Cost & Tax Considerations For Mineral Vault Token Holders

The following costs will, or could be, incurred by a Mineral Vault tokenized SPV (and therefore, token holders). However, all costs are payable purely from the net royalty income received from mineral properties being tokenized – no “collections” of additional monies from token holders after initial token purchase will or could ever be performed.

• Property Taxes: All producing oil & gas properties in the U.S. are subject to property taxes which are levied annually by tax authorities. These property taxes generally amount to ~3% of annual revenue, though this is purely a rule-of-thumb and is subject to variation year-to-year. These property taxes are paid by Mineral Vault LLC annually as a management service for the SPV.

• Withholding Taxes: All U.S. source income is initially subject to 30% withholding tax. This tax is withheld from the tokenized SPV until such a time as the SPV files a tax return in the United States to recoup any amount of this withholding which can be reclaimed. This filing will be done by Mineral Vault LLC as a management service for the SPV each year. Although Mineral Vault is not a tax advisor and separate tax & legal advice should be obtained by all prospective token holders, investors should expect that they will effectively be paying U.S. income tax rates on all token income by proxy of the net withholding which takes place.

• Management Fees: Token holders will pay 10% of all revenue received as a management fee to Mineral Vault LLC, a Texas limited liability company, compensating Mineral Vault LLC for ongoing management of the property portfolio on the token holders’ behalf for the duration of the investment term, including negotiation and execution of new oil & gas leases, review and validation of division orders related to new and existing wells, verification of payment from operators & purchasers, calculation and payment of property taxes, filing of all necessary tax and regulatory paperwork, token management, and investor communication and coordination, including compliant onboarding of investors, as well as all costs directly related to the provision of these services.

• Joint Interest Billing Costs: This cost type is rare in that nearly all oil & gas interests associated with Mineral Vault tokens are mineral or royalty interests and therefore are not cost-bearing, meaning that the costs associated with drilling and maintaining the wells on the properties are borne by the operator and not the token holder. In some rare cases, however, a working interest (cost-bearing interest) may be included in a tokenized product. With these interests, the interest owner is responsible for a small part of the operating costs of the well. However, if these costs are present in a Mineral Vault product, they will be a de minimis portion of the overall property portfolio.

• Trivial SPV Registration & Compliance Costs: Annual SPV entity registration, reporting, and similar compliance-related costs will be the responsibility of the token holders since they relate directly to the SPV entity’s existence, however, these costs are expected to be quite trivial.