Sprott Asset Management LP et al.

Decision

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief granted from National Instrument 81-102 Mutual Funds to exchange traded mutual fund from investment restriction on purchases of platinum and palladium bullion, custodial provisions to allow Royal Canadian Mint to act as custodian and Via Mat to act as sub-custodian, and certain mutual fund requirements and restrictions on purchase and redemption orders, calculation and payment of redemptions and date of record for payment of distributions.

Exemptive relief granted from National Instrument 41-101 General Prospectus Requirement, Form 41-101F2 Information Required in an Investment Fund Prospectus, and National Instrument 81-106 Investment Fund Continuous Disclosure -- Exemption from the requirements to include in the prospectus annual financial statements prepared in accordance with Canadian generally accepted accounting principles and to prepare on a continuing basis financial statements in accordance with Canadian generally accepted accounting principles -- A mutual fund trust intending to list its units on the TSX and NYSE Arca -- Issuer is a "foreign private issuer" with the SEC and permitted to file financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board with its Form F-1 registration statement -- IFRS issues such as classification of puttable instruments, consolidation, and deferred income taxes are not expected to impact the Trust's financial statements.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.3(f), 3.3, 6.1(1), 6.1(3)(b), 6.2, 9.1, 10.2, 10.3, 10.4(1), 12.1(1), 14.1, 19.1.

National Instrument 41-101 General Prospectus Requirements, Sections 3.1(2), 4.2(2) and 19.1 of NI 41-101 and

Form 41-101F2 Information Required in an Investment Fund Prospectus, Item 38.

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.6, 17.1.

April 3, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

SPROTT ASSET MANAGEMENT LP

(the Manager)

AND

IN THE MATTER OF

SPROTT PHYSICAL PLATINUM AND PALLADIUM TRUST

(the Trust)

AND

IN THE MATTER OF

ROYAL CANADIAN MINT

(the Bullion Custodian)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Manager, in its capacity as the manager of the Trust, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the following provisions of National Instrument 81-102 Mutual Funds (NI 81-102):

(a) Subsection 2.3(f), to permit the Trust to invest up to 100% of its net assets, taken at market value at the time of purchase, in physical platinum and palladium bullion (Bullion);

(b) Section 3.3, to permit the fees and expenses associated with the initial public offering (the Offering) of transferable, redeemable units of the Trust (the Units) including the costs of creating and organizing the Trust, the costs of preparing the Preliminary Prospectus (as hereinafter defined), the final base PREP prospectus of the Trust (the Final Prospectus), the supplemented PREP prospectus of the Trust, the Registration Statement (as hereinafter defined) and any amendments to the Registration Statement, marketing expenses and other incidental expenses, filing and listing fees of the applicable securities regulatory authorities and the stock exchanges, the fees and expenses payable to the Bullion Custodian, the Trustee (as hereinafter defined) and any of their respective sub-custodians, and the Registrar and Transfer Agent (as hereinafter defined), auditing and printing expenses, and the commissions payable to the underwriters involved in the Offering of Units to be borne by the Trust;

(c) Subsection 6.1(1) and Section 6.2, to permit the Trust to appoint the Bullion Custodian as a custodian of the Trust to hold the Trust's Bullion in Canada;

(d) Clauses 6.1(2)(b) and 6.1(3)(b) and Section 6.3, to permit the Bullion Custodian to appoint Via Mat International Ltd. or its subsidiaries or affiliates (the Sub-Custodian) as a sub-custodian of the Trust to hold the Trust's physical palladium bullion outside of Canada for purposes other than facilitating portfolio transactions of the Trust;

(e) Sections 9.1 and 10.2, to permit purchases of the Units on the Toronto Stock Exchange (TSX) and the New York Stock Exchange Arca (NYSE Arca), and redemption requests to be submitted directly to the Registrar and Transfer Agent;

(f) Section 10.3, to permit the redemption price of the Units to which a redemption request pertains to be a price other than the Net Asset Value per Unit (as hereinafter defined) next determined after receipt by the Trust of the redemption request;

(g) Clause 10.4(1)(a), to permit payment of the redemption price for redeemed Units to be made later than three Business Days (as hereafter defined) after the date of calculating the Net Asset Value per Unit for the purpose of effecting such redemption;

(h) Subsection 12.1(1), to relieve the Trust from the requirement of completing and filing with the applicable securities regulatory authorities the reports required by that subsection; and

(i) Section 14.1, to permit the Trust to establish a record date for determining the right of unitholders of the Trust (the Unitholders) to receive distributions by the Trust in accordance with the rules and policies of the TSX and the NYSE Arca,

(collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator); and

(b) the Manager has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

In this decision, the "total net assets" of the Trust means the net asset value of the Trust determined in accordance with Part 14 of National Instrument 81-106 Investment Fund Continuous Disclosure.

Representations

This decision is based on the following facts represented by the Manager and the Trust:

The Manager and the Trust

1. The Manager is a limited partnership formed and organized under the laws of the Province of Ontario and maintains its head office in Toronto, Ontario. The general partner of the Manager is Sprott Asset Management GP Inc. (the General Partner), which is a corporation incorporated under the laws of the Province of Ontario. The General Partner is a wholly-owned, direct subsidiary of Sprott Inc. Sprott Inc. is a corporation incorporated under the laws of the Province of Ontario and is a public company listed on the TSX. Sprott Inc. is the sole limited partner of the Manager and the sole shareholder of the General Partner.

2. 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 an investment fund manager.

3. 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 December 23, 2011 (the Trust Agreement), as the same may be amended, restated or supplemented from time to time. Pursuant to the Trust Agreement, RBC Dexia Investor Services Trust (the Trustee) and the Manager are the trustee and the manager of the Trust, respectively.

4. Equity Financial Trust Company (the Registrar and Transfer Agent) will be the registrar and transfer agent of the Trust pursuant to a transfer agent, registrar and disbursing agent agreement to be entered into on or about the filing of the Final Prospectus.

5. In connection with the Offering of the Units, a preliminary base PREP prospectus dated January 13, 2012 of the Trust was filed with the securities regulatory authorities in each province and territory of Canada (the Canadian Jurisdictions) and the Trust intends to become a reporting issuer, or the equivalent thereof, in such Canadian Jurisdictions following the filing of the Final Prospectus.

6. Concurrently with filing the foregoing preliminary prospectus, the Trust filed a registration statement on Form F-1 (the Registration Statement) under the U.S. Securities Act of 1933, as amended, with the United States Securities and Exchange Commission (the SEC) in connection with the Offering of the Units in the United States.

7. The Trust subsequently filed via SEDAR an amended and restated preliminary base PREP prospectus of the Trust dated March 1, 2012 (the Preliminary Prospectus) amending and restating the preliminary base PREP prospectus of the Trust dated January 13, 2012 with each of the Canadian Jurisdictions. Concurrently with filing the Preliminary Prospectus, the Trust filed via EDGAR an amended version of the Registration Statement with the SEC.

8. The Trust intends to list the Units on the TSX and the NYSE Arca. The Trust will not file the Final Prospectus until the TSX and the NYSE Arca have conditionally approved the listing of the Units.

9. Although the Manager and the Trust are unable to predict with any accuracy as to where sales of Units will actually occur, the Offering is expected to be marketed to investors on a global basis and, in particular, to investors resident in Canada, the United States, Europe, Asia and the Middle East.

10. The Trust is a "mutual fund in Ontario" as such term is defined in the Securities Act (Ontario) and is subject to the investment restrictions applicable to mutual funds which are prescribed by NI 81-102. The Manager has established an independent review committee for the Trust in accordance with the requirements under National Instrument 81-107 Independent Review Committee for Investment Funds.

11. The Trust is not required to register as an "investment company" as such term is defined in the U.S. Investment Company Act of 1940, as amended (the 1940 Act), since the Trust will invest all or substantially all of its assets in Bullion. Bullion does not fall within the definition of either a "security" or an "investment security" under the 1940 Act and, accordingly, the Trust is not required to be registered as an "investment company".

12. The Manager and the Trust are not in default of securities legislation in the Canadian Jurisdictions.

The Trust's Investment Objective, Strategy, and Investment and Operating Restrictions

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

14. The Trust intends to achieve its objective by investing primarily in long-term holdings of unencumbered, fully allocated Bullion and will not speculate with regard to short-term changes in platinum or palladium prices. The Trust will not invest in platinum or palladium certificates, futures or other financial instruments that represent platinum or palladium or that may be exchanged for platinum or palladium. The Trust will purchase approximately equal dollar amounts of each of physical platinum and palladium bullion. While the Trust will not rebalance the Trust's invested assets in Bullion back to equal weight after its initial purchases of Bullion with the proceeds of the Offering, the Trust may in the future allocate any additional proceeds raised in subsequent offerings of Units, if any, with a view to balancing the value of the Trust's holdings of Bullion at then current prices.

15. Except with respect to cash held by the Trust to pay expenses and anticipated cash redemptions of Units, the Trust expects to own only Bullion that is certified as Good Delivery. Good Delivery means Bullion conforming to the Good Delivery Standards of the London Platinum and Palladium Market (LPPM). The Manager intends to invest and hold approximately 97% of the total net assets of the Trust in Bullion, which will be stored in Good Delivery plate and/or ingot form.

16. As disclosed in the Preliminary Prospectus, the investment and operating restrictions of the Trust provide that, among other things, the Trust will invest in and hold a minimum of 90% of the total net assets of the Trust in Bullion in Good Delivery plate or ingot form and hold no more than 10% of the total net assets of the Trust, at the discretion of the Manager, in Bullion (in Good Delivery plate or ingot form or otherwise), 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 DBRS Limited or its successors or assigns or F-1 (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 Offering or additional offerings or prior to the distribution of the assets of the Trust.

17. The Manager and the Trust believe that, as the market in platinum and palladium is highly liquid, there are no liquidity concerns with permitting the Trust to invest in Bullion despite the restrictions of NI 81-102.

Net Asset Value of the Trust and Redemption of Units

18. The net asset value (the Net Asset Value) of the Trust and the Net Asset Value per Unit will be determined on a daily basis as of 4:00 p.m. (Toronto time) on each day on which the NYSE Arca or the TSX is open for trading (a Business Day), by the Trust's valuation agent, which is the Trustee.

19. Pursuant to the Offering, Units will be offered at a price equal to USD $10.00 per Unit. The Trust may not issue additional Units following the completion of the Offering, except: (i) if the net 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.

20. Subject to the terms of the Trust Agreement and the Manager's right to suspend redemptions of Units in certain circumstances as described in the Trust Agreement, Units may be redeemed at the option of a Unitholder in any month for Bullion or cash. All redemptions of Units will be determined using United States dollars, regardless of whether the redeemed Units were acquired on the NYSE Arca or the TSX. Redemption requests for Bullion must be for a minimum of 25,000 Units

21. Unitholders whose Units are redeemed for Bullion will be entitled to receive a redemption price equal to 100% of the aggregate value of the Net Asset Value per Unit of the redeemed Units on the last day of the month on which the NYSE Arca is open for trading for the month in respect of which the redemption request is processed (less applicable expenses described below) (the Redemption Amount).

22. The amount of Bullion a redeeming Unitholder is entitled to receive will be determined by the Manager by allocating the Redemption Amount to Bullion in direct proportion to the value of Bullion held by the Trust at the time of redemption (the Bullion Redemption Amount). The quantity of each particular metal delivered to a redeeming Unitholder will be dependent on the applicable Bullion Redemption Amount and the sizes of plates and ingots of that metal that are held by the Trust on the redemption date. A redeeming Unitholder may not receive Bullion in the proportions then held by the Trust and, if the Trust does not have a Good Delivery plate or ingot, as the case may be, of a particular metal in inventory of a value equal to or less than the applicable Bullion Redemption Amount, the redeeming Unitholder will not receive any of that metal. Because the Trust's physical platinum bullion will be stored at the Bullion Custodian in Canada and the Trust's physical palladium bullion will be stored at the Sub-Custodian in London or Zurich, in the event of a redemption, the physical platinum bullion and the physical palladium bullion the redeeming Unitholder will receive will be shipped separately. Any Bullion Redemption Amount in excess of the value of the Good Delivery plates or ingots, as the case may be, of the particular metal to be delivered to the redeeming Unitholder will be paid in cash (and, for greater certainty, will not be combined with any such amounts in respect of the other metal for the purpose of delivering additional Bullion). Any portion of physical platinum bullion or physical palladium bullion not available at the time of redemption will be paid in cash at a rate equal to 100% of the aggregate value of the Net Asset Value per Unit of such unavailable amount of physical platinum bullion or physical palladium bullion.

23. A Unitholder redeeming Units for Bullion will be responsible for expenses incurred by the Trust in connection with such redemption. These expenses include expenses associated with the handling of the written redemption notice for Bullion, the delivery and transportation of Bullion for Units that are being redeemed, the applicable platinum and palladium storage in-and-out fees and applicable taxes including, without limitation, harmonized sales tax (HST) or federal goods and services tax (GST) and any provincial sales tax including Quebec sales tax (PST) associated with the importation, or delivery and transportation, of physical palladium bullion to a location in Canada and any PST applicable to physical platinum bullion being brought by or on behalf of such redeeming Unitholder into any province which imposes PST on such bullion.

24. A Unitholder that owns a sufficient number of Units who desires to exercise redemption privileges for Bullion must do so by instructing his, her or its broker, who must be a direct or indirect participant of CDS Clearing and Depository Services Inc. (CDS) or The Depository Trust Company (DTC), to deliver to the Registrar and Transfer Agent on behalf of the Unitholder a written notice of the Unitholder's intention to redeem Units for Bullion. A redemption notice to redeem Units for Bullion must be received by the Registrar and Transfer Agent no later than 4:00 p.m. (Toronto time) on the 15th day of the month in which such redemption notice will be processed or, if such day is not a Business Day, then on the immediately following day that is a Business Day. Any redemption notice for Bullion received after such time will be processed in the next month. Any redemption notice for Bullion must include a valid signature guarantee to be deemed valid by the Trust.

25. Once a redemption notice for Bullion is received by the Registrar and Transfer Agent, the Registrar and Transfer Agent, together with the Manager, will determine whether such redemption notice complies with the applicable requirements including a minimum redemption of 25,000 Units, and contains delivery/transportation instructions that are acceptable to the armoured service transportation carrier. If the Registrar and Transfer Agent and the Manager determine that the redemption notice for Bullion complies with all applicable requirements, the Registrar and Transfer Agent will provide a notice to such redeeming Unitholder's broker confirming that such redemption notice was received and determined to be complete.

26. Any redemption notice for Bullion delivered to the Registrar and Transfer Agent regarding a Unitholder's intent to redeem Units that the Registrar and Transfer Agent or the Manager, in their sole discretion, determines to be incomplete, not in proper form, not duly executed or not for a minimum redemption of 25,000 Units will for all purposes be void and of no effect, and the redemption privilege to which it relates will be considered for all purposes not to have been exercised thereby. If the Registrar and Transfer Agent and the Manager determine that the redemption notice for Bullion does not comply with the applicable requirements, the Registrar and Transfer Agent will provide a notice explaining the deficiency to the Unitholder's broker.

27. If the redemption notice for Bullion is determined to have complied with the applicable requirements, the Registrar and Transfer Agent and the Manager will determine on the last Business Day of the applicable month the amount of Bullion and the amount of cash that will be delivered to the redeeming Unitholder. Also on the last Business Day of the applicable month, the redeeming Unitholder's broker will deliver the redeemed Units to CDS or DTC, as the case may be, for cancellation.

28. As Good Delivery plates or ingots vary in weight between one kilogram (32.15 troy ounces) and six kilograms (192.90 troy ounces) for Bullion, the Registrar and Transfer Agent and the Manager will have some discretion regarding the amount of Bullion the redeeming Unitholder will receive based upon the weight of plates and ingots owned by the Trust and the amount of cash necessary to cover the expenses associated with the redemption and delivery and transportation that must be paid by the redeeming Unitholder. The amount of Bullion a redeeming Unitholder may be entitled to receive will be determined by the Manager by allocating the Redemption Amount to Bullion in direct proportion to the value of Bullion held by the Trust at the time of redemption in addition to meeting the requirement for a minimum aggregate redemption amount. Once such determination has been made, the Registrar and Transfer Agent will inform the broker through which the Unitholder has delivered its redemption notice of the proportionate amount of Bullion and cash that the redeeming Unitholder will receive.

29. Based on instructions from the Manager, the Bullion Custodian and/or the Sub-Custodian will release the requisite amount of Bullion from such custodian or sub-custodian's custody to the armoured transportation service carrier and such release will constitute delivery of such Bullion by the Trust to the redeeming Unitholder and the payment of the portion of the applicable Bullion Redemption Amount that is to be paid in Bullion. As directed by the Manager, any cash to be received by a redeeming Unitholder in connection with a redemption of Units for Bullion will be delivered or caused to be delivered by the Manager to the Unitholder's account within 21 Business Days after the month in which the redemption is processed.

30. A Unitholder redeeming Units for Bullion will receive Bullion from the Bullion Custodian and/or its Sub-Custodian. Bullion received by a Unitholder as a result of a redemption of Units will be transported by armoured transportation service carrier pursuant to instructions provided by the Unitholder to the Manager, provided that those instructions are acceptable to the armoured transportation service carrier. The armoured transportation service carrier will be engaged by, or on behalf of, the redeeming Unitholder and the release of the Bullion by the Bullion Custodian and/or its Sub-Custodian to the carrier will constitute delivery of such Bullion by the Trust to the Unitholder and the payment of the portion of the applicable Bullion Redemption Amount that is to be paid in Bullion. Such Bullion can be transported: (i) to an account established by the Unitholder at an institution located in North America authorized to accept and hold Good Delivery plates and ingots; (ii) in the United States, to any physical address (subject to approval by the armoured transportation service carrier); (iii) in Canada, to any business address (subject to approval by the armoured transportation service carrier); and (iv) outside of the United States and Canada, to any address approved by the armoured transportation service carrier. Bullion transported to an institution located in North America authorized to accept and hold Good Delivery plates and ingots will likely retain its Good Delivery status while in the custody of such institution. Bullion transported pursuant to a Unitholder's delivery instruction to a destination other than an institution located in North America authorized to accept and hold Good Delivery plates and ingots will no longer be deemed Good Delivery once received by the Unitholder. Physical palladium bullion delivered to a Canadian address will be subject to HST or GST and any applicable PST. Physical platinum bullion delivered to a Canadian address will be subject to PST if delivered in a province that imposes PST on such bullion.

31. Costs associated with the redemption of Units and the delivery and transportation of Bullion will be borne by the redeeming Unitholder as set forth in paragraph 23. The redeeming Unitholder will also be responsible for reimbursing the Trust for in-and-out fees charged to the Trust by the Bullion Custodian and/or its Sub-Custodian.

32. The armoured transportation service carrier will receive Bullion in connection with a redemption of Units approximately 21 Business Days after the end of the month in which the redemption notice is processed. Once Bullion representing the redeemed Units has been released to the armoured transportation service carrier, the Trust and the Bullion Custodian will no longer bear the risk of loss of, and damage to, such Bullion. In the event of a loss after Bullion has been placed with the armoured transportation service carrier, the Unitholder will not have recourse against the Trust or the Bullion Custodian.

33. Unitholders whose Units are redeemed for cash will be entitled to receive a redemption price per Unit equal to 95% of the lesser of (i) the volume-weighted average trading price of the Units traded on the NYSE Arca or, if trading has been suspended on the NYSE Arca, the volume-weighted average trading price of the Units traded on the TSX, for the last five days on which the respective stock exchange is open for trading for the month in which the redemption request is processed, and (ii) the Net Asset Value per Unit of the redeemed Units on the last day of such month on which the NYSE Arca is open for trading. Cash redemption proceeds will be transferred to a redeeming Unitholder approximately three Business Days after the end of the month in which such redemption request is processed by the Trust.

34. To redeem Units for cash, a Unitholder must deliver a written notice to redeem Units for cash to the Registrar and Transfer Agent or, if applicable, instruct the Unitholder's broker to deliver a notice to redeem Units for cash to the Registrar and Transfer Agent. A redemption notice to redeem Units for cash must be received by the Registrar and Transfer Agent no later than 4:00 p.m. (Toronto time) on the 15th day of the month in which the redemption notice for cash will be processed or, if such day is not a Business Day, then on the immediately following day that is a Business Day. Any redemption notice to redeem Units for cash received after such time will be processed in the next month. Any redemption notice for cash must include a valid signature guarantee to be deemed valid by the Trust.

35. Any redemption notice for cash delivered to the Registrar and Transfer Agent regarding a Unitholder's intent to redeem Units that the Registrar and Transfer Agent or the Manager determines to be incomplete, not in proper form or not duly executed will for all purposes be void and of no effect and the redemption privilege to which it relates will be considered for all purposes not to have been exercised thereby. For each redemption notice for cash, the Registrar and Transfer Agent will notify the redeeming Unitholder's broker that such redemption notice has been deemed insufficient or accepted and duly processed, as the case may be.

36. Upon receipt of the redemption notice for cash, the Registrar and Transfer Agent and the Manager will determine on the last Business Day of the applicable month the amount of cash that will be delivered to the redeeming Unitholder. Also on the last Business Day of the applicable month the redeeming Unitholder's broker will deliver the redeemed Units to CDS or DTC, as the case may be, for cancellation.

The Trust's Custody Arrangements

This decision is also based on the following facts represented by the Manager, the Trust and the Bullion Custodian (with respect to matters relating to the Bullion Custodian):

37. The Trustee acts as the custodian of the assets of the Trust other than Bullion pursuant to the Trust Agreement. The Trustee will only be responsible for the assets of the Trust that are directly held by it, its affiliates or appointed sub-custodians.

38. Bullion owned by the Trust will be fully allocated and stored in the vaults of a custodian and/or its sub-custodian. The Trust intends to store its physical platinum bullion at the vault facilities of the Bullion Custodian located in Canada. Since certain taxes are payable on the importation or delivery and transportation of physical palladium bullion in Canada, the Trust intends to store its physical palladium bullion at the vault facilities of the Sub-Custodian located outside of Canada. The Trust is unable to appoint the Bullion Custodian as the sole custodian of its assets since the Bullion Custodian cannot hold the cash or securities owned by the Trust.

39. The Bullion Custodian operates pursuant to the Royal Canadian Mint Act (Canada) and is a Canadian crown corporation. Crown corporations are "agents of Her Majesty the Queen" and, as such, their obligations generally constitute unconditional obligations of the Government of Canada. The Bullion Custodian had shareholders' equity of $238.7 million as at December 31, 2010. The Bullion Custodian is responsible for the minting and distribution of Canada's circulation coins. As part of its operations, the Bullion Custodian maintains a secure storage facility located in Canada that it owns and operates, and provides storage space to third parties.

40. Since HST or GST and PST are payable on the importation or delivery and transportation of physical palladium bullion to a location in Canada, the Trust intends to store its physical palladium bullion at the vault facilities of the Sub-Custodian located in London, England and/or Zurich, Switzerland.

41. The Sub-Custodian is part of Mat Securitas Express AG of Switzerland, one of Europe's largest and oldest armoured transport and storage companies, operating widely in North and South America, Europe and the Far East including acting as the carrier for Swiss banknotes used by the Swiss central bank. The Sub-Custodian has vault facilities located in London, England and Zurich, Switzerland that are accepted as warehouses for the LPPM.

42. The relationship between the Bullion Custodian and the Sub-Custodian will be primarily one whereby the Bullion Custodian is sub-contracting the vault facilities of this service provider for the purposes of storing the Trust's physical palladium bullion. The Sub-Custodian will be appointed as a sub-custodian of the Trust outside of Canada pursuant to a written agreement between the Bullion Custodian and the Sub-Custodian that complies with the requirements of Part 6 of NI 81-102. The Bullion Custodian will remain responsible for (i) ensuring that adequate safeguards are in place, including satisfactory insurance arrangements; and (ii) indemnifying the Trust for all direct loss, damage or expense that may occur in connection with the Trust's Bullion that is stored at the vault facilities of the Bullion Custodian and/or the Sub-Custodian arising out of the negligence or wrongful acts of, or failure to comply with its standard of care by, the Bullion Custodian or its Sub-Custodian. Prior to appointing the Sub-Custodian, and on a periodic basis thereafter, the Bullion Custodian will review the facilities, procedures, records and creditworthiness of the Sub-Custodian. The Trust will rely upon the Bullion Custodian, who is in the business of precious metals storage, to satisfy itself as to the appropriateness of the use or continued use of the Sub-Custodian as a sub-custodian of the Trust's physical palladium bullion held outside of Canada

43. The Bullion Custodian has also advised the Trust and the Manager that, pursuant to the terms of its existing relationship with the Sub-Custodian, the Sub-Custodian has arranged for sufficient insurance coverage in respect of any material held by the Bullion Custodian through the vault facilities of the Sub-Custodian. The Manager has discussed with the Bullion Custodian the level of insurance coverage obtained by the Sub-Custodian and the risks insured against by the Sub-Custodian and believes that the level of insurance will be sufficient.

44. The Manager and the Bullion Custodian believe that the Sub-Custodian has the resources and experience required to act as a sub-custodian for the Trust's physical palladium bullion held outside of Canada.

45. The Bullion Custodian will be appointed as the custodian of the Bullion owned by the Trust pursuant to precious metals storage agreements relating to Bullion between the Manager, for and on behalf of the Trust, and the Bullion Custodian (each individually, a Storage Agreement and collectively, the Storage Agreements). These Storage Agreements will provide for the storage of Bullion generally and will not place any limitations on the Trust's ability to buy or sell Bullion. Each Storage Agreement, including the arrangements between the Bullion Custodian and the Trust in connection with Bullion, will comply with the requirements of Part 6 of NI 81-102.

46. Under each of the Storage Agreements, upon the initial notice being delivered, the Bullion Custodian or its Sub-Custodian, as the case may be, will receive such Bullion based on a list provided by the Manager in such written notice that specifies the amount, weight, type, assay characteristics and value, and serial number of the Good Delivery plates or ingots, as the case may be. After verification, the Bullion Custodian will issue a "receipt of deposit" that confirms the plate or ingot count and total weight in troy ounces of each of physical platinum and palladium bullion. Pursuant to each of the Storage Agreements, the Bullion Custodian reserves the right to refuse delivery in the event of storage capacity limitations at either its own vault facilities or at the vault facilities of the Sub-Custodian. In the event of a discrepancy arising during the verification process, the Bullion Custodian will promptly notify the Manager. The Bullion Custodian will keep the Trust's fully allocated Bullion specifically identified as the Trust's property and will keep it on a labelled shelf or physically segregated pallets at all times. The Bullion Custodian will provide a monthly inventory statement, which the Manager will reconcile with the Trust's records of its Bullion holdings. The Manager will have the right to physically count and have the Trust's auditors subject the Trust's Bullion to audit procedures at the vault facilities at the Bullion Custodian and the Sub-Custodian upon request on any Bullion Custodian business day (which means any day other than a Saturday, a Sunday or a holiday observed by the Bullion Custodian or the Sub-Custodian) during the Bullion Custodian's or the Sub-Custodian's regular business hours, provided that such physical count or audit procedures do not interrupt the routine operation of the applicable custodian's facility.

47. Upon the Bullion Custodian's receipt and taking into possession and control (either directly or through the Sub-Custodian) of any of the Trust's Bullion, whether through physical delivery or a transfer of Bullion from a different customer's account at the Bullion Custodian, the Bullion Custodian's liability will commence with respect to such Bullion. The Bullion Custodian will bear all risk of physical loss of, or damage to, the Bullion owned by the Trust in the Bullion Custodian's custody (regardless of the location at which the Bullion Custodian decides to store the Bullion), except in the case of circumstances or causes beyond the Bullion Custodian's reasonable control, including, without limitation, acts or omissions or the failure to cooperate of the Manager, acts or omissions or the failure to cooperate by any third party, fire or other casualty, act of God, strike or labour dispute, war or other violence, or any law, order or requirement of any governmental agency or authority, and has contractually agreed to replace or pay for lost, damaged or destroyed Bullion in the Trust's account while in the Bullion Custodian's or the Sub-Custodian's care, custody and control. Under each of the Storage Agreements, the Bullion Custodian's liability terminates with respect to any Bullion upon termination of the applicable Storage Agreement, whether or not the Trust's Bullion remains in the Bullion Custodian's or the Sub-Custodian's possession and control, upon transfer of such Bullion to a different customer's account at the Bullion Custodian or the Sub-Custodian or at the time such Bullion is remitted to the armoured transportation service carrier pursuant to delivery instructions provided by the Manager on behalf of a redeeming Unitholder.

48. In the event of physical loss, damage or destruction of the Trust's Bullion in the Bullion Custodian's or the Sub-Custodian's custody, care and control, the Manager, on behalf of the Trust, must give written notice to the Bullion Custodian within five Bullion Custodian business days after the discovery of any such loss, damage or destruction, but, in the case of loss or destruction of the Trust's Bullion, in any event no more than 30 days after the delivery by the Bullion Custodian to the Manager, on behalf of the Trust, of an inventory statement in which the discrepancy first appears. The Bullion Custodian will, at its discretion, either (i) replace, or restore to its original state in the event of partial damage, as the case may be, the Trust's Bullion that was lost, destroyed or damaged as soon as practicable after the Bullion Custodian becomes aware of said loss or destruction, based on the advised weight and assay characteristics provided in the initial notice or (ii) compensate the Trust, through the Manager, for the monetary value of the Trust's Bullion that was lost or destroyed, within five Bullion Custodian business days from the date the Bullion Custodian becomes aware of said loss or destruction, based on the advised weight and assay characteristics provided in the initial notice and the market value of such Bullion that was lost or destroyed, using the first available London fix of the LPPM from the date the Bullion Custodian becomes aware of said loss or destruction. If such notice is not given in accordance with the terms of the applicable Storage Agreement, all claims against the Bullion Custodian will be deemed to have been waived. In addition, no action, suit or other proceeding to recover any loss, damage or destruction may be brought against the Bullion Custodian unless notice of such loss, damage or destruction has been given in accordance with the terms of the applicable Storage Agreement and unless such action, suit or proceeding shall have been commenced within 12 months from the time such notice is sent to the Bullion Custodian. The Bullion Custodian will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), except as a result of gross negligence or wilful misconduct by the Bullion Custodian and whether or not the Bullion Custodian had knowledge that such losses or damages might be incurred. Notwithstanding the foregoing, with respect to physical palladium bullion held by the Sub-Custodian, in the event of loss, damage and/or destruction of such bullion, the Bullion Custodian and the Sub-Custodian will promptly and diligently assist each other to establish the identity of the physical palladium bullion lost, damaged or destroyed and shall take all such other reasonable steps as may be necessary to assure the maximum amount of salvage at a minimum cost. The Bullion Custodian will, within 15 calendar days after receipt by the Sub-Custodian of proof of loss from the loss adjuster, make payment to the Trust for the monetary value of the Trust's physical palladium bullion that was lost.

49. Pursuant to each of the Storage Agreements, the Bullion Custodian will be required to exercise the same degree of care and diligence in safeguarding the property of the Trust as any reasonably prudent person acting as custodian of the Bullion would exercise in the same circumstances. The Bullion Custodian will not be entitled to an indemnity from the Trust in the event the Bullion Custodian breaches its standard of care.

50. The Bullion Custodian reserves the right to reject Bullion delivered to it if Bullion contains a hazardous substance or if such Bullion is or becomes unsuitable or undesirable for metallurgical, environmental or other reasons.

51. The Manager may terminate the custodial relationship with the Bullion Custodian by giving written notice to the Bullion Custodian of its intent to terminate the applicable Storage Agreement if: (i) the Bullion Custodian has committed a material breach of its obligations under such Storage Agreement that is not cured within ten Bullion Custodian business days following the Manager giving written notice to the Bullion Custodian of such material breach; (ii) the Bullion Custodian is dissolved or adjudged bankrupt, or a trustee, receiver or conservator of the Bullion Custodian or of its property is appointed, or an application for any of the foregoing is filed; or (iii) the Bullion Custodian is in breach of any representation or warranty contained in such Storage Agreement. The obligations of the Bullion Custodian include, but are not limited to, maintaining an inventory of the Trust's Bullion stored with the Bullion Custodian, providing a monthly inventory to the Trust, maintaining the Trust's Bullion physically segregated and specifically identified as the Trust's property, and taking good care, custody and control of the Trust's Bullion. The Trust believes that all of these obligations are material and anticipates that the Manager would terminate the Bullion Custodian as custodian if the Bullion Custodian breaches any such obligation and does not cure such breach within ten Bullion Custodian business days of the Manager giving written notice to the Bullion Custodian of such breach. Prior to terminating the custodial relationship with the Bullion Custodian, the Manager, with the consent of the Trustee, will appoint a replacement custodian for Bullion that complies with the requirements under NI 81-102.

52. The Bullion Custodian carries such insurance as it deems appropriate for its businesses and its position as custodian of the Trust's Bullion and will provide the Manager, on behalf of the Trust, with at least 30 days' notice of any cancellation or termination of such coverage. The Trust's ability to recover from the Bullion Custodian is not contingent upon the Bullion Custodian's ability to claim on its own insurance or the Sub-Custodian's ability to claim on its own insurance. Based on information provided by the Bullion Custodian, the Manager believes that the insurance carried by the Bullion Custodian, together with its status as a Canadian Crown corporation with its obligations generally constituting unconditional obligations of the Government of Canada, provides the Trust with such protection in the event of loss or theft of the Trust's Bullion stored at the Bullion Custodian or at the Sub-Custodian that is consistent with the protection afforded under insurance carried by other custodians that store platinum and palladium commercially.

53. The Manager will ensure that Bullion, whether held by the Bullion Custodian or its Sub-Custodian, will be subject to a physical count by a representative of the Manager periodically on a spot-inspection basis as well as subject to audit procedures by the Trust's external auditors on at least an annual basis.

54. The Manager will ensure that no director or officer of the Manager or its General Partner, or representative of the Trust or the Manager will be authorized to enter into the Bullion storage vaults without being accompanied by at least one representative of the Bullion Custodian or the Sub-Custodian or, if Bullion is held by another custodian, that custodian or its sub-custodians, as the case may be.

55. The Manager will ensure that no part of the stored Bullion may be delivered out of safekeeping by the Bullion Custodian (except to an authorized sub-custodian thereof) or, if Bullion is held by another custodian, that custodian (except to an authorized sub-custodian thereof), without receipt of an instruction from the Manager in the form specified by the Bullion Custodian or such custodian indicating the purpose of the delivery and giving direction with respect to the specific amount

56. The Manager and the Trust believe that the custodial arrangements with the Bullion Custodian and the Sub-Custodian in connection with the Trust's Bullion are consistent with industry practice.

57. The Manager will not be responsible for any losses or damages to the Trust arising out of any action or inaction by the Trust's custodians or any sub-custodians holding the assets of the Trust, including the Trustee or its sub-custodians holding the assets of the Trust other than Bullion and the Bullion Custodian and/or the Sub-Custodian holding Bullion owned by the Trust.

58. The Manager, with the consent of the Trustee, will have the authority to change the custodial arrangements described above including, but not limited to, the appointment of a replacement custodian or sub-custodian and/or additional custodians or sub-custodians subject to the requirements under NI 81-102.

Decision

The Principal Regulator is satisfied that the decision meets the tests set out in the Legislation for the Principal Regulator to make the decision.

The decision of the Principal Regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the Manager, on behalf of the Trust, ensures that the prospectus of the Trust contains disclosure regarding the unique risks associated with an investment in the Trust, including the risk that direct purchases of Bullion by the Trust may generate higher transaction and custody costs than other types of investments, which may impact the performance of the Trust;

(b) the Trust and the Bullion Custodian are limited to using the Sub-Custodian as sub-custodian for the Trust's physical palladium bullion which will be held only in London, England and/or Zurich, Switzerland;

(c) the Bullion Custodian and the Sub-Custodian each has in excess of the highest minimum capitalization amount of shareholders' equity required under NI 81-102 for entities qualified to act as a custodian or a sub-custodian for assets held in or outside Canada, as applicable;

(d) in respect of the compliance reports to be prepared by the Bullion Custodian pursuant to paragraphs 6.7(1)(b), 6.7(1)(c)(ii) and 6.7(2)(c) of NI 81-102, as such paragraphs will not be applicable given the nature of the relief granted herein, the Bullion Custodian shall include a statement in such reports regarding the completion of the Bullion Custodian's review process for the Sub-Custodian and that the Bullion Custodian is of the view that the Sub-Custodian continues to be an appropriate sub-custodian to hold the Trust's physical palladium bullion outside of Canada; and

(e) the Trust complies with applicable TSX and NYSE Arca requirements in setting the record date for the payment of distributions to Unitholders.

"Sonny Randhawa"
Manager, Investment Funds Branch
Ontario Securities Commission