DAK,
I have been reading the GLD prospectus here:
sec.gov
By the way, the physical gold will be stored in London:
Custody of the Trust's Gold
Custody of the gold bullion deposited with and held by the Trust will be provided by the Custodian at its London, England vaults, by subcustodians selected by the Custodian and by others acting on behalf of the subcustodians. The Custodian is a market maker, clearer and approved weigher under the rules of the LBMA.
EDIT: Fine, as long as the UK never confiscates American's gold. <vbg> Also, no insurance:
The Trust may not have adequate sources of recovery if its gold is lost, damaged, stolen or destroyed and recovery may be limited, even in the event of fraud, to the market value of the gold at the time the fraud is discovered.
Shareholders' recourse against the Trust, the Trustee and the Sponsor, under New York law, the Custodian, under English law, and any subcustodians under the law governing their custody operations is limited. The Trust will not insure its gold. The Custodian will maintain insurance with regard to its business on such terms and conditions as it considers appropriate. The Trust will not be a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. Therefore, Shareholders cannot be assured that the Custodian will maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the Trust.
EDIT: I noticed this section. I was wondering why short sales would be necessary? Short sales:
Plan of Distribution
The Marketing Agent will assist the Sponsor in (1) developing a marketing plan for the Trust on an ongoing basis, (2) prepare marketing materials regarding the Shares, including the content on the Trust's website, (3) executing the marketing plan for the Trust, (4) incorporating gold into its exchange-traded fund research, and (5) licensing the "streetTRACKS®" trademark. Fees will be paid to the Marketing Agent by the Trustee from the assets of the Trust as compensation for services preformed pursuant to the Marketing Agent Agreement.
The Sponsor has agreed to indemnify the Purchaser, the Marketing Agent and the Authorized Participants against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the Purchaser, the Marketing Agent and the Authorized Participants may be required to make in respect of those liabilities. The Trustee has agreed to reimburse the Purchaser, the Marketing Agent and the Authorized Participants, solely from and to the extent of the Trust's assets, for indemnification and contribution amounts due from the Sponsor in respect of such liabilities to the extent the Sponsor has not paid such amounts when due. See "Risk Factors — The Trust's obligation to reimburse the Purchaser, the Marketing Agent and the Authorized Participants for certain liabilities . . ." In addition, the WGC has agreed to indemnify the Purchaser and the Marketing Agent against certain liabilities.
In connection with this offering, the Purchaser may engage in activities that stabilize, maintain or otherwise affect the price of the Shares, including:
• stabilizing transactions;
• short sales; and
• purchases to cover positions created by short sales.
Stabilizing transactions consist of bids or purchases for the purpose of preventing or retarding a decline in the market price of the Shares while this offering is in progress. These transactions may also include making short sales of Shares, which involves the sale by the Purchaser of a greater number of Shares than they are required to purchase in this offering, and purchasing Shares on the open market to cover positions created by short sales.
<EOM>
David |
