Sprott Physical Gold Trust, A Gold ETF With A Twist

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December 16, 2009 1:23pm NYSE:GLD NYSE:PHYS

brinksSprott Asset Management has filed paperwork with the SEC for the “Sprott Physical Gold Trust.” The trust will trade on the NYSE Arca and the TSX and will provide institutional and retail investors


 with indirect access to the physical gold bullion market while providing them with the liquidity of an exchange traded security. The units may be bought and sold on the NYSE Arca and the TSX under the symbols “PHYS” and “PHY”, respectively. The trust intends to achieve its objective by investing primarily in long-term holdings of unencumbered, fully allocated, physical gold bullion and will not speculate with regard to short-term changes in gold prices. Physical gold will be held in the Royal Canadian Mint.

That sounds pretty much like (GLD), or (SGOL), but there is the twist. Units may be redeemed at the option of a unitholder for cash OR physical gold bullion in any month. That sounds pretty good hunh? Well there is yet one more twist. Sprott is not going to be sending out gold coins to everyone looking to cash in on their investment. Redemption requests for gold must be for amounts that are at least equivalent in value to one London Good Delivery bar or an integral multiple thereof, plus applicable expenses. A “London Good Delivery bar” contains between 350 and 430 troy ounces of gold. So if you are cashing in at least a half a million cudos to you. You will have the option of having them send an armored truck to the bank of your choosing. Be aware, though, you will be paying for this service.

The filing states: Subject to the terms of the trust agreement, units may be redeemed at the option of a unitholder for physical gold bullion in any month. Units redeemed for physical gold bullion will be entitled to a redemption price equal to 100% of the NAV of the redeemed units on the last day of the month on which the NYSE Arca is open for trading for the month in which the redemption request is processed. Redemption requests for gold must be for amounts that are at least equivalent in value to one London Good Delivery bar or an integral multiple thereof, plus applicable expenses. A “London Good Delivery bar” contains between 350 and 430 troy ounces of gold. A unitholder’s ability to redeem units for physical gold bullion will depend in part on the size of the London Good Delivery bars held by the Trust on the redemption date. Any fractional amount of redemption proceeds in excess of a London Good Delivery bar or an integral multiple thereof will be paid in cash at a rate equal to 100% of the NAV of such excess amount. A unitholder redeeming units for physical gold bullion will be responsible for expenses incurred by the Trust in connection with such redemption and applicable delivery expenses, including the handling of the notice of redemption, the delivery of the physical gold bullion for units that are being redeemed and the applicable gold storage in-and-out fees. See “Redemption of Units” for detailed terms and conditions relating to the redemption of units for physical gold bullion.

A redemption notice to redeem units for physical gold bullion must be received by the Trust’s transfer agent no later than 4:00 p.m., Toronto time, on the 15th day of the month in which the redemption notice will be processed or, if such day is not a business day, on the immediately following day that is a business day. Any redemption notice received after such time will be processed in the next month. For each redemption notice, the Trust’s transfer agent will send a confirmation notice to the unitholder’s broker that such notice has been received and determined to be complete.

Physical gold bullion received by a unitholder as a result of a redemption of units will be delivered by armored transportation service carrier pursuant to delivery instructions provided by the unitholder. Physical gold bullion transported to an account established by the redeeming unitholder at an institution authorized to accept and hold London Good Delivery bars by certain armored transportation service carriers will likely retain its London Good Delivery status while in the custody of such institution; physical gold bullion delivered pursuant to a unitholder’s delivery instruction to a destination other than such an institution will no longer be deemed London Good Delivery once received by the unitholder. The armored transportation service carrier will receive physical gold bullion in connection with a redemption of units approximately 10 business days after the end of the month in which the redemption notice is processed. See “Redemption of Units—Transporting the Gold from the Mint to the Redeeming Unitholder.”  If you choose to receive physical gold bullion upon redemption of units, you will be responsible for expenses in connection with effecting the redemption and applicable delivery expenses, including the handling of the notice of redemption, the delivery of the physical gold bullion for units that are being redeemed and the applicable gold storage in-and-out fees. See “Redemption of Units—Redemptions for Physical Gold Bullion.”

For the full prospectus click: HERE

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