Document:

Exhibit 10.2

 

MANAGEMENT
AGREEMENT

 

THIS AGREEMENT made and entered
into as of the · day
of ·,
2009

 

B E T W E E N:

 

SPROTT
PHYSICAL GOLD TRUST,

a closed-end mutual fund
trust established under the laws of the Province of Ontario, by its trustee, RBC DEXIA INVESTOR SERVICES TRUST,  a
trust company incorporated under the federal laws of Canada

 

(hereinafter referred to as
the “Trust”)

 

OF
THE FIRST PART

 

- and -

 

SPROTT
ASSET MANAGEMENT LP,

a limited
partnership formed under the laws of the Province of Ontario

 

(hereinafter
referred to as the “Manager”)

 

OF THE SECOND PART

 

WHEREAS the Trust was
established under the laws of the Province of Ontario pursuant to a trust
agreement dated as of August 28, 2009, as amended and restated as of December
7, 2009 (the “Trust Agreement”);

 

AND
WHEREAS the Trust was created to invest and hold
substantially all of its assets in physical gold bullion, which will provide
holders of units of the Trust with 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;

 

AND
WHEREAS pursuant to the Trust Agreement, RBC Dexia Investor
Services Trust and the Manager were appointed as the trustee and the manager of
the Trust, respectively;

 

AND
WHEREAS pursuant to the Trust 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 management and
administrative services, and to provide such other services and facilities as
described in the Trust Agreement;

 

AND
WHEREAS, pursuant to the Trust Agreement, the Trustee has
no responsibility for the investment management of the Trust Property (as
hereinafter defined) or for monitoring the Investment Policy (as hereinafter
defined);

 

AND
WHEREAS the Trust and the Manager wish to evidence by this
Agreement the manner in which the Manager will provide investment management
services to the Trust and such other

 

 

management and
administrative services to the Trust as hereinafter described, subject to the
terms and conditions set out herein.

 

NOW THEREFORE in
consideration of the mutual covenants and agreements contained herein and for
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged) the parties hereto agree as follows:

 

1.             Definitions and Interpretations

 

The terms defined in this Section whenever used
in this Agreement shall, unless the context otherwise requires, have the
respective meanings hereinafter specified:

 

(a)           “Agreement” means this management agreement dated as of the day and year
first above written as the same may be amended, restated or supplemented from
time to time and “herein”, “hereof”, “hereby”, “hereunder” and similar expressions refer to
this Agreement and include every instrument supplemental or ancillary to this
Agreement and, except where the context otherwise requires, not to any
particular article, section or subsection thereof;

 

(b)           “Applicable Laws”  means, unless the
context otherwise dictates, any applicable statute of Canada or of a province
or territory of Canada or any applicable statute of the United States of
America or of a state or territory of the United States of America or any
applicable regulations, orders, instruments, policies or other laws made under
statutory authority by any governmental or regulatory body or agency having
jurisdiction over the Trust including, but not limited to, Securities
Legislation and the Tax Act;

 

(c)           “Business Day” means any day on which the New York Stock
Exchange Arca or the Toronto Stock Exchange are open for trading;

 

(d)           “Custodian”  means the
Trustee, acting as the custodian of the Trust Property other than the Gold
Bullion, and any sub-custodians appointed by the Trustee, in accordance with
the Trust Agreement, or any successor custodian of the Trust Property other
than the Gold Bullion appointed in accordance with the Trust Agreement or
pursuant to a separate written custodial agreement;

 

(e)           “Disclosure Documents” means any  (final)
prospectus of the Trust filed in all provinces and territories of Canada and
any registration statement of the Trust filed with the United States Securities
and Exchange Commission or similar offering documents, and any continuous
disclosure documents of the Trust filed with applicable Securities Authorities
as may be used by the Manager or required by applicable Securities Legislation
in connection with qualifying the distribution of the Units to the public,
including any amendments to such offering documents or continuous disclosure
documents;

 

(f)            “Expense Cap” shall have the meaning set forth in Section 8
hereof;

 

(g)           “Gold Bullion”  means physical
gold bullion in London Good Delivery bar form that is unencumbered, fully
allocated and stored at the Gold Custodian by or on behalf of the Trust;

 

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(h)           “Gold Custodian”  means the Royal
Canadian Mint, acting as the custodian of the Gold Bullion, and any
sub-custodians appointed by the Royal Canadian Mint, in accordance with the
Storage Agreement, or any successor custodian of the Gold Bullion appointed in
accordance with the Trust Agreement or pursuant to a separate written custodial
agreement;

 

(i)            “Investment Policy” shall have the meaning set forth in Section 3
hereof;

 

(j)            “LBMA” means the London Bullion Market Association which is
the London-based trade association that represents the wholesale gold and
silver bullion market in London and maintains a list of accredited melters and
assayers whose gold and silver bars are accepted by members of the London
bullion market in settlement against transactions between each other and other acceptable
counterparts, which is referred to as the LBMA Good Delivery List;

 

(k)           “Management Fee” shall have the meaning set forth in Section 8
hereof;

 

(l)            “Manager” means Sprott Asset Management LP, acting as the
manager of the Trust, and appointed in accordance with the Trust Agreement;

 

(m)          “Net Asset Value of the Trust” shall have the meaning and
shall be calculated in accordance with the Trust Agreement;

 

(n)           “Securities Authorities”  means the Ontario
Securities Commission and equivalent securities regulatory authorities in each
other province and territory of Canada, and the United States Securities and
Exchange Commission;

 

(o)           “Securities Legislation” means the laws, regulations, rules,
requirements and policies of the Securities Authorities which are in effect
from time to time and applicable to the Trust including, but not limited to,
National Instrument 81-102 Mutual Funds,
National Instrument 81-106 Investment Fund Continuous
Disclosure, National Instrument 81-107 Independent
Review Committee for Investment Funds and the United States Securities Act of 1933, as amended;

 

(p)           “Storage Agreement” means the precious metals storage agreement between the Manager, on
behalf of the Trust, and the Gold Custodian, to be dated on or about the date
of filing the final prospectus and registration statement with the applicable
Securities Authorities, as the same may be amended, restated or supplemented
from time to time;

 

(q)           “Tax Act”  means the Income Tax Act (Canada)
and the regulations, rules, requirements and policies promulgated thereunder,
as amended from time to time;

 

(r)            “Trust” means Sprott Physical Gold Trust, a closed-end mutual
fund trust established pursuant to the Trust Agreement;

 

(s)           “Trust Agreement” means the trust agreement of the Trust dated
as of August 28, 2009, as amended and restated as of December 7,
2009, as the same may be further amended, restated, supplemented or replaced
from time to time;

 

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(t)            “Trust Property”  at any time,
means any and all securities, cash (including free credit balances), property
and assets, real and personal, tangible and intangible, transferred, conveyed
or paid to the Trust including, without limitation:

 

(i)            all funds realized from the
sale of Units;

 

(ii)           Gold Bullion from time to
time delivered to and received by the Trust or held for its account as directed
by the Manager and accepted by the Gold Custodian on behalf of the Trust in
accordance with the Storage Agreement;

 

(iii)          all investments, sums or property
of any type or description (other than the Gold Bullion) from time to time
delivered to and received by the Trust or held for its account as directed by
the Manager and accepted by the Trustee on behalf of the Trust in accordance
with the Trust Agreement;

 

(iv)          any proceeds of disposition
of any of the foregoing property and assets; and

 

(v)           all income,
interest, profit, gains and accretions and additional rights arising from or
accruing to such foregoing property or such proceeds of disposition;

 

(u)           “Trustee” means RBC Dexia Investor Services Trust, acting as
the trustee of the Trust, or any successor trustee appointed in accordance with
the Trust Agreement;

 

(v)           “Unit”  means a unit of beneficial
interest, in any class or series of a class of the Trust, as presently
constituted pursuant to the Trust Agreement or as the same may from time to
time hereinafter be constituted, and collectively referred to as the “Units; and

 

(w)          “Valuation Date”  means each
Business Day, unless the Manager determines that the assets of the Trust should
be valued less frequently, either generally or in respect of one or more
specific instances, in which event “Valuation Date”
shall mean such Business Day or Business Days as the Manager determines.

 

In this Agreement, where the
context so indicates, the singular shall include the plural and the masculine
shall include the feminine and neuter.

 

2.             Appointment of the Manager

 

The Manager hereby directs the Trustee to execute this Agreement on
behalf of, and in order for, the Trust to appoint the Manager to provide or
engage others to provide all necessary or advisable investment management and
administrative services and facilities as hereinafter set forth and the Manager
hereby accepts such appointment and agrees to act in such capacity and to
provide or cause to be provided such investment management and administrative
services and facilities upon the terms set forth in this Agreement.

 

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The Trust hereby retains the Manager to manage the
Trust Property in the name of the Trust with full discretionary authority as to
all trades on a continuing basis until terminated and subject to and in
accordance with the provisions of this Agreement.

 

The Manager may from time to time employ or retain any other person or
entity to manage on behalf of the Manager or to assist the Manager in managing
or providing investment management and administrative services to all or any
portion of the Trust Property, and in
performing other duties of the Manager set out in this Agreement.  In the event that the Manager engages such
other person or entity with respect to providing investment management services
to the Trust Property, and such other person or entity is not registered as an
adviser (or exempt from such registration requirement) under the Securities Act (Ontario), the Manager
shall be responsible under the terms of this Agreement and the Trust Agreement
to the Trust for advice received from such other person or entity with respect
to the Trust Property as if such advice were given by the Manager.

 

In accordance with its authority and exclusive powers to manage and
direct the investment management and administrative services for the Trust, the
Manager, on behalf of the Trust, shall select brokers or dealers to transact
trades in respect of the Trust Property. 
The Manager may execute a portion of such portfolio transactions through
an affiliate (as such term is defined in the Securities
Act (Ontario)) which is a registered investment dealer. The Manager
or its affiliates will offer competitive rates and will only execute trades as
an investment dealer for the Trust when the executions obtained would be on
terms and conditions no less favourable to the Trust than would otherwise be
obtainable if the orders were placed through independent brokers or dealers and
at commission rates equal or comparable to rates that would have been charged
by independent brokers or dealers.

 

Funds of the Manager shall not be commingled with
those of the Trust under any circumstances.

 

3.             Investment Policy

 

The Trust’s investment objective, strategy and operating restrictions
with respect to the Trust Property are set out in Article 22 of the Trust
Agreement and Schedule “A” attached hereto (the “Investment
Policy”).  Subject to
applicable Securities Legislation and the terms of the Trust Agreement and this
Agreement, the Manager shall advise the Trust in writing promptly of any
material change to the Investment Policy, and any such writing shall be annexed
hereto as a supplementary schedule.

 

4.             Investment Management Services

 

The Manager shall manage the Trust Property by taking
such action from time to time in connection therewith as the Manager, in its
sole discretion, shall deem necessary or desirable for the proper investment
management of the Trust Property at all times in compliance with the Investment
Policy.  It is expressly understood that
the Manager’s investment discretion shall, subject to the Investment Policy, be
absolute.  Without limiting the
generality of the preceding sentence, the Manager shall not be limited to
investing the Trust Property in securities of a class authorized for investment
by trustees.

 

The Trust hereby grants to the Manager, subject to the
Trust Agreement, all power and authority necessary to give effect to the
foregoing including, without limitation, the power to:

 

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(a)                                  provide
or arrange to be provided research, information, data, advice, opportunities
and recommendations with respect to the making, acquiring (by purchase,
investment, re-investment, exchange or otherwise), holding and disposing
(through sale, exchange or otherwise) of Trust Property in the name of, on
behalf of, and at the risk of, the Trust;

 

(b)                                 obtain
for the Trust such services as may be required in acquiring, disposing of and
owning Trust Property including, but not limited to, the placing of orders with
brokers and investment dealers to purchase, sell and otherwise trade in or deal
with any Trust Property in the name of, on behalf of, and at the risk of, the
Trust;

 

(c)                                  direct
the delivery of the Trust Property sold, exchanged or otherwise disposed of
from the Trust’s account and to direct the payment for Trust Property acquired
for the Trust’s account upon delivery to the Custodian or the Gold Custodian,
as the case may be;

 

(d)                                 direct
the holding of all or any part of the Trust Property in cash or cash
equivalents from time to time available for investment in Gold Bullion,
securities and other assets, which cash or cash equivalents shall be invested
or held on deposit with a Canadian chartered bank, trust company, custodian or
prime broker appointed by the Trust from time to time, and investing all or any
part of said cash or cash equivalents from time to time available for
investment in short-term debt obligations of or guaranteed by the Government of
Canada or a province thereof, or the Government of the United States of America
or a state thereof, or such other short-term investment grade corporate debt
obligations as the Manager, in its discretion, deems advisable;

 

(e)                                  arrange
for, and complete, for and on behalf of the Trust, the purchase and sale of
Gold Bullion, at the best available prices available over a prudent period of
time;

 

(f)                                    provide
to the Trust and the Gold Custodian delivery and payment particulars in respect
of each purchase and sale of Gold Bullion;

 

(g)                                 arrange
or cause to be arranged with the Gold Custodian, or other custodians possessing
industry expertise, for the storage of Gold Bullion which is owned by the
Trust, including arrangements regarding indemnities or insurance in favour of
the Trust for the loss of such Gold Bullion in accordance with industry
practices;

 

(h)                                 monitor
relationships with gold bullion brokers to ensure trades in Gold Bullion to be
held as London Good Delivery bars are effected and executed in accordance with
LBMA compliance standards;

 

(i)                                     monitor
relationships with the Gold Custodian and any other custodian that has been
appointed by the Trust to hold and store the Gold Bullion which is owned by the
Trust;

 

(j)                                     exercise,
or direct the exercise of, any and all rights, powers and discretion in
connection with the Trust Property, including the power to vote the securities
at meetings of securityholders or executing proxies or other instruments on
behalf 

 

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of the Trust for that purpose, and to consent to any reorganization or
similar transaction;

 

(k)                                  make
any election to be made in connection with any mergers, acquisitions, tender
offers, take-over bids, arrangements, bankruptcy proceedings or other similar
occurrences which may affect the Trust Property;

 

(l)                                     execute
any prospectus, registration statement or similar offering document relating to
the offering of securities of the Trust filed with the Securities Authorities
on behalf of the Trust; and

 

(m)                               generally
perform any other act necessary to enable it to carry out its obligations under
this Agreement and the Trust Agreement.

 

The Manager agrees to give notice to the Trust:

 

(a)                                  of any legal or
contractual restrictions on the ability of the Trust to trade in any specific
security or securities generally, including securities deposited in its account
by the Manager, on behalf of the Trust, as Trust Property; or

 

(b)                                 of any issuer of
which the Trust is an insider, unless the Investment Policy precludes
transactions in securities of such an issuer.

 

5.             Records

 

The Manager shall keep at all times proper books of
account and records relating to the services performed hereunder, which books
of account and records shall be accessible for inspection by the Trust at any
time during normal business hours.

 

6.             Information, Statements and Reports

 

The Manager shall provide the Trust with periodic
statements describing the Trust Property, and transactions involving the Trust
Property, as follows:

 

(a)                                  at the end of
each month in which a transaction has been effected in respect of the Trust
Property; or

 

(b)                                 at the end of
each calendar quarter if no transaction has been effected with respect to the
Trust Property.

 

The Manager shall provide the Trust with notice of any change in the
primary portfolio manager(s) who are responsible for the day-to-day
investment management decisions made on behalf of the Trust Property as set out
in Schedule “A” attached hereto.  The
Manager shall also provide the Trust with notice of any action, inquiry or
proceeding involving the Manager which is initiated by a Securities Authority
having jurisdiction over the Manager’s investment management operations, unless
such action, inquiry or proceeding is initiated in conjunction with
correspondence and applications made in the ordinary course of maintaining such
registrations in good standing and such action, inquiry or proceeding does not
have an adverse material effect on the Trust, including the Manager’s ability
to act as discretionary investment manager to the Trust Property.

 

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7.             Custody of Trust Property

 

It is agreed that the
Manager, on behalf of the Trust, shall be entitled to make arrangements for the
Trust Property, or any part thereof, to be held by such custodian(s) as
the Manager may designate; in such event, the Manager agrees to provide the
Trust with a copy of any authorization to such custodian(s) regarding
acceptance of instructions from the Manager or the Trust and the Trust agrees
not to withdraw any of the Trust Property so held without notice to the
Manager.

 

Subject to the foregoing paragraph, the Trust and the Manager agree
that the Gold Bullion will be held by the Gold Custodian appointed by the
Manager, on behalf of the Trust, and the Trust Property other than the Gold
Bullion will be held by the Custodian appointed by the Manager, on behalf of
the Trust.

 

8.             Fees and Expenses

 

In consideration for the management, administrative and investment
management services rendered by the Manager pursuant to this Agreement and the
Trust Agreement, the Manager shall receive from the Trust a monthly management
fee (the “Management Fee”) set out in Schedule “B”
attached hereto, as such may be amended from time to time.

 

In addition to the Management Fee paid to the Manager pursuant to the
foregoing paragraph, the Trust shall reimburse the Manager for all expenses
incurred by the Manager in connection with the duties set out in Section 4
hereof (including payments to third parties in that regard) to the extent such
expenses were incurred for and on behalf of the Trust and do not represent
administrative costs of the Manager necessary for it to carry out its functions
hereunder.  Such expenses shall be
reimbursed on each Valuation Date when incurred.

 

The Management Fee payable to the Manager by the Trust shall be subject
to the following:

 

(a)                       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 Net Asset Value of the
Trust (the “Expense Cap”), 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.

 

(b)                      In calculating the expenses
of the Trust for purposes of the Expense Cap, the following items will be
excluded:  any applicable taxes payable
by the Trust or to which the Trust may be subject including federal and
provincial income taxes, goods and services taxes and withholding taxes, and
any extraordinary expenses of the Trust.

 

The expenses of the Trust’s initial public offering of Units and the
on-going operating expenses of the Trust, and the responsibility for the
payment thereof, are as set out in the Trust Agreement.

 

8

 

9.             Compensation for Additional Services

 

If and to the extent that the Manager shall render
services to the Trust other than those required to be rendered pursuant to the
provisions of this Agreement, such additional services and activities will be
compensated for separately and shall be on such terms that are generally no
less favourable to the Trust than those available from arm’s length parties
(within the meaning of the Tax Act) for comparable services.

 

10.           Other Activities of the
Manager

 

The Trust acknowledges that
the Manager has investment management responsibilities and contracts with other
persons, companies, limited partnerships, investment funds and other
entities.  The Trust therefore agrees
that the Manager may provide investment management and other services to such
other persons and entities which are similar or different from the services
provided to the Trust by the Manager even though such other persons or entities
may be the same or similar to the Trust. 
The Trust hereby accedes to such advisory arrangement consequences on
the understanding that the Manager will act in good faith and follow a policy
of allocating over a period of time investment opportunities to the Trust on a
basis which is, in the Manager’s reasonable opinion, fair and equitable to the
Trust relative to investment opportunities allocated to other persons or
entities for which the Manager is responsible, and of which the Manager has
knowledge, in which case the Manager shall not be liable to account to the
Trust for any profit, commission or remuneration made or received from or by
reason of such investment decisions or advice.

 

The Manager, on behalf of the Trust, may from time to time invest the
Trust Property in securities of an issuer in which the Manager or any
affiliate, or any director, partner, officer, shareholder and/or employee of
either has an interest or is an officer, a partner or a director, as set out
under the sub-heading “Conflicts of Interest” in Schedule “C” attached hereto.

 

11.           Authority to Enter into Agreement

 

Each of the parties
to this Agreement hereby represents and warrants to the other that it is duly
authorized and empowered to execute, deliver and perform this Agreement and
that such action does not conflict with or violate any provision of law, regulation,
policy, contract, deed of trust or other instrument to which it is a party or
by which it is bound and that this Agreement constitutes a valid and binding
obligation of it enforceable in accordance with its terms.

 

The
Trust shall provide to the Manager concurrently with the execution and delivery
by the Trust of this Agreement all such evidence of authority to act including,
without limitation, designations of authorized persons and certified copies of
the Trust Agreement and other documents, as the Manager may require.  The Manager may continue to rely on all such
evidence until notice to the contrary given hereunder has been received by it.

 

12.           Representations and
Warranties of the Manager

 

The Manager hereby represents and warrants to
the Trust that:

 

(a)                                  the
Manager is registered under the securities legislation in British Columbia,
Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and
Newfoundland and Labrador as an adviser in the category of portfolio manager
and in Ontario as a dealer in the category of exempt market dealer; and

 

9

 

(b)                                 the
Manager has obtained, completed, executed, filed, received and passed, as the
case may be, all registrations, filings, approvals, authorizations, consents
and/or examinations required under applicable Securities Legislation or by any
Securities Authority by reason of its activities as Manager hereunder and it
shall maintain such registrations, filings, authorizations and consents
throughout the term of this Agreement.

 

13.           Standard of Care

 

The
Manager shall exercise the powers granted and discharge its duties hereunder
honestly, in good faith and in the best interests of the Trust and, in
connection therewith, shall exercise the degree of care, diligence and skill
that a reasonably prudent professional manager would exercise in comparable
circumstances.  However, it is agreed
that the Manager does not in any way guarantee the performance of the Trust
Property and shall not be responsible for any loss in respect of the Trust
Property, except where such loss arises out of acts or omissions of the Manager
done or suffered in breach of its standard of care or through the Manager’s own
negligence, wilful
misconduct, wilful
neglect, default, bad faith or dishonesty or a material failure in complying
with Applicable Laws or the provisions set forth in this Agreement or the Trust
Agreement.

 

14.           Liability of the Manager

 

The Manager shall
not be liable to the Trust or any unitholder thereof for any loss suffered by
the Trust or any unitholder thereof, as the case may be, which arises out of
any action or inaction of the Manager if such course of conduct did not
constitute a breach of its standard of care or negligence, wilful misconduct,
wilful neglect, default, bad faith or dishonesty or a material failure in
complying with Applicable Laws or the provisions set forth in this Agreement or
the Trust Agreement, and if the Manager, in good faith, determined that such
course of conduct was in the best interests of the Trust.

 

The Trust acknowledges and agrees that the Manager shall not be
responsible for any loss of opportunity whereby the value of any of the Trust
Property could have been increased nor shall it be responsible for any decline
in value of any of the Trust Property unless such decline is the result of the
Manager’s breach of its standard of care or negligence, wilful misconduct,
wilful neglect, default, bad faith or dishonesty or a material failure in
complying with Applicable Laws or the provisions set forth in this Agreement or
the Trust Agreement.

 

The Trust acknowledges and agrees that the Manager shall not be
responsible for any losses or damages to the Trust arising out of any action or
inaction by the Gold Custodian, the Custodian or any sub-custodian holding the
Trust Property, unless such action or inaction arises out of or is the result
of the Manager’s breach of its standard of care or negligence, wilful
misconduct, wilful neglect, default, bad faith or dishonesty or a material
failure in complying with Applicable Laws or the provisions set forth in this
Agreement or the Trust Agreement.

 

The Manager may
rely and act upon any statement, report or opinion prepared by or any advice
received from auditors, solicitors, notaries or other professional advisors of
the Manager and shall not be responsible or held liable for any loss or damage
resulting from relying or acting thereon if the advice was within the area of
professional competence of the person from whom it was received and the Manager
acted reasonably and in good faith in relying thereon.

 

The Manager hereby acknowledges and agrees that the
obligations of the Trust hereunder are not personally binding upon the
unitholders of the Trust, any annuitant under a plan of which 

 

10

 

a unitholder of the Trust acts as a trustee or carrier, or the agents
of the Trust and that the Manager shall not resort to or seek redress, recourse
or satisfaction from the private property of any of the foregoing, whether the
liability be based on contract, tort or otherwise.  The Manager agrees that only the Trust and
the Trust Property shall be bound by and subject to the obligations and
liabilities arising out of this Agreement.

 

15.           Indemnity

 

The
Trust shall indemnify and hold harmless the Manager and its partners, officers,
agents and employees from and against any and all expenses, losses, damages,
liabilities, demands, charges, costs and claims of any kind or nature
whatsoever (including legal fees, judgments and amounts paid in settlement,
provided that the Trust has approved such settlement in accordance with the
Trust Agreement) in respect of the acts, omissions, transactions, duties,
obligations or responsibilities of the Manager as manager to the Trust, save
and except where such expenses, losses, damages, liabilities, demands, charges,
costs or claims are caused by acts or omissions of the Manager done or suffered
in breach of its standard of care or through the Manager’s own negligence,
wilful misconduct, wilful neglect, default, bad faith or dishonesty or a
material failure in complying with Applicable Laws or the provisions set forth
in this Agreement or the Trust Agreement.

 

16.           Not Partners or Joint
Venturers

 

The Trust and the Manager are not partners or joint venturers with each
other and nothing herein shall be construed so as to make them partners or
joint venturers or impose any liability as such on either of them; provided,
however, that nothing herein shall be construed so as to prohibit the Trust and
the Manager or its affiliates from embarking upon an investment together as
partners, joint venturers or in any other manner whatsoever, subject to
Applicable Law.

 

17.           Term

 

This Agreement shall
become effective on the date hereof and shall be in force until ·, 2014  and shall be automatically
renewed from time to time thereafter for additional terms of one year unless
otherwise terminated pursuant to Section 18 hereof.

 

18.           Termination

 

This Agreement shall continue in full force and
effect until this Agreement is terminated by either party giving at least 90
days’ prior written notice (or such shorter period as the parties in writing may
mutually agree upon) to the other party of such termination.

 

The Trust may terminate immediately this Agreement if the Manager is,
in the opinion of the Trustee, in material default of its obligations under
this 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 this Agreement where
the Manager (i) 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) 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.

 

11

 

Such termination of the Agreement will be without prejudice to the
rights and liabilities created under this Agreement prior to the effective date
of the termination.  Termination of this
Agreement in accordance with the terms hereof shall not result in any penalty
or other fee.

 

The parties acknowledge and agree that any change of the Manager (other
than to its affiliate) requires the approval of the unitholders of the Trust
and the approval of Securities Authorities in accordance with applicable
Securities Legislation.

 

Upon termination or assignment of this Agreement, the Manager shall
forthwith deliver to the Trust, in the case of termination, or to the assignee,
in the case of an assignment:

 

(a)                                  all
records, documents and books of account of the Trust; and

 

(b)                                 all
materials and supplies of the Trust,

 

which are in the
possession or control of the Manager and relate directly or indirectly to the
performance by the Manager of its obligations under this Agreement; provided,
however, that the Manager may retain notarial or other copies of such records,
documents and books of account and the Trust or the assignee shall produce at
its head office the originals of such records, documents and books of account
whenever reasonably required to do so by the Manager for the purpose of legal
proceedings or dealings with any governmental authorities.

 

Notwithstanding the foregoing paragraphs, the Trust reserves the right
to make a partial withdrawal from the Trust Property by providing prior written
notice to the Manager.

 

With respect to any transactions entered into by the Manager on behalf
of the Trust prior to giving or receiving notice of termination or partial
withdrawal, such transactions shall not be affected by such termination or
partial withdrawal and adequate provisions will be made for proper settlement
of outstanding commitments and the orderly transfer of the Trust Property.

 

19.                                 Conflict of
Interest Policy

 

Attached as Schedule “C” hereto is a copy of the Manager’s Statement of
Policies, which policy may be amended or restated from time to time.

 

20.                                 Confidentiality
and Anti-Money Laundering Legislation

 

The Manager shall treat as confidential all information pertaining to
the Trust including, without limitation, the financial affairs of the Trust,
and the Manager shall not disclose such confidential information to persons who
are not involved in the management and operation of the Trust, except with the
Trust’s consent or as may be necessary to comply with Applicable Laws or rules,
regulations and policies of Securities Authorities.  The Trust will treat all investment advice
and information which it receives from the Manager as confidential and for the
exclusive use of the Trust.

 

With respect to any prospective investor or unitholder
in the Trust, the Manager shall comply with Applicable Laws aimed at the
prevention of money laundering and terrorist financing.  If, as a result of any information or other
matter coming to the attention of the Manager, or any of its directors,
partners, officers, employees, or its professional advisors, the 

 

12

 

Manager
knows or suspects that a
prospective investor or unitholder of the Trust is engaged in money laundering
or terrorist financing, the Manager shall be required to report such
information or other matter to the Financial Transactions and Reports Analysis
Centre of Canada and such report or any other report required by Applicable
Laws shall not be treated as a breach of any restriction upon the disclosure of
information imposed by Canadian law or otherwise.

 

21.                                 Notices

 

Any notice or
other communication required or permitted to be given hereunder shall be in
writing and if delivered, shall be delivered to a responsible officer of the
Trust or to the Manager, as the case may be, and if mailed shall be mailed by
prepaid registered mail:

 

(a)                                  in
the case of the Trust:

 

c/o RBC Dexia Investor Services Trust

155 Wellington Street West,
5th Floor

RBC Centre

Toronto, Ontario

M5V 3L3

 

Attention:                           Head
of Funds

 

Telephone:                      (416)
974-5273

Facsimile:                          (416)
955-1240

 

(b)                                 in
the case of the Manager:

 

Sprott Asset Management LP

Royal Bank Plaza, South Tower

200 Bay Street

Suite 2700, P.O. Box 27

Toronto, Ontario

M5J 2J1

 

Attention:                           Kirstin
McTaggart, Chief Compliance Officer

 

Telephone:                      (416)
943-4065

Facsimile:                          (416)
943-6497

 

or at such other address and
number as the party to whom such communication is to be given shall have last
notified the party giving the same in the manner provided in this section.

 

Any
notice so mailed shall be deemed to have been given and received at the time of
delivery.  Any notice so mailed shall be
deemed to have been given and received if given by the Trust, when received by
the Manager, and if given by the Manager, on the third Business Day following
such mailing, except in the event of interruption of normal postal service, in
which event it shall be deemed given when received by the Trust.  Either party may from time to time upon
written notice to the other party change their or its address.

 

13

 

22.                                 Headings

 

The
inclusion of section headings in this Agreement is for convenience of reference
only and shall not affect the construction or interpretation hereof.

 

23.                                 Governing Law

 

This
Agreement shall be governed by, and construed in accordance with, the laws of
the Province of Ontario and the federal laws of Canada applicable therein and
shall be treated in all respects as an Ontario contract.  The parties hereto hereby attorn to the
jurisdiction of the courts of Ontario for arbitration of any disputes between
them with respect to the subject matter hereof.

 

24.                                 Entire Agreement

 

This
Agreement, including the Schedules attached hereto, and the Trust Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes and replaces all prior understandings, agreements,
negotiations or discussions, whether written or oral, between the parties with
respect thereto.  There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements or understanding, express or implied, between the parties other than
those expressly set forth in this Agreement and the Trust Agreement.

 

25.                                 Further Acts

 

Each of the Trust and
the Manager shall promptly do, make, execute or deliver, or cause to be done,
made, executed or delivered, all such further acts, documents and things as the
other party hereto may reasonably require from time to time for the purpose of
giving effect to this Agreement.

 

26.                                 Invalidity of
Provisions

 

Each
of the provisions contained in this Agreement is distinct and severable and a
declaration of invalidity or unenforceability of any such provision or part
thereof by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof. 
To the extent permitted by Applicable Law, the parties waive any
provision of law which renders any provision of this Agreement invalid or
unenforceable in any respect.

 

27.                                 Amendment

 

This Agreement may not
be amended, changed, supplemented or otherwise modified in any respect except
by written instrument executed by the parties hereto or their respective
successors or permitted assigns.

 

28.                                 Assignment

 

This Agreement shall not be assigned by the
Trust without the prior written consent of the Manager.  Upon notice to the Trust, the Manager may
transfer or assign any and all rights granted hereunder to any of its
successors or affiliates.

 

14

 

29.                                 Successors

 

This
Agreement shall enure to the benefit of, and be binding upon, the parties
hereto and their respective successors and permitted assigns.

 

30.                                 Counterparts

 

This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original
and such counterparts together shall constitute one and the same instrument.

 

[The remainder of this page has been intentionally left blank.]

 

15

 

IN WITNESS WHEREOF the
Trust and the Manager, by proper officers duly authorized on their behalf, have
executed this Agreement as of the date first above written.

 

 

	
   

  	
  SPROTT PHYSICAL GOLD TRUST, by its Trustee, RBC DEXIA INVESTOR
  SERVICES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  We have the authority to bind the Trust.

  
	
   

  	
   

  
	
   

  	
  SPROTT ASSET MANAGEMENT LP, by its general partner, SPROTT ASSET MANAGEMENT
  GP INC., in its capacity as the Manager of the Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Eric S. Sprott

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Kirstin H. McTaggart

  
	
   

  	
   

  	
  Corporate Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  We have the authority to bind the Manager.

  

 

16

 

SCHEDULE “A”

 

INVESTMENT POLICY

 

Investment Objective

 

The Trust was
created to invest and hold substantially all of its assets in Gold Bullion. The
Trust seeks to provide a secure, convenient and exchange-traded investment
alternative for investors interested in holding Gold Bullion without the
inconvenience that is typical of a direct investment in Gold Bullion.  The Trust does not anticipate making regular
cash distributions to unitholders.

 

Investment Strategy

 

The Trust intends to achieve its objective by investing primarily in
long-term holdings of unencumbered, fully allocated, Gold Bullion and will not
speculate with regard to short-term changes in gold prices.

 

Investment and Operating Restrictions

 

The investment activities of the Trust are intended to be conducted in
accordance with, among other things, the following investment and operating
restrictions, and they provide that the Trust:

 

(a)                       will invest in
and hold a minimum of 90% of the total net assets of the Trust in physical gold
bullion in London Good Delivery bar form and hold no more than 10% of the total
net assets of the Trust, at the discretion of the Manager, in physical gold
bullion (in London Good Delivery bar form or otherwise), gold coins, debt
obligations of or guaranteed by the Government of Canada or a province thereof,
or by the Government of the United States of America or a state thereof,
short-term commercial paper obligations of a corporation or other person whose
short-term commercial paper is rated R-1 (or its equivalent, or higher) by
Dominion Bond Rating Service Limited or its successors or assigns or F1 (or its
equivalent, or higher) by Fitch Ratings or its successors or assigns or A-1 (or
its equivalent, or higher) by Standard & Poor’s or its successors or
assigns or P-1 (or its equivalent, or higher) by Moody’s Investor Service or
its successors or assigns, interest-bearing accounts and short-term
certificates of deposit issued or guaranteed by a Canadian chartered bank or
trust company, money market mutual funds, short-term government debt
or short-term investment grade corporate debt, or other short-term debt
obligations approved by the Manager from time to time (for the purpose of this
paragraph, the term “short-term” means having a date of maturity or call for
payment not more than 182 days from the date on which the investment is made), except
during the 60-day period following the closing of the Trust’s initial public
offering or additional offerings or prior to the distribution of the assets of
the Trust;

 

(b)                      will store all
Gold Bullion owned by the Trust at the Gold Custodian or in the treasury vaults
of a Schedule I Canadian chartered bank or an affiliate or division thereof in
Canada on a fully allocated basis, provided that the Gold Bullion held in
London Good Delivery bar form may be stored with a custodian only if the Gold
Bullion will remain London Good Delivery while with that custodian;

 

(c)                       will not hold
any “taxable Canadian Property” within the meaning of the Tax Act;

 

(d)                      will not
purchase, sell or hold derivatives;

 

(e)                       will not issue
Units following the completion of the Trust’s initial public offering except (i) if
the gross proceeds per Unit to be received by the Trust are not less than 100%
of the most recently

 

 

calculated Net Asset Value per Unit 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;

 

(f)                         will ensure
that no part of the stored Gold Bullion may be delivered out of safekeeping by
the Gold Custodian or, if the Gold Bullion is held by another custodian, that
custodian, without receipt of an instruction from the Manager in the form
specified by the Gold Custodian or such other custodian indicating the purpose
of the delivery and giving direction with respect to the specific amount;

 

(g)                      will ensure
that no director or officer of the Manager or the Manager’s general partner, or
representative of the Trust or the Manager will be authorized to enter into the
Gold Bullion storage vaults without being accompanied by at least one
representative of the Gold Custodian or, if the Gold Bullion is held by another
custodian, that custodian, as the case may be;

 

(h)                      will ensure
that the Gold Bullion remains unencumbered;

 

(i)                          will inspect or
cause to be inspected the stored Gold Bullion periodically on a spot inspection
basis and, together with a representative of the Trust’s external auditor,
physically audit each bar annually to confirm the bar number;

 

(j)                          will not
guarantee the securities or obligations of any person other than the Manager,
and then only in respect of the activities of the Trust;

 

(k)                       in connection
with requirements of the Tax Act, will not make or hold any investment that
would result in the Trust failing to qualify as a “mutual fund trust” within
the meaning of the Tax Act;

 

(l)                          in connection
with requirements of the Tax Act, will not invest in any security that would be
a tax shelter investment within the meaning of section 143.2 of the Tax Act;

 

(m)                    in connection
with requirements of the Tax Act, will not invest in the securities of any
non-resident corporation, trust or other non-resident entity (or of any
partnership that holds such securities) if the Trust (or the partnership) would
be required to mark its investment in such securities to market in accordance
with the proposed section 94.2 of the Tax Act or to include any significant
amounts in income pursuant to proposed sections 94.1 or 94.3 of the Tax Act or
invest in any non-resident trust other than an “exempt foreign trust” as set
forth in Bill C-10, which was previously before the Canadian Parliament (or
amendments to such proposals or provisions as enacted into the law or successor
provisions thereto);

 

(n)                      in connection
with requirements of the Tax Act, will not invest in any security of an issuer
that would be a foreign affiliate of the Trust for purposes of the Tax Act; and

 

(o)                      in connection
with requirements of the Tax Act, will not carry on any business and make or
hold any investments that would result in the Trust itself being subject to the
tax for specified investment flow-through trusts (SIFT) as provided for in
section 122 of the Tax Act.

 

Primary Portfolio Manager

 

Eric
Sprott is the primary portfolio manager authorized to trade and carry out the
foregoing investment objective and strategy in respect of the Trust Property.

 

A2

 

SCHEDULE “B”

 

FEES

 

Management Fee

 

As compensation for providing management, administrative and investment
management services to the Trust pursuant to this Agreement and the Trust
Agreement, the Trust shall pay the Manager a monthly Management Fee equal to
1/12 of 0.35% of the Net Asset Value of the Trust (determined in accordance
with the Trust Agreement), plus any applicable federal and provincial
taxes.  The Management Fee shall be calculated
and accrued daily and payable monthly in arrears on the last day of each
month.  The Management Fee payable to the
Manager by the Trust shall be subject to the Expense Cap as set forth in Section 8
of this Agreement.

 

 

SCHEDULE “C”

 

 

SPROTT ASSET MANAGEMENT LP

STATEMENT OF POLICIES

 

IMPORTANT - The securities laws of certain
jurisdictions of Canada require securities dealers and advisers, when they
trade in or advise with respect to their own securities or securities of
certain other issuers to which they, or certain other parties related to them,
are related or connected, to do so only in accordance with particular
disclosure and other rules.  These rules require
dealers and advisers, prior to trading with or advising their customers or
clients, to inform them of the relevant relationships and connections with the
issuer of the securities. Clients and customers should refer to the applicable
provisions of these securities laws for the particulars of these rules and
their rights or consult with a legal advisor.

 

General

 

Sprott Asset Management LP (herein referred
to as “SAM” or “we”)
is registered under the securities laws of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Newfoundland
and Labrador as an adviser in the registration category of portfolio manager
and in Ontario as a dealer in the registration category of exempt market
dealer.

 

Under certain circumstances, SAM may advise
you, deal with or for you in securities transactions where the issuer of the
securities or the other party involved in the transaction is this firm or a
party having an ownership or business relationship with us, including affiliates
of SAM that are registered under securities laws (a “Sprott
Registrant”).

 

Since these transactions may create a
conflict between our interests and yours, we are required by securities laws to
disclose to you certain relevant matters relating to these transactions.  This statement contains a general description
of our policies and the required disclosures.

 

Compliance
with Law and Regulatory Requirements

 

SAM, its officers and employees are required
to fully observe, in letter and spirit, all laws governing their business and
securities activities.  SAM, its officers
and employees must deal fairly, honestly and in good faith with its clients.

 

SAM will only engage in
activities where it is confident that such activities are in compliance with
all requirements imposed by applicable law. 
In particular, it is SAM’s policy to ensure that the engagement of other
Sprott Registrants on behalf of SAM’s clients would only be done when it has
been determined that such other Sprott Registrant is an appropriate selection
in the circumstances.

 

 

In addition to applicable securities regulatory provisions and
contractual provisions respecting any business arrangements that may exist
between SAM and other dealers and advisers, the directors, officers and
employees of each are subject to guidelines or codes of conduct governing their
actions.  Our internal compliance process
supplements these policies and procedures.

 

Related
and Connected Issuers

 

National Instrument 31-103 Registration Requirements and Exemptions requires SAM to
disclose to investors whether any securities it recommends to investors to buy,
sell or hold are securities issued by SAM, a related issuer or, during the
distribution of the securities, a connected issuer of SAM.  An issuer is related to SAM if, through the
ownership of, or control over, voting securities or otherwise, the issuer is an
influential securityholder of SAM, SAM is an influential securityholder of the
issuer or if each of them is a related issuer of the same third party.  An issuer is connected to SAM if it has a
business relationship with SAM that, in connection with a distribution of
securities of that issuer, may lead a reasonable prospective purchaser to
question if the issuer and SAM are independent of each other.

 

In addition, SAM must disclose the name of
any related issuer that is a reporting issuer in Ontario or that has
distributed securities outside Ontario on a basis that, if it had done so in
Ontario, would have made such issuer a reporting issuer.  Set out below are the names of such related
issuers:

 

·                  Sprott Inc. (“SI”),
a reporting issuer that is a related issuer of SAM because SI is an indirect
100% shareholder of Sprott Asset Management GP Inc., the general partner of
SAM, and is the sole limited partner of SAM.

 

·                  Sprott Resource Corp. (“SRC”),
a reporting issuer that is a related issuer of SAM because the professional
group (as such term is defined under National Instrument 33-105 Underwriting Conflicts) of SAM exercises control or
direction over, or beneficially owns, directly or indirectly, 10% or more of
the voting securities of SRC, and SAM has officers, directors or employees who
constitute at least 20% of the directors of SRC.  In addition, an affiliate of SAM has entered
into an agreement to provide management services to SRC.

 

We may, from time to time, be deemed to be
related or connected to one or more other issuers for purposes of the
disclosure and other rules of the securities laws referred to above.  We are prepared to act as an adviser and
dealer in the ordinary course of our business to, and in respect of securities
of, any such related or connected issuer and, in connection therewith to
provide the full range of services customarily provided by us to, and in
respect of securities of, other issuers.  In any such case, such adviser or dealer and
other services shall be carried on by us in the ordinary course of our business
as an adviser or dealer in accordance with our usual practices and procedures
and in accordance with all applicable disclosure and other regulatory
requirements.

 

SAM, or its directors,
officers, partners, salespeople or other employees may, from time to time,
recommend that you trade in, or provide to you advice about, a security issued
by these listed persons or companies.  If
you wish further information concerning the relationship between SAM and these
listed persons or companies, or if you have any questions, please contact us.

 

Related Registrants

 

Where SAM has a principal
shareholder, director or officer that is a principal shareholder, director or
officer of another registrant, SAM shall adopt policies and procedures to
minimize the potential for conflict of interest resulting from such
relationship(s).  SAM is also required to
disclose to clients in writing, initially before making a trade for or
providing advice to the client, and in a timely manner 

 

C2

 

thereafter and, if possible,
before making the next trade for or providing advice to the client, if there
are any significant changes to this disclosure, the details of the relationship(s) and
the policies and procedures adopted to minimize the potential for conflicts of
interest resulting from such relationships. 
Sprott Private  Wealth LP
(“SPW”), a registrant, is related to SAM,
by virtue of each of SAM and SPW having SI as a direct or indirect holder of
100% of the voting securities of each general partner of SAM and SPW.

 

Conflicts of Interest

 

SAM as Adviser and Dealer

 

The principal business
activity of SAM is to act as a portfolio manager for separately managed
investment accounts of its clients (a “SAM Managed Account”)
and investment funds it manages (a “SAM Investment Fund”).  SAM’s activities as a dealer are primarily
the marketing of SAM Investment Funds to clients of SAM or to investment
dealers or mutual fund dealers.  In
providing trading and advisory services to our clients it is important that our
clients understand our interests in the service or transaction.

 

We must make certain
disclosures where we (a) act as your dealer/broker; (b) advise
you; or (c) exercise discretion on your behalf, with respect to securities
issued by us, by a related issuer or, in the course of a distribution, by a
connected issuer (collectively, “Related Securities”).

 

In these situations, we must
disclose our relationship with the issuer of the securities.  We must also make disclosure to you where we
know or should know that, as a result of our acting as your dealer/broker or
adviser, or of our exercising discretion on your behalf, Related Securities
will be purchased or sold by you through us.

 

The following is a list of the time and
manner in which these disclosures must be made:

 

·                               Where
we purchase or sell securities for your account, the required disclosure will
be contained in the confirmation of trade and monthly statement, which we
prepare and send to you.

 

·                               Where
we advise you with respect to the purchase, sale or holding of securities, the
disclosure must be made prior to our giving the advice.

 

·                               If
there is a significant change to the information previously disclosed to you,
SAM will notify you of the change in a timely manner and, if possible, before
making the next purchase or sale of the securities for you or providing advice
to you to purchase, sell or hold the securities.

 

·                               Where
we use our discretion as an adviser to trade securities in a SAM Managed
Account neither we nor another Sprott Registrant will charge a trade commission
without your consent, or otherwise in compliance with applicable law.

 

·                               Where we exercise
discretion over a SAM Managed Account, SAM will refrain from causing you to
purchase Related Securities unless, to the extent required by law, prior to
exercising discretionary authority and at least once within each twelve-month
period thereafter, SAM provides you with a copy of this Statement of Policies
and secures your specific and informed written consent to allow SAM to exercise
its discretion to acquire the Related Securities on your behalf.

 

Potential for Conflict

 

To the extent that one Sprott Registrant
determines it to be in the interests of its clients to engage the services of,
or invest in financial products offered by, another Sprott Registrant, it could
be subject to a 

 

C3

 

potential conflict of interest, given its
indirect relationship with the other Sprott Registrants.  SAM and its officers and employees must
ensure that if they select another Sprott Registrant to assist a SAM client it
is based on the determination that such other Sprott Registrant is an
appropriate selection having regard to the client’s circumstances.

 

Representatives of SAM and other Sprott
Registrants may from time to time act as officers of SAM and may also be
officers of other Sprott Registrants. All Sprott Registrants have adopted
policies and procedures that minimize the potential for conflicts of interest
resulting from the relationships of the officers and the Sprott Registrants,
and all officers are required to observe such policies in carrying out their
duties.

 

There will be three individuals who will be
dually licensed with both SPW and SAM, namely:

 

	
  Name

  	
   

  	
  Position at SPW

  	
   

  	
  Position at SAM

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eric
  S. Sprott

  	
   

  	
  Chief
  Executive Officer and Ultimate Designated Person

  	
   

  	
  Chief
  Executive Officer, Senior Portfolio Manager and Ultimate Designated Person

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  James
  R. Fox

  	
   

  	
  Vice-President,
  Sales and Marketing

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kirstin
  H. McTaggart

  	
   

  	
  Chief
  Compliance Officer and Alternate Designated Person

  	
   

  	
  Chief
  Compliance Officer and Operations

  

 

SAM and SPW propose to manage potential
conflicts associated with the dual registration of the individuals in the
following manner:

 

·                               Each
dually registered individual will have sufficient time in their work week to
fully and properly discharge their responsibilities at SPW and SAM.

 

·                               In
order to protect client confidentiality, each dually registered individual
shall be prohibited from disclosing any confidential client information to any
person other than the staff of the relevant entity or for the purpose of
performing the relevant services for the client.

 

Fair Allocation of Investment Opportunities and
Fair Treatment of SAM Investment Funds and SAM Managed Accounts

 

We must ensure the fair treatment of our
clients through the highest standards of integrity and ethical business conduct.  The principle of fair treatment must be
recognized by all employees, officers and directors of SAM in order to provide
a true benefit to our clients.  Our
clients have the right to be assured that their interests will always take
precedence over the personal trading activities of SAM portfolio managers and
other SAM access persons.

 

Fairness Policy

 

In order to ensure fairness in the allocation
of investment opportunities among the SAM Managed Accounts and the SAM
Investment Funds (each a “SAM Client”),
SAM will allocate investment opportunities with consideration to the
suitability of such investments to each SAM Client’s investment objectives and
strategies, portfolio composition, restrictions and cash availability (even
though the investment objectives and strategies are substantially the same for
some of the SAM Clients and cash flows of each SAM Client can be substantially
different given daily/monthly subscriptions and 

 

C4

 

redemptions/withdrawals).  As well, cash flows (subscription inflows and
redemptions/withdrawals) and investment strategies can influence the allocation
process in order to maintain property weightings in each SAM Client account.  If an investment opportunity is suitable for
more than one SAM Client, SAM will allocate such investment opportunities
equitably in order to ensure that each SAM Client has equal access to the same
quality and quantity of investment opportunities.

 

To ensure fairness in the allocation of investment opportunities as
between each SAM Client, SAM will ensure:

 

(a)                       where orders are entered
simultaneously for execution at the same price, fills are allocated on a pro rata basis;

 

(b)                      when transactions are
executed at different prices for a group of SAM Clients, fills are allocated on
an average price basis;

 

(c)                       in the case of a block trade
or a new or secondary securities issue, if all SAM Client orders can be
accommodated (demand is smaller than supply), allocation is made on a pro rata basis based on the order size of each SAM
Client.  Where the allotment received is
insufficient to meet the full requirements of all SAM Clients on whose behalf
orders have been placed (demand exceeds supply), allocation is made on a pro rata basis based on the size of the SAM Client account
or the existing position size in a SAM Client account.  However, if such prorating should result in
an inappropriately small position for a SAM Client, the allotment would be
reallocated to another SAM Client. 
Depending on the number of block trades or new or secondary issues, over
a period of time, every effort will be made to ensure that these prorating and
reallocation policies result in fair and equal treatment to all SAM Clients,
and

 

(d)                      when orders for more than
one SAM Client are bunched or blocked and the transactions are executed at
varying prices, an average price will be determined and allocated to each SAM
Client on a pro rata basis.  As well, all commissions will be totalled and
allocated to all SAM Clients on a pro rata
basis.  If different prices and
commissions are executed, then an average price as well as total average
commission will be calculated and allocated on a pro rata
basis.  For a normal secondary purchase
order executed through a broker, the average price and commission will be
calculated and allocated evenly among our SAM Clients.  There will be no differentiation on price
towards our SAM Clients.

 

In addition, SAM will always seek to obtain
the best order execution for each SAM Client and to minimize transaction costs.  SAM employee trading accounts (i.e. “PRO”
accounts), retail and inventory trades are never commingled with trades
involving SAM Investment Funds.

 

Proxy Voting Guidelines

 

SAM, in its capacity as
portfolio adviser to the SAM Clients, is sometimes responsible for
establishing, monitoring and amending (if necessary) the policies and
procedures relating to the voting of proxies received in connection with each
SAM Client’s investment portfolio.

 

Generally speaking, SAM will vote in favour
of the following proxy proposals:

 

	
  ·      electing and
  fixing number of directors

  	
   

  	
  ·      authorizing
  directors to fix remuneration of auditors

  
	
   

  	
   

  	
   

  
	
  ·      appointing
  auditors

  	
   

  	
  ·      approving
  private placements exceeding 25% 

  

 

C5

 

	
   

  	
   

  	
  threshold

  
	
   

  	
   

  	
   

  
	
  ·      ratifying
  director actions

  	
   

  	
  ·      approving
  private placements to insiders exceeding 10% threshold

  
	
   

  	
   

  	
   

  
	
  ·      changing
  registered address

  	
   

  	
  ·      approving
  special resolutions to change the authorized capital of the company to an
  unlimited number of common shares without par value

  

 

SAM will vote against any proposal relating
to stock option plans that: (i) exceed 5% of the common shares issued and
outstanding at the time of grant over a three year period (on a non-diluted
basis); (ii) provide that the maximum number of common shares issuable
pursuant to such plan be a “rolling” maximum equal to 5% of the outstanding
common shares at the date of the grant of applicable options; and (iii) reprices
the stock option.

 

In certain cases, proxy votes may not be cast
when the portfolio adviser determines that it is not in the best interests of
the SAM Client to vote such proxies.  In
the event a proxy raises a potential material conflict of interest between the
interests of a SAM Client and SAM, the conflict will be resolved by SAM in
favour of that SAM Client.

 

SAM retains the discretion to depart from
these polices on any particular proxy vote depending upon the facts and
circumstances.

 

The proxy voting guidelines of SAM are
available on request, free of charge, by contacting SAM at 1-866-299-9906.  SAM will maintain and prepare an annual proxy
voting record for each SAM Investment Fund. 
The proxy voting record for the annual period beginning July 1 for
each SAM Investment Fund will be available free of charge to any investor upon
request at any time after June 30 of the following year.

 

Misuse of Confidential and Insider Information

 

The misuse of confidential information or
misuse of any insider information not generally disclosed, for personal gain or
for the benefit of anyone else, is prohibited and grounds for serious sanction.

 

Confidentiality and Privacy

 

In addition, SAM has adopted a privacy policy
in accordance with the Personal Information
Protection and Electronic Documents Act (Canada) with respect to
personal information of SAM Clients. 
This policy states that SAM will only disclose this information to third
parties or its affiliates in limited specific circumstances on a strictly
confidential basis.

 

Money Laundering and
Terrorist Financing

 

As outlined by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act,
SAM is obligated to implement specific measures to detect and deter money
laundering and the financing of terrorist activity.  As such, all investments into our SAM Managed
Accounts and SAM Investment Funds require completed documentation to be
submitted by investors.  It is our duty
to report to the Financial Transactions and Reports Analysis Centre of Canada
confirmation of any investors engaged in money laundering.  This reporting requirement will not be deemed
to be a breach of any information disclosure restrictions imposed by applicable
law or otherwise.

 

C6

 

Please do not hesitate to contact us should you have any questions with
regards to SAM’s Statement of Policies or should you require further details on
any SAM policies and practices.

 

Revised
October 2009.

 

C7Exhibit 10.3

 

VALUATION SERVICES AGREEMENT

 

THIS AGREEMENT made and entered into as of the · day of ·, 2009

 

BETWEEN:

 

SPROTT ASSET MANAGEMENT LP,

a limited partnership
formed under the laws of the Province of Ontario

 

(hereinafter referred to as the “Manager”)

 

OF THE FIRST PART

 

- and -

 

RBC DEXIA INVESTOR SERVICES TRUST,

a trust company incorporated under the federal laws
of Canada

 

(hereinafter referred to as the “Valuation Agent”)

 

OF
THE SECOND PART

 

WHEREAS Sprott
Physical Gold Trust (the “Trust”) is a closed-end
mutual fund trust established under the laws of the Province of Ontario
pursuant to a trust agreement dated as of August 28, 2009, as amended and
restated as of December 7, 2009 (the “Trust Agreement”);

 

AND
WHEREAS pursuant to the Trust Agreement, RBC Dexia Investor
Services Trust and the Manager were appointed as the trustee and the manager of
the Trust, respectively;

 

AND WHEREAS pursuant to the Trust
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
management and administrative services, and to provide such other services and
facilities as described in the Trust Agreement;

 

AND WHEREAS pursuant
to the Trust Agreement, the Manager has the ultimate responsibility to
calculate the Net Asset Value of the Trust, the Net Asset Value per Unit, the Class Net
Asset Value and the Class Net Asset Value per Unit, and to determine the
Net Income and the Net Realized Capital Gains for the Trust (as all such terms
are hereinafter defined) and, in conjunction therewith, may appoint a service
provider to perform some or all of such calculations and determinations on
behalf of the Trust;

 

AND WHEREAS the Manager wishes to
retain the Valuation Agent, in its capacity as a service provider to the Trust,
to provide certain valuation services (collectively, the “Services”)
for the Trust, subject to, and in accordance with, the terms and conditions
hereinafter set forth with effect from the date first written above;

 

AND WHEREAS the Valuation Agent, in its
capacity as a service provider, has agreed to provide such Services for the
Trust, subject to, and in accordance with, the terms and conditions of this
Agreement.

 

 

NOW THEREFORE in consideration of the
mutual covenants and agreements contained herein and for other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:

 

1.             Definitions

 

Unless
otherwise defined in this Agreement, the following terms shall have the meaning
as set out in the Trust Agreement:

 

(a)           “Affiliate”
has the meaning ascribed thereto in the Securities Act (Ontario), as amended from time to time;

 

(b)           “Agreement”
means this valuation services agreement dated as of the day and year first
above written as the same may be amended, restated or supplemented from time to
time and “herein”, “hereof”, “hereby”, “hereunder” and similar expressions refer to
this Agreement and include every instrument supplemental or ancillary to this
Agreement and, except where the context otherwise requires, not to any
particular article, section or subsection thereof;

 

(c)           “Applicable
Laws” means, unless the context otherwise dictates, any applicable
statute of Canada or of a province or territory of Canada or any applicable
statute of the United States of America or of a state or territory of the
United States of America or any applicable regulations, orders, instruments,
policies or other laws made under statutory authority by any governmental or
regulatory body or agency having jurisdiction over the Trust including, but not
limited to, Securities Legislation and the Tax Act;

 

(d)           “Business Day”
means any day on which the New York Stock Exchange Arca or the Toronto Stock
Exchange are open for trading;

 

(e)           “Class Expenses”
in respect of any particular class or series of a class of Units means the
expenses of the Trust (including Management Fees) that are allocated only to
that class or series of a class;

 

(f)            “Class Net
Asset Value” in respect of any particular class or series of a class
of Units is the portion of the Net Asset Value of the Trust attributed to such
class or series of a class determined in accordance with  Section 3.1
and Section 3.2 hereof;

 

(g)           “Class Net
Asset Value per Unit” in respect of any particular class or series
of a class of Units is the portion of the Class Net Asset Value of the
Trust attributed to each Unit of such class or series of a class determined in
accordance with  Section 3.1 and Section 3.2
hereof;

 

(h)           “Common
Expenses” means those expenses of the Trust other than Class Expenses;

 

(i)            “Directions”
means all directions, authorizations, notices, requests and instructions given
in accordance with Section 5 by any director, officer, employee or other
representative authorized to act on behalf of the Manager or any Third Party
Valuation Agent, as the case may be;

 

2

 

(j)            “Distribution
Date” has the meaning ascribed thereto in Section 4.1 hereof;

 

(k)           “Fiscal Year” means the fiscal year of
the Trust ending on the last day of December in each year or such other
date as may be determined from time to time by the Manager;

 

(l)            “Gold Bullion”
means physical gold bullion in London Good Delivery bar form that is
unencumbered, fully allocated and stored at the Gold Custodian by or on behalf
of the Trust;

 

(m)          “Gold Custodian” means the Royal Canadian
Mint, acting as the custodian of the Gold Bullion, and any sub-custodians
appointed by the Royal Canadian Mint, in accordance with the Storage Agreement,
or any successor custodian of the Gold Bullion appointed in accordance with the
Trust Agreement or pursuant to a separate written custodial agreement;

 

(n)           “IFRS”
means International Financial Reporting Standards as issued by the
International Accounting Standards Board;

 

(o)           “Indemnified
Party” has the meaning ascribed thereto in Section 7.4 hereof;

 

(p)           “Management Agreement” means the management agreement between the Manager and the Trust to be
dated on or about the date of filing the (final) prospectus and the
registration statement with the applicable Securities Authorities, as the same
may be amended, restated or supplemented from time to time;

 

(q)           “Management
Fee” means the monthly management fee payable to the Manager
pursuant to the Management Agreement;

 

(r)            “Manager” means Sprott Asset Management LP,
acting as the manager of the Trust, or any successor manager appointed in
accordance with the Trust Agreement and subject to the Management Agreement;

 

(s)           “Net Asset
Value of the Trust” is the amount determined from time to time in
accordance with Section 3.1 hereof;

 

(t)            “Net Asset
Value per Unit” is the amount determined from time to time in accordance
with Section 3.1 hereof;

 

(u)           “Net Change
in Non-Portfolio Assets” on a Valuation Date means:

 

(i)            the aggregate of all income accrued by the Trust as
of that Valuation Date, including cash dividends and distributions, interest
and compensation since the last calculation of Class Net Asset Value or Class Net
Asset Value per Unit, as the case may be; minus

 

(ii)           the Common Expenses to be
accrued by the Trust as of that Valuation Date which have been accrued since
the last calculation of Class Net Asset Value or Class Net Asset
Value per Unit, as the case may be; plus or minus

 

3

 

(iii)          any change in the value of
any non-portfolio assets or liabilities stated in any foreign currency accrued
on that Valuation Date since the last calculation of Class Net Asset Value
or Class Net Asset Value per Unit, as the case may be, including, without
limitation, cash, accrued dividends or interest and any receivables or
payables; plus or minus

 

(iv)          any other item
accrued on that Valuation Date determined by the Manager to be relevant in
determining the Net Change in Non-Portfolio Assets;

 

(v)           “Net Income”  has the meaning ascribed thereto in Subsection 4.2(a) hereof;

 

(w)          “Net Realized
Capital Gains”  has the
meaning ascribed thereto in Subsection 4.2(b) hereof;

 

(x)            “Person”
means any individual, partnership, limited partnership, joint venture,
syndicate, sole proprietorship, company or corporation with or without share
capital, unincorporated association, trust, trustee, executor, administrator or
other legal personal representative, regulatory body or agency, government or
governmental agency, authority or entity however designated or constituted;

 

(y)           “Proportionate
Share”, when used to describe (i) an amount to be allocated to
any one class or series of a class of Units, means the total amount to be
allocated to all classes or series of classes of Units 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 Net Asset Value
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 of Units 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 of Units and aggregated);

 

(z)            “QEF”
has the meaning ascribed thereto in Section 4.7 hereof;

 

(aa)         “Registrar and Transfer Agent”  means Equity Transfer &
Trust Company, acting as the registrar and
transfer agent of the Units, and appointed by the Manager in accordance with
the Trust Agreement and pursuant to a transfer agent, registrar and disbursing
agent agreement to be dated on or about
the date of filing the (final) prospectus and the registration statement with
the applicable Securities Authorities, as the same may be amended, restated or
supplemented from time to time;

 

(bb)         “Securities Authorities”  means the Ontario Securities
Commission and equivalent securities regulatory authorities in each other
province and territory of Canada, and the United States Securities and Exchange
Commission;

 

(cc)         “Securities
Legislation” means the laws, regulations, rules, requirements and
policies of the Securities Authorities which are in effect from time to time
and applicable to the Trust including, but not limited to National Instrument
81-102 Mutual Funds, National

 

4

 

Instrument 81-106 Investment Fund Continuous
Disclosure, National Instrument 81-107 Independent
Review Committee for Investment Funds and the United States Securities Act of 1933, as amended;

 

(dd)         “Services”
means certain valuation services provided for the Trust by the Valuation Agent,
in its capacity as a service provider to the Trust, subject to, and in
accordance with, the terms and conditions set forth in this Agreement;

 

(ee)         “Storage
Agreement” means the precious metals storage agreement between the Manager, on behalf of the Trust, and the
Gold Custodian, to be dated on or about the date of filing the (final)
prospectus and the registration statement of the Trust with the applicable
Securities Authorities, as the same may be amended, restated or supplemented
from time to time;

 

(ff)           “Tax Act”  means the  Income Tax Act (Canada) and the regulations, rules, and
policies promulgated thereunder, as amended from time to time;

 

(gg)         “Third Party
Data” has the meaning ascribed thereto in Section 3.4 hereof;

 

(hh)         “Third Party
Valuation Agent” means any investment dealers, investment managers
or advisors, consultants, custodians, registrar and transfer agents or other
agents appointed by the Manager from time to time in connection with its responsibilities
hereunder.  The Manager shall, or may, by
a Direction specify that such Third Party Valuation Agent shall direct the
Valuation Agent as to any matters in Sections 3 or 4 or any matter related
thereto, requiring the Manager’s Direction;

 

(ii)           “Trust”  means Sprott
Physical Gold Trust, a
closed-end mutual fund trust established under the laws of the Province of
Ontario and governed by the Trust Agreement;

 

(jj)           “Trust
Agreement” means the trust agreement of the Trust dated as of August 28,
2009, as amended and restated as of December 7, 2009, as the same may be
further amended, restated, supplemented or replaced from time to time;

 

(kk)         “Trust
Property” at any time, means any and all securities, cash (including
free credit balances), property and assets, real and personal, tangible and
intangible, transferred, conveyed or paid to the Trust including, without
limitation:

 

(i)            all funds realized from the
sale of Units;

 

(ii)           Gold Bullion from time to
time delivered to and received by the Trust or held for its account as directed
by the Manager and accepted by the Gold Custodian on behalf of the Trust in
accordance with the Storage Agreement;

 

(iii)          all investments, sums or
property of any type or description (other than the Gold Bullion) from time to
time delivered to and received by the Trust or held for its account as directed
by the Manager and accepted by the Trustee on behalf of the Trust in accordance
with the Trust Agreement;

 

(iv)          any proceeds of disposition
of any of the foregoing property and assets; and

 

5

 

(v)           all income, interest,
profit, gains and accretions and additional rights arising from or accruing to
such foregoing property or such proceeds of disposition;

 

(ll)           “Trustee”  means RBC Dexia
Investor Services Trust, acting as the trustee of the Trust, or any successor
trustee appointed in accordance with the Trust Agreement;

 

(mm)       “Unit”
means a unit of beneficial interest, in any class or series of a class of the
Trust, as presently constituted pursuant to the Trust Agreement as the same may
from time to time hereinafter be constituted, and collectively referred to as
the “Units”;

 

(nn)         “Unitholders”
means Persons whose name appears as a registered holder of one or more Units or
fractions thereof in the register established and maintained by the Registrar
and Transfer Agent appointed by the Manager and “Unitholder”
means any one of them;

 

(oo)         “Valuation
Agent” means RBC Dexia Investor Services Trust, acting as a service
provider to the Trust, and appointed by the Manager in accordance with this
Agreement and the Trust Agreement;

 

(pp)         “Valuation Date”
means each Business Day, unless the Manager determines that the assets of the
Trust should be valued less frequently, either generally or in respect of one
or more specific instances, in which event “Valuation
Date” shall mean such Business Day or Business Days as the Manager
determines; and

 

(qq)         “Valuation
Time” means 4:00 p.m. (Toronto
time) on a Valuation Date or such other time on a Valuation Date as the Valuation
Agent in consultation with the Manager deems appropriate.

 

2.             Appointment of the Valuation Agent

 

2.1           Appointment

 

The Manager hereby retains the Valuation Agent, in
its capacity as a service provider to the Trust, and the Valuation Agent hereby
accepts such retainer, for the purpose of providing the Services for the Trust,
subject to, and in accordance with, the terms and conditions set forth in this
Agreement.

 

2.2           Authority
of the Manager

 

The
Manager hereby represents, warrants and confirms to the Valuation Agent that it
has the power and authority to enter into this Agreement, to retain the
Valuation Agent to provide the Services to the Trust, and to otherwise perform
its obligations hereunder, and the Manager has obtained all authorizations and
approvals required of the Manager for the due execution, delivery and
performance by the Manager of this Agreement and the engagement of the
Valuation Agent to provide the Services hereunder.

 

2.3           Authority of the Valuation Agent

 

The
Valuation Agent hereby represents, warrants and confirms to the Manager that it
has the power and authority to enter into this Agreement and to perform its
obligations hereunder, and the Valuation Agent has obtained all authorizations
and approvals required of the Valuation Agent for the due execution, delivery
and performance by the Valuation Agent of this Agreement.

 

6

 

3.             Determination
of Net Asset Value

 

3.1           Calculation
of Net Asset Value of the Trust and Net Asset Value per Unit

 

Pursuant
to the Trust Agreement, the Net Asset Value of the Trust shall be determined
for the purposes of subscriptions and redemptions as at the Valuation Time on
each Valuation Date in United States dollars. 
The Net Asset Value of the Trust determined on the last Valuation Date
of each year shall include all income, Common Expenses, Class Expenses or
any other items to be accrued to December 31st of each year
and since the last calculation of the Net Asset Value per Unit or the Class Net
Asset Value per Unit for the purpose of the distribution of Net Income and Net
Realized Capital Gains of the Trust to Unitholders.  The “Net Asset Value of the
Trust” as at the Valuation Time on each Valuation Date shall be the
amount obtained by deducting from the aggregate fair market value of the assets
of the Trust as of such Valuation Date an amount equal to the fair value of the
liabilities of the Trust (excluding all liabilities represented by outstanding
Units) as of such Valuation Date.  The “Net Asset
Value per Unit” shall be determined by dividing the Net Asset
Value of the Trust on a Valuation Date by the total number of Units then
outstanding on such Valuation Date. 
Subject to Directions from the Manager as required, the Net Asset Value
of the Trust as at the Valuation Time on a Valuation Date shall be determined
by the Valuation Agent in accordance with the following:

 

(a)           The assets of the Trust
shall be deemed to include the following property:

 

(i)            all Gold Bullion owned by or
contracted for the Trust;

 

(ii)           all cash on hand or on
deposit, including any interest accrued thereon adjusted for accruals deriving
from trades executed but not yet settled;

 

(iii)          all bills, notes and
accounts receivable;

 

(iv)          all interest accrued on any
interest-bearing securities owned by the Trust other than interest, the payment
of which is in default; and

 

(v)           prepaid expenses.

 

(b)           The market value of the
assets of the Trust shall be determined as follows:

 

(i)            the value of Gold
Bullion shall be its market value based on the price provided by a widely
recognized pricing service as directed by the Manager and, if such service is
not available, such Gold Bullion shall be valued at a price provided by another
pricing service as determined by the Manager in consultation with the Valuation
Agent;

 

(ii)           the value of any
cash on hand or on deposit, bills, demand notes, accounts receivable, prepaid
expenses, and interest accrued and not yet received, shall be deemed to be the
full amount thereof unless the Valuation Agent shall have determined that any
such deposit, bill, demand note, account receivable, prepaid expense or
interest is not worth the full amount thereof, in which event the value thereof
shall be deemed to be such value as the Valuation Agent in consultation with
the Manager shall determine to be the fair value thereof;

 

(iii)          short-term
investments including notes and money market instruments shall be valued at
cost plus accrued interest;

 

7

 

(iv)          the value of any
security or other property for which no price quotations are available or, in
the opinion of the Manager, to which the above valuation principles cannot or
should not be applied, shall be the fair value thereof determined from time to
time in such manner as the Valuation Agent in consultation with the Manager
shall from time to time provide; and

 

(v)           the value of all
assets and liabilities of the Trust valued in terms of a currency other than
the currency used to calculate the Net Asset Value of the Trust shall be
converted to the currency used to calculate the Net Asset Value of the Trust by
applying the rate of exchange obtained from the best available sources to the Valuation
Agent as agreed upon by the Manager including, but not limited to, the Trustee
or any of its Affiliates.

 

(c)           The liabilities of the Trust shall be calculated on a
fair value basis and shall be deemed to include the following:

 

(i)            all bills, notes and
accounts payable;

 

(ii)           all fees (including
Management Fees) and administrative and operating expenses payable and/or
accrued by the Trust;

 

(iii)          all contractual obligations
for the payment of money or property, including distributions of Net Income and
Net Realized Capital Gains, if any, declared, accrued or credited to the Unitholders
but not yet paid on the day before the Valuation Date as of which the Net Asset
Value of the Trust is being determined;

 

(iv)          all allowances authorized or
approved by the Manager or the Trustee for taxes or contingencies; and

 

(v)           all other liabilities of the
Trust of whatsoever kind and nature, except liabilities represented by
outstanding Units.

 

(d)           For the
purposes of determining the market value of any security or property pursuant
to Subsection 3.1(b) to which, in the opinion of the Valuation Agent in
consultation with the Manager, the above valuation principles cannot be applied
(because no price or yield equivalent quotations are available as provided
above, or the current pricing option is not appropriate, or for any other
reason), shall be the fair value as determined in such manner by the Valuation
Agent in consultation with the Manager and generally adopted by the marketplace
from time to time, provided that any change to the standard pricing principles
as set out above shall require prior consultation and written agreement with the
Manager. For greater certainty, fair valuing an investment comprising the Trust
Property may be appropriate if: (i) market quotations do not accurately reflect
the fair value of an investment; (ii) an investment’s value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded; (iii) a trading halt closes an exchange
or market early; or (iv) other events result in an exchange or market delaying
its normal close.

 

(e)            For the purposes of determining the value of Gold Bullion,
the Manager relies solely on weights provided to the Manager by third
parties.  The Manager, the Trustee or the
Valuation Agent shall not be required to make any investigation or inquiry as
to the accuracy or validity of such weights.

 

(f)            Portfolio transactions (investment purchases and sales) will
be reflected in the first computation of the Net Asset Value of the Trust made
after the date on which the transaction becomes binding.

 

(g)           The Net Asset Value of the Trust and Net Asset Value per
Unit on the first Business Day following a Valuation Date shall be deemed to be
equal to the Net Asset Value of the Trust (or per Unit, as the case may be) on
such Valuation Date after payment of all fees, including Management Fees, and
after processing of all subscriptions and redemptions of Units in respect of
such Valuation Date.

 

(h)           The Net Asset
Value of the Trust and the Net Asset Value per Unit determined by the Valuation
Agent in accordance with the provisions of this section shall be conclusive and binding on all Unitholders.

 

8

 

(i)            The Manager and any investment manager retained by the
Manager as a Third Party Valuation Agent may determine such other rules regarding
the calculation of the Net Asset Value of the Trust and the Net Asset Value per
Unit which they deem necessary from time to time, which rules may deviate
from IFRS, and the Manager or such investment manager shall direct the
Valuation Agent on a timely basis.

 

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

 

(a)           The Net Asset Value for a
particular class or series of a class of Units (the “Class Net
Asset Value”) as at the Valuation Time on a Valuation Date shall be
determined for the purposes of subscriptions and redemptions in accordance with
the following calculation:

 

(i)            the Class Net Asset
Value last calculated for that class or series of a class; plus

 

(ii)           the increase in the assets
attributable to that class or series of a class as a result of the issue of
Units of that class or series of a class or the redesignation of Units into
that class or series of a class since the last calculation; minus

 

(iii)          the decrease in the assets
attributable to that class or series of a class as a result of the redemption
of Units of that class or series of a class or the redesignation of Units out
of that class or series of a class since the last calculation; plus or minus

 

(iv)          the Proportionate Share of
the Net Change in Non-Portfolio Assets attributable to that class or series of
a class since the last calculation; plus or minus

 

(v)           the Proportionate
Share of market appreciation or depreciation of the portfolio assets
attributable to that class or series of a class since the last calculation;
minus

 

(vi)          the Proportionate Share of
the Common Expenses allocated to that class or series of a class since the last
calculation; minus

 

(vii)         any Class Expenses
allocated to that class or series of a class since the last calculation.

 

(b)           A Unit of a class or series of a class of the Trust
being issued or a Unit that has been redesignated as a part of that class or
series of a class shall be deemed to become outstanding as of the next
calculation of the applicable Class Net Asset Value immediately following
the Valuation Date at which the applicable Class Net Asset Value per Unit
that is the issue price or redesignation basis of such Unit is determined and
the issue price received or receivable for the issuance of the Unit shall then
be deemed to be an asset of the Trust attributable to the applicable class or
series of a class.

 

(c)           A Unit of a class or series of a class of the Trust
being redeemed or a Unit that has been redesignated as no longer being a part
of that class or series of a class shall be deemed to remain outstanding as
part of that class or series of a class until immediately following the
Valuation Date as of which the applicable Class Net Asset Value per Unit
that is the redemption price or redesignation basis of such Unit is determined;
thereafter, the redemption price of the Unit being redeemed, until paid, shall
be deemed to be a liability of the Trust attributable to the applicable class
or series of a class and the Unit which has

 

9

 

been redesignated will be deemed to be outstanding as a part of the
class or series of a class into which it has been redesignated.

 

(d)           On any Valuation Date that a distribution is paid to
Unitholders of a class or series of a class of Units, a second Class Net
Asset Value shall be calculated for that class or series of a class, which
shall be equal to the first Class Net Asset Value calculated on that
Valuation Date minus the amount of the distribution.  For greater certainty, the second Class Net
Asset Value shall be used for determining the Class Net Asset Value per
Unit on such Valuation Date for purposes of determining the issue price and
redemption price for Units on such Valuation Date, as well as the redesignation
basis for Units being redesignated into or out of such class or series of a
class, and Units redeemed or redesignated out of that class or series of a
class as at such Valuation Date shall participate in such distribution while
Units subscribed for or redesignated into such class or series of a class as at
such Valuation Date shall not.

 

(e)           The Class Net Asset
Value per Unit of a particular class or series of a class of Units as at any
Valuation Date is the quotient obtained by dividing the applicable Class Net
Asset Value as at such Valuation Date by the total number of Units of that
class or series of a class outstanding at such Valuation Date. This calculation
shall be made without taking into account any issuance, redesignation or redemption
of Units of that class or series of a class to be processed by the Trust
immediately after the Valuation Time of such calculation on that Valuation
Date.  The Class Net Asset Value per
Unit for each class or series of a class of Units for the purpose of the issue
of Units or the redemption of Units shall be calculated on each Valuation Date
by or under the authority of the Manager as at the Valuation Time on every
Valuation Date as shall be fixed from time to time by the Manager and the Class Net
Asset Value per Unit so determined for each class or series of a class shall
remain in effect until the Valuation Time as of which the Class Net Asset
Value per Unit for that class or series of a class is next determined.

 

3.3           Suspension of Right of Redemption
and Calculation of Net Asset Value

 

(a)           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 Gold Bullion and/or cash, as the case may be) with the prior
approval of Canadian Securities 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 Net Asset Value of the Trust and
the Net Asset Value per Unit or the redemption amount for the Units.

 

(b)           In the event of any such
suspension, the Manager shall issue a press release announcing the suspension
and shall advise the Trustee, the Valuation Agent and any other agents
appointed by the Manager, as applicable. 
The suspension shall terminate in any event on the first

 

10

 

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 shall issue a press release announcing the termination of the
suspension and shall advise the Trustee, the Valuation Agent and any other agents
appointed by the Manager, as applicable. 
Subject to applicable Securities Legislation, any declaration of
suspension made by the Manager, on behalf of the Trust, shall be conclusive.

 

(c)           During any period in which the right of Unitholders
to request a redemption of their Units for Gold Bullion and/or cash is
suspended pursuant to the Trust Agreement, the Manager, on behalf of the Trust,
shall direct the Valuation Agent to suspend the calculation of the Net Asset
Value of the Trust, the Net Asset Value per Unit, the Class Net Asset
Value and the Class Net Asset Value per Unit for each class or series of a
class of Units.  During any such period
of suspension, the Trust shall not issue or redeem any Units.  The calculation of the Net Asset Value of the
Trust, the Net Asset Value per Unit, the Class Net Asset Value and the Class Net
Asset Value per Unit for each class or series of a class of Units shall resume
in compliance with applicable Securities Legislation or any approval granted by
Canadian Securities Authorities having jurisdiction.  As noted above, in the event of any such
suspension or termination thereof, the Manager shall issue a press release
announcing the suspension or the termination of such suspension, as the case
may be.  Further, the Manager shall
advise the Valuation Agent on a timely basis as to the date of the first
calculation of the Net Asset Value of the Trust, the Net Asset Value per Unit,
the Class Net Asset Value and the Class Net Asset Value per Unit for
each class or series of a class of Units following such termination of the
suspension.

 

3.4           Third Party Data

 

Where,
for the purposes of the foregoing calculation of the Net Asset Value of the
Trust, the Net Asset Value per Unit, the Class Net Asset Value and the Class Net
Asset Value per Unit, and the calculation of any amounts for distribution
purposes hereunder, the Valuation Agent is provided with a value, quotation, or
other information related thereto by a third party (collectively, the “Third Party Data”) including, without limitation, the
Manager or any Third Party Valuation Agent, the Valuation Agent may rely on
such Third Party Data and shall not be required to make any investigation or
inquiry as to the accuracy, completeness or validity of such Third Party Data
unless such data on its face is manifestly incomplete or incorrect.  If such Third Party Data is not available to the Valuation Agent as of a
time reasonably proximate to the Valuation Date, such valuation of the Trust
Property shall be based on an estimate or estimates provided by the Manager or
a Third Party Valuation Agent.  Such
estimate or estimates shall be final and binding and shall be considered to be
the actual value of such Trust Property for the purposes of any distribution,
the Net Asset Value of the Trust, the Net Asset Value per Unit, the Class Net
Asset Value and the Class Net Asset Value per Unit calculations.  The Valuation Agent shall have no
responsibility or liability, whatsoever, for any loss or damage arising out of,
or in connection with, the Valuation Agent’s reliance on, or any failure to
provide, such Third Party Data or any such estimates except as provided in this
section.

 

4.             Determination of
Net Income and Net Realized Capital Gains

 

4.1           Valuation on
Distribution Date

 

As
at the Valuation Time on the last Valuation Date in each Fiscal Year or such
other date as the Manager may, in its sole discretion, determine (a “Distribution Date”), the Valuation Agent,
subject to

 

11

 

Directions
from the Manager as required, shall, in the manner hereinafter provided,
determine the amount of the Net Income and the Net Realized Capital Gains of
the Trust for the period since the immediately preceding Distribution Date (or
in the case of the first Distribution Date, from the inception date of the
Trust).

 

4.2           Computation of
Net Income and Net Realized Capital Gains

 

The Net
Income and the Net Realized Capital Gains of the Trust shall be computed as of
the Valuation Time on each Distribution Date in accordance with the following:

 

(a)           “Net  Income”
for any taxation year of the Trust shall be the net income for the year
determined pursuant to the provisions of the Tax Act having regard to the
provisions thereof that relate to the calculation of income of a trust, other
than subsection 104(6), and taking into account such adjustments thereto as are
determined by the Valuation Agent; provided, however, that capital gains and
capital losses shall be excluded from the computation of net income.

 

(b)           “Net Realized Capital Gains”
of the Trust for any taxation year of the Trust shall be determined as the
amount, if any, by which the aggregate of the capital gains of the Trust in the
year exceeds:

 

(i)            the aggregate of the capital losses of the Trust in the taxation year; and

 

(ii)           the amount determined by the
Valuation Agent in respect of any unapplied net capital losses for prior
taxation years which the Trust is permitted by the Tax Act to deduct in
computing the taxable income of the Trust for the applicable taxation year and
provided that, in consultation with the Manager, the Net Realized Capital Gains
of the Trust for a taxation year may be calculated without subtracting the full
amount of the net capital losses of the Trust carried forward from previous
taxation years.

 

4.3           Distribution
of Net Income and Net Realized Capital Gains to Unitholders

 

(a)           Commencing with the Fiscal Year ending December 31, 2009, the Manager
intends to cause the Trust to make annual distributions to Unitholders of Net
Income, if any, for each year calculated in accordance with Section 4.2.  Commencing with the Fiscal Year ending December 31,
2009, the Manager also intends to cause the Trust to make annual distributions
to Unitholders of such portion of Net Realized Capital Gains, if any, for each
year as determined in accordance with Section 4.2 hereof. 

 

(b)           Having regard to the present intention of the Manager to allocate,
distribute and make payable to Unitholders all Net Income or Net Realized
Capital Gains so that the Trust will not have any liability for tax under Part I
of the Tax Act in any taxation year, it is the intention of the Manager that
the total amount due and payable pursuant to this Section 4.3 on the last
Distribution Date in any year shall 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.

 

12

 

(c)           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 shall be the amount of Net Income or Net Realized Capital Gains
determined as described in Section 4.2 and Section 4.3 divided by the
total number of Units outstanding on the Distribution Date multiplied by the
number of Units held by such Unitholder 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 and, in any such event, shall advise the
Valuation Agent on a timely basis.

 

(d)           All distributions, if declared and paid, shall be calculated and, if a
cash distribution, paid in United States currency.

 

4.4           Additional
Distributions, Designations, Determinations and Allocations

 

In
addition to any distributions calculated by the Valuation Agent and distributed
by the Trust to Unitholders as described under Section 4.3 hereof, on the
Direction of the Manager, the Valuation Agent shall at such times and in
such manner as directed by the Manager determine 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 the Valuation Agent shall also make such
designations, determinations, allocations and elections for Canadian 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.

 

13

 

4.5           Income
Tax Statements to Unitholders

 

(a)           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 by the Tax Act, the Manager shall
prepare and deliver or make available electronically, or cause to be prepared
and delivered or made available electronically, to Unitholders information
pertaining to the Trust, including all distributions, designations,
determinations, allocations and elections, which is required or permitted by
the Tax Act or which is necessary to permit Unitholders to complete their
individual income tax returns for the preceding year.

 

(b)           It is the Manager’s
intention to claim the maximum amount of deduction available to the Trust under
paragraph 104(6)(b) of the Tax Act for each relevant Fiscal Year of the
Trust.  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 increase its claim under paragraph 104(6)(b) of the
Tax Act for that Fiscal Year, which shall include the discretion to
issue new or amended  tax reporting slips to the relevant Unitholders
or former Unitholders and 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.

 

(c)           In conjunction with the foregoing,
the Valuation Agent shall provide the Manager with any income and capital gain
or loss factors or other information determined in accordance with the Services
hereunder and required by the Manager for such purpose.

 

4.6           Qualified Electing Trust Election
and Reporting

 

Within 45 days from the end of each taxable year of
the Trust, the Manager shall 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 “qualified electing fund” (a “QEF”) within the meaning of Section 1295 of the U.S. Internal Revenue Code of 1986, as amended from time to time,
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 shall comply and cause the Trust to comply with all
applicable requirements of the U.S. Treasury Regulations necessary to enable
Unitholders or

 

14

 

beneficial owners of Units, as applicable, to elect to treat the Trust
as a QEF.

 

4.7           Unaudited Fund Accounting
Statements

 

On the Direction of the Manager, the Valuation Agent shall, based on
information in its records, prepare annual and semi-annual draft unaudited fund
accounting statements for the Trust in respect of which the Manager shall
review and provide ongoing Directions, as required, to the Valuation Agent as
to any revisions or amendments thereto and shall approve the final version of
all such fund accounting statements for the Trust.

 

4.8           Tax
Reporting for the Trust

 

On the Direction of the Manager, the Valuation Agent shall, in
accordance with the prescribed Canadian tax filing deadlines and requirements
as set out in Applicable Laws, prepare and file on behalf of the Manager, applicable
Canadian tax and/or information returns for the Trust and provide a copy of
such tax reporting to the Manager upon its request.  For greater certainty hereunder, the Manager
shall be responsible for all United States tax reporting and elections to be
filed on behalf of the Trust pursuant to Applicable Laws; provided that, for
greater certainty, the Valuation Agent shall provide such agreed upon
accounting reports prepared in accordance with the Services hereunder and
required by the Manager for such purpose.

 

4.9           Tax Definitions

 

Unless the context otherwise requires, any term in
this Section 4 which is defined for the purposes of the Tax Act shall have
for the purposes of this Section 4 the meaning that it has for the
purposes of the Tax Act.

 

5.             Directions and Communications

 

5.1           Directions

 

(a)           Unless otherwise specified
herein, all communications (including, for greater certainty, Directions) given
under this Agreement shall be given in one of the methods authorized by Section 5.2
and shall be given by an authorized officer, Person or other representative of
the Manager or any Third Party Valuation Agent, as the case may be.  The Manager and any Third Party Valuation
Agent shall from time to time furnish the Valuation Agent with a Certificate of
Authorized Signing Authorities substantially in the form set out in Schedule A
attached hereto signed by the Chief Executive Officer, the Chief Financial
Officer or the Corporate Secretary of the general partner of the Manager
stating the name(s) and title(s) of the authorized officer(s), Person(s) or
representative(s) of the Manager and any Third Party Valuation Agent, as
the case may be, authorized to act on its behalf together with specimen
signatures of all such officers, Persons or representatives.  The Manager and any Third Party Valuation
Agent shall keep the Valuation Agent informed as to any changes in its
authorized signatories, and the Valuation Agent shall be entitled to rely upon
the identification of such Persons as specified in such certificates as the
Persons entitled to act on behalf of the Manager and any Third Party Valuation
Agent for the purposes of this Agreement until a later certificate respecting
the same is delivered to the Valuation Agent.

 

15

 

(b)           The Valuation Agent shall:

 

(i)            be fully protected in acting upon any Direction
reasonably believed by it to be genuine and presented by the proper Person(s);

 

(ii)           be under no duty to monitor or verify whether any
Direction by the Manager is in compliance with the terms of the Trust’s
governing  documentation or with
Securities Legislation; and

 

(iii)          be under no duty to make any investigation or
inquiry as to any statement contained in any such Direction, but may accept
such statement as conclusive evidence of the truth and accuracy of such
statement.

 

(c)           Any Direction or telephone instruction, including a
Direction or telephone instruction from any Third Party Valuation Agent, is
deemed for all purposes of this Agreement to be a Direction from the Manager to
the Valuation Agent.

 

5.2           Methods
of Communication

 

(a)           Any notice to
be given or any document or instrument in writing to the Valuation Agent, the
Manager or any Third Party Valuation Agent (including for greater certainty,
all Directions) must be given through one of the following methods of
communication:

 

(i)            personal or courier
delivery;

 

(ii)           facsimile (in accordance
with the Manager’s guidelines);

 

(iii)          S.W.I.F.T.;

 

(iv)          one of the Valuation Agent’s
secured client access channels;

 

(v)           directly between
electromechanical or electronic terminals (other than the internet or unsecured
lines of communication);

 

(vi)          telephone (subject to
Sections 5.4 and 5.5); or

 

(vii)         internet (subject to Section 5.6).

 

(b)           Communications should be
addressed, as applicable, as follows:

 

(i)            in the case of the Valuation Agent:

 

RBC
Dexia Investor Services Trust

155
Wellington Street West, 5th Floor

RBC
Centre

Toronto,
Ontario M5V 3L3

 

16

 

Attention:     Head of Funds

 

Telephone:   (416) 974-5273

Facsimile:    (416) 955-1240

 

(ii)           in the case of the Manager:

 

Sprott
Asset Management LP

Royal
Bank Plaza, South Tower

200
Bay Street

Suite 2700,
P.O.Box 27

Toronto,
Ontario M5J 2J1

 

Attention:    
Kirstin McTaggart, Chief Compliance Officer

 

Telephone:   (416) 943-4065

Facsimile:    (416) 943-6497

 

or at such other address and number as the
party to whom such communication is to be given shall have last notified the
party giving the same in the manner provided in this section.

 

5.3           Deemed
Delivery

 

Pursuant
to Section 5.2:

 

(a)                                  any
communication delivered personally shall be deemed to have been given and
received on the day it is so delivered (or if that day is not a Business Day,
on the next succeeding Business Day); and

 

(b)           any communication given by
facsimile, S.W.I.F.T., secured client access channels, directly between
electromechanical or electronic terminals (other than the internet or unsecured
lines of communication) or the internet (subject to Section 5.6) shall be
deemed to have been given and received on the Business Day it is transmitted
provided that it was received before 3:00 p.m. (Toronto time) and, if
received after 3:00 p.m. (Toronto time), it shall be deemed to have been
given and received on the Business Day following the day of transmission
provided in each case that confirmation of transmission is available from the
party giving the communication.

 

5.4           Telephone
Directions

 

With respect to telephone
Directions, the Manager shall endeavor to forward Directions (other than by
telephone) confirming such telephone Directions on the same day that such
verbal Directions are given to the Valuation Agent.  The fact that such confirming Directions are
not received or that contrary Directions are received by the Valuation Agent
shall in no way affect the validity of transactions effected by the Valuation
Agent on the basis of the telephone Directions.

 

17

 

5.5           Telephone
Communications

 

The Manager agrees that some or all telephone
conversations between the parties, including Directions or communication given
by telephone, may be recorded by the Valuation Agent and that, in the event of
any disagreement as to the content of any Directions or communication given by telephone,
such recording shall be conclusive and determinative of the contents of the
Directions or communication.

 

5.6           Internet

 

The Manager agrees and
confirms, in connection with the Services provided by the Valuation Agent to
the Trust, that the Valuation Agent may forward reports and information to the
Manager and/or to the Manager’s authorized agents, and may receive and act upon
communications and instructions (including, without limitation, Directions)
received from the Manager and/or the Manager’s authorized agents through the
use of such form of electronic means of communications (including the internet
which is not a secure means of communication) as may be agreed to from time to
time in writing.  Without limiting the
terms of this Agreement, the Manager agrees and acknowledges that the Valuation
Agent shall bear no responsibility or liability whatsoever for any errors and
omissions, or direct, indirect or consequential losses or damages that are
attributable to the use of the internet for the purposes set out herein and
resulting or arising from viruses or worms, or the interception, tampering or
breach of confidentiality of data or information transmitted which is not
encrypted and authenticated in accordance with the Valuation Agent’s encryption
standards.

 

6.             Fees and Statements

 

6.1           Fees
and Charges

 

In consideration
of the Services provided by the Valuation Agent hereunder, the Valuation Agent
shall be paid such compensation as may from time to time be agreed upon in
writing between the Manager and the Valuation Agent. In addition, the Valuation
Agent shall be reimbursed for any disbursements and expenses incurred in the
performance of its duties hereunder.

 

6.2           Statements

 

The
Valuation Agent shall send to the Manager itemized statements setting out the
amount of all compensation, disbursements and expenses provided for in Section 6.1,
and such amounts shall be due and payable within 30 days after the respective
dates on which such statements were issued by the Valuation Agent  hereunder.

 

7.             Standard of Care, Limitation of
Liability and Indemnification

 

7.1           Standard
of Care

 

In providing the
Services hereunder, the Valuation Agent shall exercise the powers and discharge
the duties of its office honestly and in good faith and in connection therewith
shall exercise the degree of care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances.

 

18

 

7.2           Liability
of the Valuation Agent

 

The
Valuation Agent shall not be liable for any act or omission in the course of,
or connected with, rendering the Services hereunder, except to the extent that
such liability arises directly out of the negligence, wilful misconduct or lack
of good faith of the Valuation Agent.  In
no event shall the Valuation Agent be liable for any consequential or special
damages including, but not limited to, loss of reputation, goodwill or
business.  Notwithstanding the foregoing
or any other provision of this Agreement, the Valuation Agent’s liability
hereunder shall 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 12 months.

 

7.3           Limitation
of Responsibility

 

Without limiting the foregoing and except to
the extent that the Valuation Agent has not complied with its standard of care
set out in Section 7.1, the Valuation Agent shall not be responsible for:

 

(a)           any loss to, or diminution of, the Trust Property;

 

(b)           any act or
omission required or demanded by any governmental, taxing, regulatory or other competent authority which has
jurisdiction over the Valuation Agent or the Trust;

 

(c)           any loss resulting from official action (including
nationalisation and expropriation), currency restrictions or devaluations, acts
or threat of war or terrorism, insurrection, revolution or civil disturbance,
acts of God, strikes or work stoppages, inability of any settlement system to
settle transactions, interruptions in postal, telephone, facsimile and/or other
communication systems or in power supply, or any other event or factor beyond
the reasonable  control of the Valuation Agent;

 

(d)           any failure to act on Directions, if the Valuation
Agent reasonably believed that to do so might result in a breach of any
Applicable Laws or the terms of this Agreement;

 

(e)           any
action taken in accordance with a Direction from the Manager, or for failure to
act in the absence of a Direction from the Manager where a Direction is
required under this Agreement;

 

(f)            any
registrar, transfer agency or record-keeping services on behalf of the Trust or
any Unitholders;

 

(g)           any
preparation or filing of any audited financial statements or any compliance,
reporting or filings in accordance with applicable Securities Legislation or
any United States tax laws, regulations, rules or policies that apply to
the Trust pursuant to Applicable Laws; or

 

(h)           any
ongoing monitoring of investments of the Trust or any risk factors whatsoever
related thereto.

 

7.4           Indemnification
of the Valuation Agent

 

(a)           The Manager
shall indemnify and hold harmless the Valuation Agent, its Affiliates and
agents, and their respective directors, officers, and employees (each an “Indemnified Party”) from and against all taxes, duties,
charges, costs, expenses, damages, claims,

 

19

 

actions,
demands and any other liability whatsoever to which the Indemnified Party, or
any of them, 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 Services provided hereunder, except to the extent incurred
as a result of the negligence, wilful misconduct or lack of good faith of any
Indemnified Party.  For greater certainty,
the foregoing does not make the commencement of formal legal proceedings a
precondition for indemnification hereunder.

 

(b)           Further, none
of the provisions of this Agreement shall require the Valuation Agent to expend
or risk its own funds, appear in, prosecute or defend proceedings, or otherwise
incur financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers hereunder, unless first indemnified to
its satisfaction.

 

8.             Amendments and Termination of the
Agreement

 

8.1           Amendments

 

This Agreement may not be
amended, changed, supplemented or otherwise modified in any respect except by
written instrument executed by the parties hereto or their respective
successors or permitted assigns.

 

8.2           Termination

 

(a)           Either party may at any time
terminate this Agreement without any penalty by giving at least 60 days’ prior
written notice to the other party of such termination unless the parties
mutually agree in writing to a different period.  Such prior notice is not required
and termination will be immediate upon the giving of notice in accordance with Section 5
hereof in the event that:

 

(i)            either party is declared
bankrupt or shall be insolvent;

 

(ii)           the assets or
the business of either party shall become liable to seizure or confiscation by
any public or governmental authority; or

 

(iii)          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.

 

(b)           Upon the termination of this
Agreement, the Valuation Agent shall forthwith deliver to the Manager, on
behalf of the Trust, all books of account and other records in the format
existing at the effective date of termination of this Agreement.  A receipt signed by the Manager, on behalf of
the Trust, shall be a valid discharge to the Valuation Agent in respect of its
obligations hereunder.

 

9.             Miscellaneous

 

9.1           Access
to Records

 

On
reasonable notice and during normal business hours, the Valuation Agent shall
make available to and permit the authorized officers, employees and agents of
the Manager, and such Securities Authorities or other regulatory authorities as
may have lawful jurisdiction over the Trust and the

 

20

 

Manager, to inspect and make
copies of all accounts, books and records maintained by the Valuation Agent in
connection with its duties under this Agreement, provided such Persons comply
with the Valuation Agent’s reasonable requirements as to confidentiality and
privacy.

 

9.2           Review of Statements

 

The
Manager shall, within 30 days following the issuance of
any statement by the Valuation Agent related to the provision of the Services
hereunder, provide the Valuation Agent
with written notice of any alleged omissions from, or additions wrongly made
to, or inaccurate entries in, such statement. 
If such notification by the Manager is not received by the Valuation
Agent within such 30-day period, the Valuation Agent shall be released and
discharged from liability and accountability to anyone with respect to its acts
and all transactions during the period covered by such statement, except as
provided in this Agreement.

 

9.3           Self-Dealing

 

(a)        The Valuation Agent’s Services to the Manager and to the Trust are not exclusive
and, subject to the limitations otherwise provided in this Agreement on the
power and authorities of the Valuation Agent, the Valuation Agent may for any
purpose, and is hereby expressly authorized from time to time in its discretion
to, appoint, employ, invest in, contract or deal with any individual, firm,
partnership, association, trust or body corporate including, without
limitation, itself and any partnership, trust or body corporate with which it
may directly or indirectly be 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), without being liable to account
therefor and without being in breach of this Agreement.

 

(b)        Without limiting the
generality of the foregoing, the Manager hereby authorizes the Valuation Agent
to act hereunder notwithstanding that the Valuation Agent or any of its
divisions, branches or Affiliates may:

 

(i)         have a material interest in the transaction or that circumstances
are such that the Valuation Agent may have a potential conflict of duty or
interest including the fact that the Valuation Agent or any of its Affiliates
may:

 

(A)       purchase, hold, sell, invest in or otherwise
deal with securities or other property or assets of the same class and nature
as may be held in the Trust, whether on its own account or for the account of
another (in a fiduciary capacity or otherwise);

 

(B)       act as a market
maker in the securities that form part of the Trust Property to which any
Directions relate;

 

(C)       provide brokerage services to other clients;

 

(D)       act as financial adviser to the issuer of such
securities;

 

(E)        act in the same transaction as agent for more than one
client;

 

21

 

(F)        have a material
interest in the issue of securities that form part of the Trust Property;

 

(G)       use in other
capacities knowledge gained in its capacity as a provider of Services
hereunder; or

 

(H)       earn profits from any of the activities listed herein,

 

without
being liable to account therefor and without being in breach of this Agreement
provided that the Valuation Agent complies with Section 9.6 hereof.

 

9.4           Assignment

 

Subject
to Section 9.5, neither this Agreement nor any of the rights or obligations
of either party hereunder may be assigned to any other Person without the prior
written consent of the other party, such consent not to be unreasonably
withheld or delayed.

 

9.5           Successors

 

This Agreement shall enure to the benefit of,
and be binding upon, the parties hereto and their respective successors and
permitted assigns.  For greater
certainty, any trust company resulting from the merger or amalgamation of the
Valuation Agent with one or more trust companies, or any trust company which
succeeds to substantially all of the business of the Valuation Agent shall
thereupon become the successor to the Valuation Agent hereunder without further
act or formality.

 

9.6           Confidentiality

 

Except as provided in Subsection
9.3(a)(vii) hereof, each party shall hold in confidence all information
relating to the Trust and this Agreement and may only release such information
to others where required by Applicable Law or pursuant to any Directions, if
applicable, or as otherwise agreed between the parties.

 

9.7           Capacity

 

For
greater certainty, the parties acknowledge that the Valuation Agent is not
entering into this Agreement in a fiduciary capacity and the terms of this
Agreement and the performance by the Valuation Agent of its obligations under
this Agreement shall not result, directly or indirectly or in any manner
whatsoever, in any fiduciary duties being imposed or inferred upon the
Valuation Agent.

 

9.8           Headings

 

The inclusion of section
headings in this Agreement is for convenience of reference only and shall not
affect the construction or interpretation hereof.

 

9.9           Governing Law

 

This Agreement shall be
governed by, and construed in accordance with, the laws of the Province of
Ontario and the federal laws of Canada applicable therein and shall be treated
in all respects as an Ontario contract. 
The parties hereto hereby attorn to the jurisdiction of the courts of
Ontario for arbitration of any disputes between them with respect to the
subject matter hereof.

 

22

 

9.10         Entire Agreement

 

This Agreement, including
Schedule A attached hereto, and the Trust Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes and replaces all prior understandings, agreements, negotiations or
discussions, whether written or oral, between the parties with respect
thereto.  There are no representations,
warranties, terms, conditions, undertakings or collateral agreements or understanding,
express or implied, between the parties other than those expressly set forth in
this Agreement and the Trust Agreement.

 

9.11         Further Acts

 

Each of the Valuation Agent
and the Manager shall promptly do, make, execute or deliver, or cause to be
done, made, executed or delivered, all such further acts, documents and things
as the other party hereto may reasonably require from time to time for the
purpose of giving effect to this Agreement.

 

9.12         Invalidity of Provisions

 

Each of the provisions
contained in this Agreement is distinct and severable and a declaration of
invalidity or unenforceability of any such provision or part thereof by a court
of competent jurisdiction shall not affect the validity or enforceability of
any other provision hereof.  To the
extent permitted by Applicable Law, the parties waive any provision of law
which renders any provision of this Agreement invalid or unenforceable in any
respect.

 

9.13         Counterparts

 

This Agreement may be
executed in several counterparts, each of which when so executed shall be
deemed to be an original and such counterparts together shall constitute one
and the same instrument.

 

23

 

 

IN
WITNESS WHEREOF the parties have caused this Agreement to be
executed by their respective duly authorized officers effective as of the day
and year first above written.

 

	
   

  	
  SPROTT
  ASSET MANAGEMENT LP, by its general partner, SPROTT ASSET MANAGEMENT GP INC., in its capacity as the
  Manager of the Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Eric
  S. Sprott

  
	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Kirstin
  H. McTaggart

  
	
   

  	
   

  	
  Corporate
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  We
  have the authority to bind the Manager.

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC
  DEXIA INVESTOR SERVICES TRUST, in its capacity as the
  Valuation Agent of the Trust

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  We
  have the authority to bind the Valuation Agent.

  

 

24

 

SCHEDULE A

 

CERTIFICATE OF AUTHORIZED SIGNING
AUTHORITIES

 

[To be attached hereto.]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]