ratashare of the Trust's gain from the sale of the physical gold bullion, which
will be taxable as described above, even though the Trust's sale of physical gold bullion is not attributable to any action on their part. See "Material Income Tax
Considerations  Material U.S. Federal Income Tax Considerations  U.S. Federal Income Taxation of
U.S. Holders  Taxation of U.S. Holders Making a Timely QEF Election."

Unitholders may be liable for obligations of the Trust to the extent the Trust's obligations are not satisfied out of the Trust's assets.

The
Trust Agreement provides that no unitholder will be subject to any liability whatsoever, in tort, contract or otherwise, to any person in connection with the investment obligations, affairs or
assets of the Trust and all such persons will look solely to the Trust's assets for satisfaction of claims of any nature arising out of or in connection therewith. Also, under the Trust Beneficiaries' Liability Act,
2004(Ontario), holders of units of a trust governed by the laws of the Province of Ontario that is a reporting
issuer under theSecurities Act(Ontario) (as the trust is) are not, as beneficiaries, liable for any act, default, obligation or liability of
the trust. Notwithstanding the above, there is a risk that a unitholder could be held personally liable for obligations of the Trust to the extent that claims are not satisfied out of the assets of
the Trust if a court finds (i) that Ontario law does not govern the ability of a third party to make a claim against a beneficiary of a trust and that the applicable governing law permits such
a claim, or (ii) that the unitholder was acting in a capacity other than as a beneficiary of the trust. In the event that a unitholder should be required to satisfy any obligation of the Trust,
under the Trust Agreement, such unitholder will be entitled to reimbursement from any available assets of the Trust.

Canadian registered plans that redeem their units for physical gold bullion may be subject to adverse consequences.

Physical
gold bullion received by a Canadian registered plan, such as a registered retirement savings plan, on a redemption of units for physical gold bullion will not be a qualified investment for
such plan. Accordingly, such plans (and in the case of certain plans, the annuitants

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or
beneficiaries thereunder or holders thereof) may be subject to adverse Canadian tax consequences including, in the case of registered education savings plans, revocation of such plans.

If the Trust ceases to qualify as a mutual fund trust for Canadian income tax purposes, it or the unitholders could become subject to material adverse
consequences.

In
order to qualify as a mutual fund under theIncome Tax Act(Canada) (the "Tax Act"), the Trust must comply with various
requirements contained in the Tax Act, including (in many or most circumstances) requirements to hold substantially all its property in assets (such as physical gold bullion and cash)
that are not "taxable Canadian property," and to restrict its undertaking to the investing of its funds. See "Material Income Tax Considerations  Material
Canadian Federal Income Tax Considerations  Qualification as a Mutual Fund Trust." If the Trust were to cease to qualify as a mutual fund (whether as a result of
a change of law or administrative practice, or due to its failure to comply with the current Canadian requirements for qualification as a mutual fund trust), it may experience various potential
adverse consequences, including becoming subject to a requirement to withhold tax on distributions made to non-resident unitholders of any capital gains realized from the dispositions of
physical gold bullion and the units not qualifying for investment by Canadian registered plans.

If the Trust were to carry on a business in Canada in a taxation year or acquire securities that were "non-portfolio properties," it could become subject to tax at
full corporate tax rates on some or all of its income for that year.

The
Manager anticipates that the Trust will make sufficient distributions in each year of any income (including taxable capital gains) realized by the Trust for Canadian tax purposes in the year so as
to ensure that it will not be subject to Canadian income tax on such income. Such income generally will become subject to Canadian income tax at full corporate rates if the Trust becomes a specified
investment flow-through (a "SIFT"), trust, even if distributed in full. If the Trust, contrary to its investment restrictions, were to carry on a business in Canada in a taxation
year and use its property in the course of any such business, or acquire securities that were "non-portfolio properties," it could become a SIFT trust. Although the activities of the
Trust, as described in this prospectus, are intended to avoid having the Trust characterized as a SIFT trust, it may be possible that the CRA would take a different (and adverse) view of this
issue. 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. See "Material Income Tax Considerations  Material Canadian Federal
Income Tax Considerations  SIFT Trust Rules."

If the Trust treats distributed gains as being on capital account and the CRA later determines that the gains were on income account, then Canadian withholding taxes would
apply to the extent that the Trust has distributed the gains to non-resident unitholders and Canadian resident unitholders could be reassessed to increase their taxable income. Any taxes
borne by the Trust itself would reduce the NAV and the trading prices of the units.

The
Manager anticipates that the Trust generally will treat gains (or losses) as a result of dispositions of physical gold bullion as capital gains (or capital losses), although
depending on the circumstances, it may instead include (or deduct) the full amount of such gains in computing its income. See "Material Income Tax
Considerations  Material Canadian Federal Income Tax Considerations  Taxation of the Trust." 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, and non-resident unitholders potentially could be assessed directly by the CRA for Canadian withholding tax on the amount of net gains on such
transactions that were treated by the CRA as having been distributed to them. Furthermore, any gains that had already accrued to the Trust on its holdings of gold bullion prior to an acquisition of
units by a particular unitholder would generally have the effect of increasing such taxable component of redemption proceeds, on a subsequent redemption by that unitholder. The CRA can assess the
Trust for a failure of the Trust to withhold tax on distributions made by it to non-resident unitholders that are subject to withholding tax, and typically would do so rather than
assessing the non-resident unitholders directly. Accordingly, any such re-determination by the CRA may result in the Trust being liable for unremitted withholding taxes on
prior distributions made to unitholders who were not resident in Canada for the purposes of the Tax Act at the time of the distribution. See "Material Income Tax
Considerations  Canadian Taxation of Unitholders  Unitholders Not Resident in Canada." As the Trust may not

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be
able to recover such withholding taxes from the non-resident unitholders whose units were redeemed, payment of any such amounts by the Trust would reduce the NAV and the trading prices
of the units.

A unitholder may be unable to bring actions or enforce judgments against the Trust, the Trustee, the Manager, the Manager's general partner or any of their officers and
directors under U.S. federal securities laws in Canada or to serve process on any of them in the United States.

Each
of the Trust, the Trustee, the Manager, and the Manager's general partner is organized under the laws of the Province of Ontario, Canada, and all of their executive offices and administrative
activities and assets are located outside the United States. In addition, the directors and officers of the Trustee and the Manager's general partner 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. As a result, a unitholder may be unable to serve legal
process within the United States upon any of the Trust, the Trustee, the Manager or the Manager's general partner or any of their directors or officers, as applicable, or enforce against them
in the appropriate Canadian courts judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the
United States, or bring an original action in the appropriate Canadian courts to enforce liabilities against the Trust, the Trustee, the Manager, the Manager's general partner or any of their
directors of officers, as applicable, based upon the U.S. federal securities laws.

Remuneration of Directors, Officers, Trustee and the IRC

No
payment or reimbursement has been made to the directors and officers of the Manager by the Trust in the 2010 financial year. The Trustee is entitled to receive from the Trust, pursuant to the Trust
Agreement, trustee fees, custody, administration and securityholder reporting fees. For the financial year ended December 31, 2010, the Trust paid to the Trustee, in the aggregate,
approximately $4,127 for the Trustee's services as trustee. For the financial year ended December 31, 2010, the aggregate compensation paid to the IRC by all the investment funds managed by the
Manager was $190,750 (including HST). The amount allocated to the Trust can be found in the financial statements of the Trust.

Material Contracts

Copies
of the material contracts, listed below, are available for inspection during normal business hours at the offices of the Manager at Royal Bank Plaza, South Tower, Suite 2700,
P.O. Box 27, Toronto, Ontario:



Legal and Administrative Proceedings

There
are currently no ongoing legal or administrative proceedings involving the Manager which may be material to the Trust, nor are there any such proceedings known to be contemplated as of the date
of this Annual Information Form.

Termination of the Trust

The
Trust will be terminated and dissolved in the event any of the following occurs:



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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 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 units at the time at least 90 days notice. 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 in applicable Canadian regulations, the matter will be referred by the Manager to the Trust's independent review committee for its recommendation.

In
the event of the winding-up of the Trust, the rights of unitholders to require redemption of any or all of their units will be suspended, and the Manager or, in the event of (4), (5),
(6) or (7) above, such other person appointed by the Trustee, the unitholders of the Trust or a court of competent jurisdiction, as the case may be, will make appropriate arrangements
for converting the investments of the Trust into cash and the Trustee will proceed to wind-up the affairs of the Trust in such manner as seems to it to be appropriate. The assets of the
Trust remaining after paying or providing for all obligations and liabilities of the Trust will be distributed among the unitholders registered as of 4:00 p.m., Toronto time, on the date on
which the Trust is terminated in accordance with the Trust Agreement. Distributions of net income and net realized capital gains will, to the extent not inconsistent with the orderly realization of
the assets of the Trust, continue to be made in accordance with the Trust Agreement until the Trust has been wound up.

Notwithstanding
the foregoing, if a notice of termination has been given by the Manager and if authorized by the vote of unitholders holding units representing in aggregate not less than 50% of the
value of the net assets of the Trust as determined in accordance with the Trust Agreement, the assets of the Trust may be, in the event of the winding-up of the Trust, distributed to the
unitholders on the termination of the Trust in specie in whole or in part, and the Trustee will have complete discretion to determine the assets to be distributed to any unitholder and their
values for distribution purposes.

If,
after a period of six months from the effective date on which the Trust was terminated, the Trust's registrar and transfer agent is unable to locate the owner of any units as shown on the Trust's
register, such amount as would be distributed to such unitholder will
be deposited by the Trust's registrar and transfer agent in an account in a chartered bank or trust company (including the Trustee) in Canada in the name and to the order of such unitholder upon
presentation by such unitholder of sufficient information determined by the chartered bank or trust company to be appropriate to verify such unitholder's entitlement to such amount. Upon such deposit
being made, the units represented thereby will be cancelled and the Trust's registrar and transfer agent, the Manager, and the Trustee will be released from any and all further liability with respect
to such moneys. Thereafter, the unitholder will have no rights against the Trust's registrar and transfer agent, the Trustee or the Manager to such moneys or an accounting therefor.

Exemptions and Approvals

The
Trust has obtained exemptive relief from the Canadian securities regulatory authorities for relief from National Instrument 81-102 Mutual Trusts
("NI 81-102") (the "Exemptive Relief") to permit (i) the Trust to invest up to 100% of its assets in

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physical
gold bullion; (ii) certain filing and listing fees payable to securities regulatory authorities and applicable stock exchanges in connection with the offering to be borne by the Trust;
(iii) the appointment of the Mint as custodian of the Trust's physical gold bullion assets; (iv) purchases of 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 units and payment upon redemption of units all as described under "Redemption of Units"; 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 and for exemptive relief from National
Instrument 81-106 Investment Trust Continuous Disclosure to permit the use of International Financial Reporting Standards rather than Canadian generally accepted accounting
principles in preparing the Trust's financial statements.

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SPROTT PHYSICAL GOLD TRUST

Manager
Sprott Asset Management LP
Royal Bank Plaza
South Tower, Suite 2700
P.O. Box 27
Toronto, Ontario
M5J 2J1
Tel: (416) 943 6707
Fax: (416) 943-6497

Additional information about the Trust is available in the Trust's management reports of fund performance and financial statements. You may obtain a copy of these documents, at no cost by calling toll
free: 1 866 299 9906 from your dealer, or by e mail at: invest@sprott.com. These documents and other information about the Trust, such as information circulars and
material contracts are also available on the Sprott Asset Management LP internet site at: www.sprott.com or at www.sedar.com.

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