PHYSICAL GOLD FUND SP

a segregated portfolio of Physical Hard Assets Fund SPC

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Supplemental Offering Memorandum & Offering Memorandum

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[email protected]

www.physicalgoldfund.com

A UNIQUE APPROACH PHYSICAL GOLD FUND SP allows an investor to own a share of fully unencumbered physical gold held by the Fund. Investors may take delivery of gold at any time. Gold is vaulted outside of the banking system providing the ultimate level of protection versus systemic risk in financial assets. KEY ATTRIBUTES The Fund's assets are isolated from systemic risk and vaulted with private (non-bank) institutional Good Delivery vaulting providers. This assures that the Fund retains the highest options for liquidity yet protects the Fund's assets from loss in the event of bank failures. The Fund leverages its direct relationships with the largest Swiss Good Delivery refineries in the world to ensure a supply of gold as well as providing access to a global pool of liquidity. Shares of the Fund are redeemable not only for cash but for physical gold as well. All of the Fund's physical gold assets are insured to full market value at all points of acquisition, transport, vaulting, and sale and at all times are held within the Good Delivery Chain of Integrity. STRATEGIC ADVANTAGES OF PHYSICAL GOLD FUND OVER OTHER GOLD ETFs AND FUNDS Some of the largest Gold ETFs and fund products today lack the stringent controls and advantages PHYSICAL GOLD FUND has emplaced to safeguard investors and the Fund's physical assets versus various risks. Redemption in Kind: Shares of the Fund may be converted into the underlying asset through the Precious Metals Agent. PHYSICAL GOLD FUND provides excellent liquidity as a result of bypassing commodity paper markets as well as bullion banks and buying and selling precious metals directly through Swiss LBMA Certified Refineries at the core of the industry. Physical gold bars held by PHYSICAL GOLD FUND are stored in vaults constructed, owned, and managed by a globally recognised top-tier security transport and vaulting company. By vaulting assets outside of bank vaults, PHYSICAL GOLD FUND reduces exposure to any risk that might be experienced by investors holding metal in a bank that fails.

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All vaulted physical gold is insured to full market value by a Lloyds of London underwriter.

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PHYSICAL GOLD FUND will not accept a promise of precious metals in the form of encumbered metal, unallocated bars, leases, swaps or futures contracts in lieu of actual physical metal bars. PHYSICAL GOLD FUND is the only fund in the industry to have taken proactive measures against confiscation of metals by a government entity. Please contact us for more details. Phone Contact by Region Asia/Hong Kong: +852.300.85632 - Europe/London: +44.2085840063 North America/New York: +1.347.471.1952 - Latin America/Panama: +507.282.6602 [email protected] www.physicalgoldfund.com

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SUPPLEMENTAL OFFERING MEMORANDUM

1

PHYSICAL HARD ASSETS FUND SPC

1

IMPORTANT INFORMATION

2

THIRD PARTY SERVICE PROVIDERS, SUPPLIERS, AND OPERATIONAL TERMINOLOGY

3

1

INVESTMENT OVERVIEW 1.1 INVESTMENT RATIONALE FOR INVESTING IN PHYSICAL GOLD BULLION 1.2 INVESTMENT STRATEGY 1.3 INVESTMENT POLICY 1.4 PORTFOLIO DIVERSIFICATION 1.5 INVESTMENT RESTRICTIONS

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GOLD BULLION CUSTODY PROCEDURES 2.1 GOOD DELIVERY 2.2 TRANSACTION 2.3 PRECIOUS METALS AGENT 2.4 TRANSACTION STAGES AND PROCESSES 2.5 PRECIOUS METALS AGENT RESPONSIBILITY 2.6 INSTRUCTIONS AND ADVICE 2.7 INSURANCE 2.8 SECURITY VAULT ACCESS 2.9 DE-BAILMENT 2.10 ENGAGEMENT OF BULLION VERIFICATION AUDITOR 2.11 PAYMENT FLOWS AND BANKING 2.12 BULLION CUSTODY ORGANIZATIONAL CHART 2.13 BULLION SUBSCRIPTION AND TRANSACTION FLOW 2.14 BULLION BAILMENT PROCESS 2.15 BULLION ACQUISITION AND CUSTODY PERFORMANCE AGREEMENTS

9 9 9 9 9 10 10 11 12 12 13 13 14 15 16

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GOLD MARKET SECTOR FUNDAMENTALS

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HUMAN RIGHTS AND ENVIRONMENTAL POLICY

25

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PORTFOLIO ADVISORY COMMITTEE 5.1 INVESTMENT ADVISOR

26 27

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METHODOLOGY FOR CALCULATION OF FUND NET ASSET VALUE 6.1 BASE CURRENCY OF THE FUND 6.2 VALUATION METHODOLOGY 6.3 SUSPENSION OF CALCULATION OF NAV

28 28 28 29

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SUBSCRIPTION OF PARTICIPATING SHARES 7.1 INITIAL SUBSCRIPTIONS AND INITIAL PRICE 7.2 SUBSEQUENT SUBSCRIPTIONS AND SUBSCRIPTION PRICE 7.3 SUBSCRIPTION PROCEDURE 7.4 MINIMUM INVESTMENT AND MINIMUM HOLDING

30 30 30 30 31

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5 5 7 8 8

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7.5 7.6 7.7 7.8 7.9

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ELIGIBLE INVESTORS INELIGIBLE APPLICANTS FORM OF PARTICIPATING SHARES SUSPENSION OF SUBSCRIPTIONS ANTI-MONEY LAUNDERING

31 32 32 32 32

REDEMPTION OF PARTICIPATING SHARES 8.1 REDEMPTION IN CASH 8.2 REDEMPTION DAYS 8.3 REDEMPTION PRICE 8.4 PROCEDURE 8.5 SETTLEMENT 8.6 DEFERRED REDEMPTIONS 8.7 SUSPENSION OF REDEMPTIONS 8.8 COMPULSORY REDEMPTIONS 8.9 REDEMPTION OF PARTICIPATING SHARES IN KIND 8.10 REDEMPTION IN KIND TYPE 8.11 REDEMPTION IN KIND VALUATION 8.12 REDEMPTION IN KIND APPLICATION 8.13 GOLD RELEASE AND/OR DELIVERY 8.14 RELEASE INTO SAFE CUSTODY 8.15 SECURE SHIPMENT AND DELIVERY INTO SAFE CUSTODY 8.16 REMITTANCE OF CASH BALANCE 8.17 REDEMPTION IN KIND GOLD BAR TYPES 8.18 REDEMPTION IN KIND GOLD BAR COSTS 8.19 CHANGES TO REDEMPTION IN KIND POLICY AND PROCEDURES 8.20 NON-APPROVAL OF REDEMPTION IN KIND AND REQUEST OF KNOW YOUR CLIENT INFORMATION 8.21 FORCE MAJEURE APPLYING TO REDEMPTION IN KIND

34 34 34 34 34 35 35 35 35 36 36 36 37 37 38 38 39 39 39 40

RISK PROFILE OF AN INVESTMENT IN THE FUND 9.1 GENERAL RISKS OF INVESTING 9.2 LACK OF PORTFOLIO DIVERSIFICATION 9.3 LIMITED TRANSFERABILITY AND LACK OF LIQUIDITY OF PARTICIPATING SHARES 9.4 EFFECT OF SUBSTANTIAL REDEMPTIONS 9.5 LEGAL STRUCTURE, DIRECTORS, AND AFFILIATES ENTITIES 9.6 NO VOTING RIGHTS 9.7 COMPULSORY REDEMPTIONS 9.8 CHANGES IN APPLICABLE LAW 9.9 TAXATION 9.10 INVESTMENT ADVISOR 9.11 SPECIFIC RISK FACTORS 9.12 MARKET RISK 9.13 NO GUARANTEED RETURN 9.14 BUSINESS AND PERFORMANCE RISKS 9.15 FEES AND INDEMNITIES 9.16 MARKET AND LIQUIDITY RISKS 9.17 SHORT SELLING AND MARKET MANIPULATION 9.18 CROSS CLASS LIABILITY

41 41 41

40 40

41 42 42 42 42 42 42 43 43 43 43 44 44 44 44 44

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FEES, EXPENSES, AND OTHER DETAILS 10.1 REPORTING 10.2 BASE CURRENCY

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LEGAL ADVISORS

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DIRECTORY

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OFFERING SUMMARY

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CONFIDENTIAL OFFERING MEMORANDUM

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PHYSICAL HARD ASSETS FUND SPC

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DIRECTORY

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IMPORTANT INFORMATION 2.1 INCORPORATION AND REGISTRATION IN THE CAYMAN ISLANDS 2.2 RELIANCE ON OFFERING MEMORANDUM AND ANY SUPPLEMENTAL OFFERING MEMORANDUM 2.3 CONFIDENTIALITY 2.4 RESTRICTIONS ON DISTRIBUTION 2.5 RISKS

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DEFINITIONS AND INTERPRETATION 3.1 DEFINITIONS 3.2 INTERPRETATION

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INVESTMENT OBJECTIVE, STRATEGY, GUIDELINES, RESTRICTIONS, ETC. 4.1 INVESTMENT OBJECTIVE 4.2 INVESTMENT STRATEGY 4.3 HOLDING OF INVESTMENTS 4.4 CURRENCY HEDGING POLICY 4.5 LEVERAGE POLICY 4.6 DISTRIBUTION/DIVIDEND POLICY 4.7 INVESTMENT RESTRICTIONS

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MANAGEMENT AND SERVICE PROVIDERS 5.1 DIRECTORS 5.2 INVESTMENT ADVISOR 5.3 ADMINISTRATOR 5.4 BANK(S) 5.5 AUDITORS 5.6 LEGAL COUNSEL 5.7 PERSHING LLC 5.8 OTHER AGENTS/ADVISORS

62 62 64 64 65 65 65 66 66

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SHARE CAPITAL 6.1 COMPANY AUTHORISED SHARE CAPITAL 6.2 PARTICIPATING SHARES 6.3 VOTING SHARES

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SUBSCRIPTION OF SHARES 7.1 NUMBER OF PARTICIPATING SHARES INITIALLY AVAILABLE 7.2 INITIAL SUBSCRIPTIONS AND INITIAL PRICE 7.3 SUBSEQUENT SUBSCRIPTIONS AND SUBSCRIPTION PRICE 7.4 SUBSCRIPTION PROCEDURE 7.5 MINIMUM INVESTMENT AND MINIMUM HOLDING 7.6 ELIGIBLE INVESTORS 7.7 INELIGIBLE APPLICANTS 7.8 FORM OF SHARES 7.9 SUSPENSION OF SUBSCRIPTIONS 7.10 ANTI-MONEY LAUNDERING

68 68 68 68 68 68 69 69 69 69 70

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REDEMPTION OF SHARES 8.1 GENERAL 8.2 REDEMPTION DAYS 8.3 REDEMPTION PRICE 8.4 PROCEDURE 8.5 SETTLEMENT 8.6 DEFERRED REDEMPTIONS 8.7 SUSPENSION OF REDEMPTIONS 8.8 COMPULSORY REDEMPTIONS

72 72 72 72 72 72 72 72 72

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RESTRICTIONS ON TRANSFER 9.1 GENERAL 9.2 PROCEDURE

73 73 73

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CALCULATION OF NET ASSET VALUE

74

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FEES AND EXPENSES 11.1 REMUNERATION OF DIRECTORS 11.2 ORGANISATIONAL/OPERATING COSTS AND EXPENSES 11.3 REDEMPTION FEES 11.4 OTHER FEES

75 75 75 75 75

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TAXATION 12.1 CAYMAN ISLANDS 12.2 SHAREHOLDER TAXATION 12.3 EUROPEAN UNION 12.4 FOREIGN ACCOUNT TAX COMPLIANCE ACT

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GENERAL INFORMATION 13.1 REPORTS AND FINANCIAL STATEMENTS 13.2 CONSTITUTIVE DOCUMENTS, LAWS, ETC. 13.3 MUTUAL FUND REGISTRATION 13.4 MISCELLANEOUS

79 79 79 79 79

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POTENTIAL CONFLICTS OF INTERESTS 14.1 VOTING SHARES AND DIRECTORS/AGENTS 14.2 NON-EXCLUSIVITY 14.3 NON-PUBLIC INFORMATION

80 80 80 80

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RISK FACTORS

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APPENDIX A - LBMA GOOD DELIVERY RULES

SUPPLEMENTAL OFFERING MEMORANDUM PHYS

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SUPPLEMENTAL OFFERING MEMORANDUM

PHYSICAL HARD ASSETS FUND SPC A MULTI SUB-FUND INVESTMENT COMPANY INCORPORATED IN THE CAYMAN ISLANDS AS A SEGREGATED PORTFOLIO COMPANY

PHYSICAL GOLD FUND SP

August 2015

This document is supplemental to the Offering Memorandum (as issued from time to time) and is in respect of a private offering of redeemable Participating Shares for the Physical Gold Fund SP (the ‘Fund’), a Segregated Portfolio of Physical Hard Assets Fund SPC (the ‘Company’). This Segregated Portfolio constitutes a sub-fund of the Company. This document does not relate to any other sub-fund of the Company. Prospective investors who are interested in any other sub-fund should obtain a copy of the relevant Supplemental Offering Memorandum from the Administrator. Please read this Supplemental Offering Memorandum together with the Offering Memorandum (as issued from time to time) before investing. They contain important information about the Company and the sub-fund to which this Supplemental Offering Memorandum relates. If you are in any doubt about the contents of this document or the Offering Memorandum (as issued from time to time), you should consult your stockbroker, bank manager, accountant, legal advisor or other independent professional advisor. This offering has not been underwritten or guaranteed by any institution or body. This Supplemental Offering Memorandum is restricted from general distribution and the Participating Shares shall not be offered to the public in the Cayman Islands. An investment in the Participating Shares of the Fund is suitable for the investors to whom such an investment does not represent a complete investment program and who understand and are capable of bearing the risks of such an investment including the ability to absorb a loss of some or all of their investment.

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SUPPLEMENTAL OFFERING MEMORANDUM IMPORTANT INFORMATION

IMPORTANT INFORMATION This Supplemental Offering Memorandum (‘SOM’) is issued in respect of non-voting, redeemable participating shares of the Fund, a Segregated Portfolio of the Company. Such Segregated Portfolio constitutes a sub-fund of the Company. This SOM must be read in conjunction with the Company’s Offering Memorandum as issued from time to time (‘Offering Memorandum’). The provisions of and definitions used in the Offering Memorandum are deemed to be incorporated into this SOM by reference. If there is any inconsistency between the provisions of the Offering Memorandum and this SOM, the provisions of this SOM shall prevail. This SOM together with the Offering Memorandum constitutes a listing document in respect of Participating Shares of Class A, B or I of Physical Gold Fund SP. Such Participating Shares were admitted to the Official List of the Cayman Islands Stock Exchange in December 2012. This listing document includes information given in compliance with the listing rules of the Cayman Islands Stock Exchange. Directors of the Fund collectively and individually accept full responsibility for the accuracy of the information contained in this listing document and confirm that, having made reasonable enquiry to the best of their knowledge and belief, there are no facts the omission of which would make any statement within this listing document misleading. The Cayman Islands Stock Exchange takes no responsibility for the contents of this document, makes no representations as to its accuracy or completeness, and expressly disclaims any liability whatsoever for any loss arising from or in reliance upon any part of this document. As at the date of this Offering Memorandum, no other classes of Participating Shares have been admitted to listing on the Cayman Islands Stock Exchange. The Participating Shares were admitted to the Official List of the Cayman Islands Stock Exchange in December 2012. This listing document includes information given in compliance with the listing rules of the Cayman Islands Stock Exchange. Members of the Board of Directors of the Company (the 'Directors') are the persons responsible for the information contained in this SOM. To the best knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this SOM is in accordance with the facts available to them and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. The Cayman Islands Stock Exchange takes no responsibility for the contents of this listing document, makes no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss arising from or in reliance upon any part of this document. The Directors do not anticipate that an active secondary market in the Participating Shares will develop. NEITHER THE PRINCIPAL OFFERING MEMORANDUM NOR THIS SUPPLEMENTAL OFFERING MEMORANDUM HAS BEEN OR WILL BE APPROVED BY ANY REGULATORY AUTHORITY IN ANY JURISDICTION (INCLUDING WITHOUT LIMITATION THE CAYMAN ISLANDS MONETARY AUTHORITY). NOTE ON FORWARD-LOOKING STATEMENTS This SOM and the information contained herein may contain statements about future events and expectations which can be characterized as forward-looking statements including in particular statements about companies, investment strategies, financial markets and economic and/or geo-political events. The use of the words “anticipate,” “assumption,” “estimate,” “expect,” “may,” “project,” “believe,” “in all likelihood,” and similar expressions are intended to identify future uncertainties. These forward-looking statements are based on certain assumptions and involve risks and uncertainties. Actual events are inherently difficult to predict and are likely to differ from those assumed. Although the Directors believe that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties, and the company cannot assure that estimated results or returns can be realised, that forward-looking statements will materialise, or that actual results or returns will not be materially different than those projected. Any statement containing forward-looking information speaks only as of the date on which it is made, and we undertake no duty to update any such statement to reflect events or circumstances after the date on which it is made.

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THIRD PARTY SERVICE PROVIDERS, SUPPLIERS, AND OPERATIONAL TERMINOLOGY

SUPPLEMENTAL OFFERING MEMORANDUM IMPORTANT INFORMATION

In this SOM, the following terminology shall apply in respect to operational procedures and third party service providers: a)

b) c) d) e) f) g) h)

i) j) k) l) m) n) o)

The Fund – Physical Gold Fund SP, a Segregated Portfolio of Physical Hard Assets Fund SPC registered in the Cayman Islands as outlined in THE PHYSICAL HARD ASSETS FUND SPC OFFERING MEMORANDUM and this PHYSICAL GOLD FUND SP SUPPLEMENTAL OFFERING MEMORANDUM. Investment Advisor – Vigilant Capital (Cayman) Limited, Cayman Islands, providing Investment Advice and Gold Market Analysis to the Fund. Fund Administrator – Trident Fund Services Cayman, providing the principal office and central administration services to the Fund. Cash Custodian and Paying Bank – CIBC FirstCaribbean International Bank ('CIBC Bank'), providing custodian paying agent and transfer agent services to the Fund. For the avoidance of doubt, CIBC Bank will provide services only in respect of the Fund’s cash assets. Fund Auditor – Ernst & Young Ltd., Cayman Islands, providing third party auditing of the Fund. Precious Metals Agent – AFE Custodial Company, Panama, precious metals agent to the Fund providing precious metals logistical services to the Fund. Bullion Verification Auditor – Grant Thornton, Zurich, providing independent site verification of gold bars being bailed into Security Vault. Security Vault and Transportation Company – A LMBA accredited security company, located in Switzerland and other approved jurisdictions, providing transportation of gold Good Delivery Bars from Refinery to Security Vault and long-term security vaulting of gold bars for the Fund. The Fund only stores with Security Vault and Transport Companies that are accredited members of the London Bullion Market Association. Approved Security Vault and Transport Companies have custody of the Fund’s physical gold bars for safe-keeping. Refinery – Any of the LBMA member accredited Good Delivery refineries providing supply, refinery, and delivery of gold Good Delivery Bars to the Fund as detailed in the SUPPLY AND DELIVERY AGREEMENT. Transaction – The adding of additional gold bars into the Fund’s holdings, or the liquidation of gold bars from the Fund’s holdings. Good Delivery – Describing the system of banks, refineries, security transport providers, and private vaulting arrangements comprised of accredited members of the LBMA. Good Delivery Bar – Gold bars that meet the LBMA as outlined in GOOD DELIVERY RULES FOR GOLD AND SILVER BARS (see Appendix A “Good Delivery Rules”). LBMA – London Bullion Market Association, the London-based trade association providing framework of industry standards and good practices in the dealing, refining, manufacturing, transporting, and storage of precious metals (see http://www.lbma.org.uk/membership). LBMA Member – A company involved in the supply chain of gold that is accredited and/or a member and/or a direct associate company of a member of the LBMA as outlined on the LBMA website. Performance Contracts – Several agreements exist to provide the framework for the Fund’s bullion custodial operations called Performance Contracts. These Performance Contracts include: • •

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Precious Metals Operational Agreement between the Fund and the Precious Metals Agent which defines the custodial operational procedures of the Fund and the Precious Metals Agent’s responsibilities to the Fund in the execution of its duties. Supply and Delivery Agreement between the Precious Metals Agent acting on behalf of the Fund and the Refinery for the acquisition and delivery of Good Delivery Bars. Storage Agreement between the Precious Metals Agent acting on behalf of the Fund and the Security Vault and Transportation Company for the secure transport and storage vaulting of Good Delivery Bars allocated and held exclusively for the benefit of the Fund defining the terms of storage including Bailment and De-bailment procedures, transportation, insurance, and annual site auditing.

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p) q) r) s) t) u) v) w) x)

Letter of Engagement between the Fund and the onsite Bullion Verification Auditor for the onsite verification of gold bars being bailed or de-bailed into the Secure Vault on behalf of the Fund.

Bullion – Gold that has been refined to a purity of 999.5 parts per thousand or better pure. Chain of Integrity – The framework of custody established to ensure an audit trail of custody for the Fund’s physical gold assets at all times. This framework also includes various third party auditors and regulators. Bailment Batch – A batch of a minimum of one up to thirty Good Delivery Bars that are transported from the refinery to the security vault and bailed into long-term high security storage. Pallet – A pallet of up to thirty Good Delivery Bars which makes up a “Bailment Batch.” Pallets are used to easily transport and segregate metal and assist in location of specific bars for sight verification purposes. Redemption In Kind – An option where a Shareholder may elect to redeem their Participating Shares of the Fund in the form of physical gold bars versus in cash. Fully Insured – Gold assets of the Fund are insured at all times for the full market value of the metal including while in transit from refinery to vault, and vice versa. Hallmark – A trademark that is unique to the refinery that produces the gold bar, also known as the “Assay Stamp” of the refiner, used to identify which LBMA certified refinery produced the gold bar. Shareholder – Holder of Participating Shares. LBMA Gold Price – (formally London Gold Fix) The LBMA Gold Price Auction takes place twice daily by ICE Benchmark Administration (IBA) at 10:30 AM and 3:00 PM GMT with the price set in US dollars per fine troy ounce. Once published, it provides an international benchmark for the price of gold.

Throughout the use of this document, the term “shall” is to be construed as imperative. Capitalised words not defined in this document, shall be given the same meaning as ascribed to them in the Offering Memorandum as issued and supplemented from time to time. For more information on the Fund’s services providers, see Section 12 "Directory."

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SUPPLEMENTAL OFFERING MEMORANDUM IMPORTANT INFORMATION

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SUPPLEMENTAL OFFERING MEMORANDUM INVESTMENT OVERVIEW

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INVESTMENT OVERVIEW

The Fund was created to invest and hold substantially all of its assets in unencumbered physical gold in the form of allocated gold bullion bars meeting the standards of the Good Delivery form factor as set forth by the LBMA and vaulted in secure LBMA-approved third party vaults. The Fund’s gold bullion is subject to periodic inspections and annual audits. The LBMA-approved security vaulting company (‘SVC’) is the Fund’s counter-party; there is no financial institution standing between the shareholder and the gold. The Fund’s investment objective is to provide a more secure, transparent, efficient, and convenient vehicle for investors interested in owning and holding physical gold. Many potential gold investors are unwilling or unable to directly invest in physical gold due to logistical constraints such as transaction management, handling, security, storage, insurance and other costs, risk of theft or legal confiscation, and other material inconveniences that are associated with a direct investment in physical gold bullion. The Fund’s principle purpose is to provide protection and a hedge against inflation and geopolitical and economic instability to its investors by investing in a highly liquid, tangible physical asset. The Fund’s investment strategy is to invest in long-term holdings of unencumbered, fully allocated physical gold bullion bars. In terms of its physical gold holdings, this provides the Fund with a high level of liquidity, as gold has a global market which trades almost 24 hours a day, and low levels of counterparty risk compared to other funds or investments which may have unallocated or derivative positions in gold. The Fund does not speculate on the short-term price movements in gold. The Fund will generally not pay a dividend on the Participating Shares and investors should not expect to receive any income from their investment. It is expected that the performance of the Fund’s share classes will track the spot gold price exactly less the relevant total annual expenses as set out in the Offering Summary. 1.1

INVESTMENT RATIONALE FOR INVESTING IN PHYSICAL GOLD BULLION

Historically gold ownership has helped protect against inflation, deflation, stagflation, systemic failure, financial collapse, currency devaluation, and geo-political uncertainty. For more information please refer to Section 1.2 "Investment Strategy." 1.2

INVESTMENT STRATEGY

The investment strategy of the Fund is to provide a secure, transparent, convenient, low-cost, low-risk alternative for investors seeking the benefits of capital preservation, appreciation, portfolio diversification into highly liquid tangible assets, and hedging against inflation or deflation that physical gold bullion may offer. The Fund’s investment objective is to maximize returns of the Fund’s assets through low operational and custody costs and provide Fund investors with high levels of transparency and low levels of counterparty risk in its gold operations and custody when compared to other gold funds in the marketplace. Lower costs of bullion acquisition and holding can be achieved through economies of scale, as the Fund is able to purchase gold bars in Good Delivery form directly from the Refinery. Good Delivery bars have lower refining and handling costs compared to bars in other forms. The Fund invests in physical gold bullion held exclusively in the form of Good Delivery Bars manufactured by accredited member refineries of the LBMA. The amounts raised by the sale of Participating Shares to investors are used to purchase physical gold bullion bars meeting Good Delivery Bar specifications minus a small percentage for operating expenses. The physical gold bullion of the Fund is stored in approved secure vaults that are provided and operated by non-bank Good Delivery members in Switzerland and is at all times insured to the full 100% of current market value. Additional vault locations may be selected by the Directors from time to time in other jurisdictions to provide additional vaulting space and geopolitical diversification provided that any such vault is operated by a non-bank Good Delivery member and will meet all standards of security and safety as to allow all physical gold assets of the Fund to be insured at all times to its full market value regardless of the change in price per ounce of the gold. Further, the Fund has taken reasonable measures to legally protect the physical gold bullion assets of the Fund from the threat of government or legal confiscation.

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SUPPLEMENTAL OFFERING MEMORANDUM INVESTMENT OVERVIEW

The main strategy of the Fund is to provide a regulated, transparent means of investing in allocated physical gold bullion that offers superior safety versus systemic risk in the global marketplace. The Fund strategy also provides a safe and convenient investment alternative for investors interested in ownership of physical gold bullion bars without the inconvenience of having to buy, transport, store, protect, insure, and resell physical gold bars. The Fund invests exclusively in unencumbered gold bars fully segregated and allocated to the sole and exclusive benefit of the Fund. Gold bars owned by the Fund are held in sealed containers separated from the holdings of other institutions. Containers once closed are sealed with numbered and tamperproof seals. The nature of the custodial arrangements of the Fund may provide superior protection versus other gold funds on the market in regards to safekeeping of the Fund’s allocated physical gold bullion for several reasons including but not limited to: 1.

2.

The Fund shall not speculate or trade on short-term price movements in the gold market. The Fund shall not invest in gold certificates and other forms of paper gold or financial instruments such as futures, options or derivatives that may represent gold. The investment strategy of the Fund may provide its Shareholder with the following: a) b)

c)

d)

A convenient way to own allocated physical gold bullion as the Fund provides investors the advantages of direct access to the physical gold bullion market without the logistical inconvenience of direct investment, storage, protection, insurance, and resale of the bullion. High liquidity as Participating Shares may be bought or sold on a weekly basis according to the terms contained within this issuing document. In addition, a daily Net Asset Valuation (‘NAV’) may be requested by the Fund as deemed appropriate which may provide an option for a faster liquidation window. Lower levels of counter-party-risk in gold bullion holdings as the Fund does not invest in gold certificates and other forms of paper gold or financial instruments such as futures, options or derivatives that may represent gold, and all gold bullion owned by the Fund is stored in approved Good Delivery security vaults that are not financial institutions involved in gold market speculation nor does the Fund use third party Sub-Custodians for the custody of its bullion holdings. Full exposure by the Fund to physical gold bullion where the Fund invests only into physical gold bullion except for cash held by the Fund to meet Fund expenses and Share Redemptions. Highest level of transparency in gold bullion operations which requires a sight audit of every gold bar purchased by the Fund by a third party Bullion Verification Auditor. Such audits are required for each and every purchase of Good Delivery Bars and are provided to the Fund Auditor for cross reference and verification. Every Good Delivery Bar must match the weight list provided by the refinery, in particular the refinery which fabricated the bar, the year of manufacture, the unique serial number, and the fine weight of gold in troy ounces to three decimal places. The bar lists of the Fund’s allocated Good Delivery Bars are made available to all Shareholders upon request.

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Security Vault and Transport Companies used by the Fund do not participate as a market maker nor engage in speculation in gold in any market therefore alleviating the risk of a conflict of interest between itself and the Fund’s physical gold that is inherent in the structure of many gold funds today that use banks or quasi-governmental vaulting solutions for the custody of their gold. Unlike some other gold funds which have physical gold assets held with banks or quasigovernmental institutions, physical gold assets of the Fund are vaulted in secure LBMA-approved third party vaults, which may provide additional protection from systemic risk to the physical gold assets of the Fund in the event of a systemic banking, credit or sovereign crisis.

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f)

SUPPLEMENTAL OFFERING MEMORANDUM INVESTMENT OVERVIEW

g)

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INVESTMENT POLICY

The investment policy of the Fund is to acquire physical gold bullion exclusively in the form of bars that meet the standards of ‘Good Delivery’ produced exclusively by member refineries of the London Bullion Market Association (see http://www.lbma.org.uk/membership) and meeting the strict criteria and specifications of the Good Delivery rules for gold bars as determined by the LBMA (see Appendix A "Good Delivery Rules"). The operational procedures of the Fund are covered under Gold Bullion Custody Procedures (see Section 2 "Gold Bullion Custody Procedures") and explicitly specified through the terms of performance agreements between the Fund, the Precious Metals Agent, and other third party Good Delivery suppliers (see Section 2.6 "Instructions and Advice"). The Fund shall adhere to the following requirements in regards to its bullion custodial arrangements: • • • •

•

•

At no time shall the Fund invest in futures, options, derivatives, debt instruments or gold certificates, nor “paper gold” in any form. All vaulted and allocated physical gold bullion shall be held exclusively in the form of Good Delivery Bars manufactured by member refineries of the LBMA. All physical gold bullion shall be stored in approved secure vaults that are provided for Good Delivery members including but not limited to vaults in Zurich, Switzerland, and other approved international locations as may be decided by the Directors. All physical gold bullion exclusively in the form of Good Delivery Bars shall be 'bailed' into long-term storage where each individual bar shall be visually inspected and verified by an external third party Bullion Verification Auditor together with a representative of The Precious Metals Agent to confirm bar numbers agree with refinery’s weight lists. Certified documents verifying all aspects of the bullion bars sight inspection and weight lists match shall be provided to the Fund and the Fund Auditor, and certified bar and weight lists shall be provided to Shareholders upon request. All physical gold bullion in the form of Good Delivery Bars shall be physically segregated from other gold bars which may be held by the Security Vault Company for other customers, and allocated for the sole and exclusive benefit of the Fund and shall not be sold, allocated or transferred to other parties other than by the proper instructions of the Fund in accordance with the provisions of this SOM, nor shall such bars be encumbered by any third party in any way. All Good Delivery Bars in vault storage shall be inspected and sight verified on an annual basis. This annual inspection shall include the onsite visual verification of gold bars to verify that all physical gold bar unique serial numbers, hallmarks, and fine weight in troy ounces agree with the original bailment records. This onsite verification shall be conducted by the Bullion Verification Auditor along with a representative of the Fund and the Precious Metals Agent (see Section 2 "Gold Bullion Custody Procedures"). Certified documents verifying the results of the inspection concurring with original bailment records shall be provided to the Fund Auditor and the Fund.

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Lower costs of bullion holding where the Fund expects that the costs of buying and selling Participating Shares will be lower than the costs associated with buying and selling physical gold in other forms. Option for Physical Redemption - Flexibility in redemption of Participating Shares where Fund Shareholders have the option to redeem Participating Shares for cash according to the terms of Redemption of Participating Shares in Cash outlined within this SOM; or where Fund Share holders have the option to redeem Participating Shares for the underlying physical gold bars according to Redemption of Participating Shares in Kind outlined within this SOM.

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7

PORTFOLIO DIVERSIFICATION

According to the investment objectives, strategy, and policy as covered in Section 1 "Investment Overview," Section 1.1 "Investor Rationale for Investing in Physical Gold Bullion," Section 1.2 "Investment Strategy," and Section 1.3 "Investment Policy," the Fund will allocate 100% of the Fund’s assets into physical gold bullion other than sufficient cash required to meet the Fund’s operational costs and fees. Under the Fund’s investment policy, the Fund’s portfolio does not provide any asset diversification. Investors investing in Participating Shares must understand the risks associated with investing in a non-diversified Fund (see Section 9 "Risk Profile of an Investment in the Fund"). 1.5

INVESTMENT RESTRICTIONS

In accordance with the investment objectives, strategy, and policy as covered in Section 1 "Investment Overview," Section 1.1 "Investor Rationale for Investing in Physical Gold Bullion," Section 1.2 "Investment Strategy," and Section 1.3 "Investment Policy," the Fund will allocate 100% of the Fund’s assets into physical gold bullion other than sufficient cash required to meet the Fund’s operational costs and fees. According to the investment policy, the Fund is expressly restricted from and shall not at any time invest in diversified investment companies, private equity companies, investments related to securities, bonds or equities or common or preferred stock, or unlisted corporate bonds issued with detachable warrants or gold certificates and other forms of paper gold or financial instruments such as futures, options, or derivatives that may represent gold. The Fund shall not invest by means of loans, convertible bonds, participating loans, and other forms of debt instruments. The Fund shall not borrow or enter into loans or debt instruments of any type. The Fund shall not speculate or trade on short-term price movements in the gold market.

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SUPPLEMENTAL OFFERING MEMORANDUM INVESTMENT OVERVIEW

1.4

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2

GOLD BULLION CUSTODY PROCEDURES

The gold bullion custody procedures of the Fund have been specifically developed to provide high levels of transparency, strictest governance, and low levels of counterparty risk in the Fund’s gold bullion custody operations. The gold bullion custody operational procedures outlined in this section of this SOM are further detailed in the Precious Metals Agreement between the Fund and the Precious Metals Agent. To deliver on its objective, the Fund is required to utilize the services of gold suppliers and specialist bullion service providers. Under these procedures, the Fund engages a Precious Metals Agent to provide certain logistical and custodian agent services to the Fund in accordance with these custody procedures and to contract, engage, coordinate, and utilize the services of gold suppliers and services providers on behalf of the Fund. In the event of any difference between this SOM and the Performance Contracts, the provisions within the Performance Contracts shall prevail. Certain procedures, terms, and definitions apply to the Fund’s gold bullion custody operations whereas: 2.1

GOOD DELIVERY

Primarily the Fund is required to acquire and hold physical gold exclusively in the form of gold bars that meet the standards of ‘Good Delivery’ which are gold bars produced exclusively by member refineries of the LBMA and meeting the strict criteria and specifications of The Good Delivery Rules for Gold and Silver Bars as determined by the LBMA and outlined in its ‘Good Delivery Rules for Gold and Silver Bars’ (see Appendix A “Good Delivery Rules”). 2.2

TRANSACTION

From time to time the Fund requires additional gold bars to be added to the Fund’s holdings in the form of Good Delivery Bars (a ‘Transaction’), and whereas it is understood that each individual Transaction is comprised of several stages and processes from the commencement to completion of that Transaction as further detailed in Section 2.4 "Transaction Stages and Processes." 2.3

PRECIOUS METALS AGENT

The Precious Metals Agent and the Company, on behalf of the Fund, have entered into the Precious Metals Agent Operating Agreement dated August 7, 2012, pursuant to which the Precious Metals Agent will execute all Transactions on behalf of the Fund, and further the Fund grants permission to the Precious Metals Agent to contract, engage, coordinate, and utilize the services of several gold suppliers on behalf of the Fund provided that all suppliers engaged by the Precious Metals Agent that are involved directly in the refining, manufacturing, transportation, and vaulting of the physical gold are current members or direct associate companies of members of the LBMA as listed on the LBMA website (see http://www.lbma.org.uk/membership), and further these suppliers meet the Fund’s expectations on Human Rights and environmental practices as set out within this SOM. The Precious Metals Agent is entitled to receive certain fees negotiated and agreed upon between the Investment Advisor and the Precious Metals Agent from time to time for its activities under the Precious Metals Operating Agreement. The Investment Advisor will make such payments out of the proceeds it receives from the Subscription Fees. The Precious Metals Operating Agreement may be terminated under the terms thereof. 2.4

TRANSACTION STAGES AND PROCESSES

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An entire Transaction from commencement to completion includes each of the following stages:

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a)

ACQUISITION - Acquisition of gold in the physical precious metals market, where this acquisition is transacted at the prevailing spot price at the time and day of the acquisition OR at the PM LBMA Gold Price on the day of the acquisition, with an LBMA-member Refinery for fabrication into physical gold bars.

9

SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

b)

c)

d)

e)

2.5

PRECIOUS METALS AGENT RESPONSIBILITY

Under its agreement with the Fund, the Precious Metals Agent is responsible for the coordination and smooth execution of Transactions according to these Gold Bullion Custody Procedures and has certain obligations to the Fund, its Custodian Bank, Fund, and Fund Administrator, and whereas there are numerous suppliers and other third parties involved in a single Transaction, all instructions or advice given between all parties and suppliers is done in writing, and where verbal instructions or advice have been given, follow-up confirmation is provided in writing between all relevant parties, where ‘in writing’ may include email, attachment to email, secure upload, fax or letter. 2.6

INSTRUCTIONS AND ADVICE

Each Transaction from commencement to completion includes each of the following instructions and advice given in writing: a) b) c)

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d)

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REFINING - Gold is manufactured by the refinery into gold bars that meet the standards of ‘Good Delivery’ as determined by the LBMA and outlined in its ‘Good Delivery Rules for Gold Bars’ (see Appendix A “Good Delivery Rules”), and these Good Delivery Bars are consolidated into ‘Bailment Batches’ with a refiner’s bar list stating bar numbers and fine ounces of gold contained in each bar. TRANSPORTATION –When a Bailment Batch is reached, the Bailment Batch is transported by armored secure transport by an LBMA member or direct associate company of an LBMA-member Security Vault and Transport Company from the refinery to a Security Vault operated by an LBMA member or a direct associate company of an LBMA member. BAILMENT - Once the Bailment Batch has been transferred to the Security Vault, the gold bars are ‘bailed’ into long-term safe storage (‘Bailment’), whereas the Bailment process requires the attendance of 1) a representative of the Precious Metals Agent on behalf of the Fund 2) a representative of the Security Vault and Transportation Company and 3) an independent auditor from an internationally recognised accounting and auditing firm who will act as the Bullion Verification Auditor (collectively called ‘Bailment Attendees’), where each one of these three Bailment Attendees individually sees each bar and cross references the bar by its individual bar number to the refiner’s bar list, and each bar placed onto a Bailment Pallet, where when all thirty gold bars have been seen, referenced to the refiner’s bar list, placed on the Bailment Pallet, the Bailment Pallet number is recorded by the Bailment Attendees, pallet closed and sealed, and seal numbers are recorded by the Bailment Attendees. CERTIFICATION - Upon completion of a Bailment, Certification of Bailment is made including Certificate of Storage issued by the Security Vault and Transportation Company, Independent Verification Report issued by the Bullion Verification Auditor, and Bailment Summary Report issued by the Precious Metals Agent.

e)

The Fund Administrator informs the Precious Metals Agent of the new Transaction and provides relevant details including the total Transaction value and Transaction type. The Precious Metals Agent advises the Refinery of its gold purchase instructions. The Refinery provides the Precious Metals Agent with daily confirmation of gold purchase Transactions which includes total ounces purchased, price per ounce paid, and total purchase value. Daily confirmations from the Refinery are provided by PDF attachment to email with carbon copy directly from the Refinery to the Precious Metals Agent, Fund, and Fund Administrator. The Precious Metals Agent provides a detailed Transaction Summary Report to the Fund, and Fund Administrator which includes new gold in fine troy ounces added to the Fund holdings and allocation, if any, to the Fund’s cash holdings. The Precious Metals Agent advises the Fund, and Fund Administrator of the payment instructions to be made directly from the Cash Custodian and Paying Bank to the Refinery.

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f)

SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

g) h)

i) j) k) l) m) n) o) p)

q)

r)

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INSURANCE

All gold shipments between the Refinery and the Security Vault, as well as gold assets held in vaults, are insured to a full 100% of its current daily market value by a Lloyds market member insurer. The Precious Metals Agent provides to the Fund and Fund Administrator on an annual basis an updated Evidence of Insurance from the insurer demonstrating that the gold assets vaulted on behalf of the Fund are insured. Copy of Evidence of Insurance is available to Shareholders upon request. Insurance is provided by Lloyds of London. All gold stored in with the Security Vault Company is insured by Marsh Ltd., Tower Place, London. Gold held at the refinery is insured by Allianz Global Corporate & Specialty, Todistrasse 61, 8002 Zurich. Further, the Fund has taken reasonable measures to legally protect the physical gold bullion assets of the Fund from the threat of government or legal confiscation.

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2.7

The Precious Metals Agent provides the Fund and Fund Administrator with a consolidated Gold Holdings Statement Report (‘Fund Holdings Statement’) on a weekly basis. From time to time, the Precious Metals Agent authorizes the Refinery to refine and manufacture gold Good Delivery Bars to be transported and vaulted in accordance with the Fund’s bullion custody requirements. The Refinery advises the Precious Metals Agent of completed Bailment Batches and provides the Precious Metals Agent with a copy of the Refinery Bar List. The original Refinery Bar List is provided with the Bailment Batch and further the Refinery Bar List is provided by PDF attachment to email with carbon copy directly from the Refinery to the Fund and Fund Administrator. The Precious Metals Agent authorizes the Security Vault and Transportation Company to provide armored transport of the Bailment Batch from the refinery to the Security Vault. The Precious Metals Agent authorizes the Refinery to release the Bailment Batch to the Security Vault and Transportation Company to transport to the Security Vault. The Precious Metals Agent coordinates Bailment with the Fund, Bullion Verification Auditor, and the Security Vault and Transportation Company. The Precious Metals Agent authorizes Vault access for Bailment with the Security Vault and Transportation Company. The Fund counter-authorizes Vault access for Bailment with the Security Vault and Transportation Company. The Precious Metals Agent advises the Bullion Verification Auditor of the Bailment and instructs them to be present at that Bailment. The Bailment is carried out in accordance with the Bailment Procedures detailed in Section 2.4.d "Bailment." At the completion of Bailment, the Security Vault and Transportation Company issues a Certificate of Storage which will include a full list of all bar numbers and fine ounces of gold of each bar and include the Bailment Pallet number signed by the Bullion Verification Auditor, an officer from the Security Vault and Transportation Company, and an officer from the Precious Metals Agent. This Certificate of Storage will be issued in original form to the Fund with copies made available to the Fund Administrator, Precious Metals Agent, and Fund Auditor At the completion of Bailment, the independent Bullion Verification Auditor will issue an Independent Verification Report which will include a full list of all bar numbers and fine ounces of gold of each bar signed by the Bullion Verification Auditor in attendance at the Bailment. This Independent Verification Report will be issued in original form to the Fund with copies made available to the Fund Administrator and Precious Metals Agent. At the completion of Bailment, the Precious Metals Agent will issue a Bailment Summary Report which will include full details of the Bailment and associated Transaction signed by the representative of the Precious Metals Agent in attendance at the Bailment. This Report is issued in original form to the Fund with copies made to the Precious Metals Agent, Fund Administrator, and Fund Auditor.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2.8

SECURITY VAULT ACCESS

No access can be made to the Security Vault without authorisation instructions being made to the Security Vault and Transportation Company by the Precious Metals Agent and concurrent instructions from the Fund, and further, all Security Vault access can only be made with the attendance of ALL Bailment Attendees as outlined in Section 2.4.d "Bailment." The Security Vault and Transportation Company are informed of the exact details of the Security Vault access prior to the Security Vault access being conducted, whereas exact details will include complete details of the Bailment or in the case of a de-bailment, the full details of the de-bailment as further detailed in Section 2.9 "De-Bailment." 2.9

DE-BAILMENT

As the Fund is required to meet redemptions of Participating Shares and Fund expenses and fees including bullion custody costs, it has a liquidity management policy as outlined within its Liquidity Plan and Policy. At times these redemptions, expenses, and fees may exceed the Fund’s current cash holdings, therefore the Fund may be required to access gold bars stored in the Security Vault for de-bailment and Refinery liquidation. In this event, the following procedures are carried out: a) b) c) d) e)

f)

g)

h)

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i)

The Fund informs the Precious Metals Agent and Fund Administrator of the De-bailment requirements and provides the Precious Metals Agent with De-Bailment instructions in writing. The Precious Metals Agent authorizes Security Vault access for the De-bailment with the Security Vault and Transportation Company together with concurrent De-Bailment instructions from the Fund. The Security Vault and Transportation Company allows the Vault access only if it has received De-bailment instructions from both the Precious Metals Agent and concurrent instructions from the Fund. The Precious Metals Agent advises the Bullion Verification Auditor of the De-bailment and instructs them to be present at the De-bailment. The De-bailment process requires the attendance of 1) a representative of the Precious Metals Agent, 2) a representative of the Security Vault and Transportation Company, and 3) a Bullion Verification Auditor from an internationally recognised accounting and auditing firm (collectively called ‘De-bailment Attendees’). At the de-bailment, predetermined pallet(s) are accessed for removal of certain predetermined gold bars, whereas these bars are removed and turned over to the Security Vault and Transportation Company for armoured secure transport to the refinery for liquidation. The removed bars are recorded by the de-bailment Attendees, per the De-bailment instructions after which the remaining bars on the Bailment Pallet are re-verified against the original Refiner’s Bar List by the de-bailment Attendees and the Bailment Pallet number is recorded. At the completion of De-bailment, the Security Vault and Transportation Company issues a new Certificate of Storage which includes a full list of all remaining bar numbers and fine ounces of gold of each bar on the Bailment Pallet and signed by the Bullion Verification Auditor, the officer from the Security Vault and Transportation Company, and an officer from the Precious Metals Agent. This Certificate of Storage is issued in original form to the Fund, Precious Metals Agent, and Fund Administrator. At the completion of De-bailment, the Bullion Verification Auditor issues an Independent Verification Report which includes a full list of all bar numbers removed during the De-bailment and an updated list of all remaining bars and fine ounces of gold of each bar and the Bailment Pallet number signed by the Bullion Verification Auditor in attendance at the bailment. This Independent Verification Report is issued in original form to the Fund with copies made available to the Precious Metals Agent, and Fund Administrator.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

j)

k) l) 2.10

ENGAGEMENT OF BULLION VERIFICATION AUDITOR

The Precious Metals Agent engages the services of a Bullion Verification Auditor from an internationally recognised accounting and auditing firm on behalf of the Fund. This Bullion Verification Auditor is required to have a representative in attendance at every Secure Vault access for Bailment and De-bailment. The Bullion Verification Auditor is required to provide independent verification at the Security Vault which includes individually sighting each gold bar, indentifying its bar number and Refiner’s hallmark, and cross referencing each bar by number to the Refiner’s bar list, and further sighting each bar being placed onto a Bailment Pallet, where once all bars have been sited, referenced to the Refiner’s bar list, and placed on the Bailment Pallet, recording the Bailment Pallet number. At the completion of each Bailment or De-bailment, the Bullion Verification Auditor is required to issue an Independent Verification Report which includes a full list of all bar numbers and fine ounces of gold of each bar and include the Bailment Pallet number signed by the Bullion Verification Auditor in attendance at the bailment. This Independent Verification Report is issued in original form to the Fund with copies made to the Precious Metals Agent, Fund Administrator, and Fund Auditor 2.11

PAYMENT FLOWS AND BANKING

The Fund utilizes the services of a Custodian and Paying Agent Bank. The Custodian Bank provides payment services of all payments directly to the Fund’s suppliers on behalf of the Fund and the Precious Metals Agent. These payments include the settlement of gold purchases from the Refinery, custodian costs, and costs incurred in the day-to-day running of the Fund including: a)

b) c)

d)

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e) L GOLD FU ICA

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At the completion of De-bailment, the Precious Metals Agent issues a De-bailment Summary Report which includes full details of the gold bars removed and all remaining gold bars signed by the representative of the Precious Metals Agent in attendance at the De-bailment. This Report is issued in original form to the Fund with copies made to the Precious Metals Agent, Fund Administrator, and Fund Auditor. Upon receiving the bars into the Refinery, the Refinery liquidates the total fine ounces of gold at the prevailing gold spot price at the time and day of the liquidation OR at the LBMA PM Gold Price on the day of the liquidation. The Refinery remits settlement funds directly to the Cash Custodian and Paying Bank.

Subscription funds entering the Fund are used in the purchase of physical gold on behalf of the Fund as further detailed in Section 2.4 "Transaction Stages and Processes" and Section 2.6 "Instructions and Advice.” Gold settlement payments are made directly from the Custodian Bank to the Refinery upon instruction from the Precious Metals Agent and proof of daily transactions from Refinery (see Section 2.6.c "Instructions and Advice"). The Investment Advisor is paid certain fees in accordance with its agreement with the Fund. These fees are invoiced to the Fund and paid directly from the Custodian Bank on a monthly basis. The Investment Advisor incurs certain fees and costs on a transactional basis as outlined within this SOM. These fees are invoiced to the Fund and paid directly from the Custodial Bank to the Investment Advisor at the completion of each Transaction (see Section 2.2 "Transaction"). The Precious Metals Agent incurs certain ongoing custodian fees and costs on a quarterly basis as outlined within this SOM. These fees are invoiced to the Investment Advisor. The Fund is required to meet redemptions of Participating Shares, and the Fund will hold a certain percentage of the total fund assets in cash to meet such redemptions. These cash reserves of the Fund will remain on deposit with the Custodian Bank, and such redemptions will be paid directly from the Custodian Bank to the redeeming Shareholder. At times redemption of Participating Shares may exceed the Fund’s current cash holdings. It is understood that at such times the Fund may access gold held on the Refinery metal account or De-bailment of bars within the Security Vault for Refinery liquidation (see Section 2.9 "De-Bailment" and Section 2.10 "Engagement of Bullion Verification Auditor") and under such events, payment will be made from the Refinery directly to the Fund’s account with the Custodian Bank from which the redemption proceeds are paid.

13

1

BULLION CUSTODY ORGANIZATIONAL CHART

BULLION CUSTODY ORGANIZATIONAL CHART

PHYSICAL GOLD FUND CIBC BANK Paying Agent Receiving Investor Funds, Paying Transaction Settlement Funds to Refinery, Payment of Fund Costs and Fees

VIGILANT CAPITAL Investment Advisor

AFECC Precious Metals Agent, Acquisition, Gold bar Bailment Logistics, Liquidation

LBMA Refinery 'Good Delivery' Gold Bar Refining and Supply

TRIDENT Fund Administrator

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2.12

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LBMA SECURITY COMPANY Secure Transport, Vaulting & Insurance of Physical Gold Bars

GRANT THORNTON Onsite at Vault Inspection & Verification of Physical Gold Bars

2

BULLION SUBSCRIPTION AND TRANSACTION FLOW

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PHYSICAL GOLD FUND

4

3 2 VIGILANT CAPITAL Investment Advisor

TRIDENT

AFECC Precious Metals Agent, Acquisition, Gold bar Bailment Logistics, Liquidation

LBMA Refinery 'Good Delivery' Gold Bar Refining and Supply

Secure Transport, Vaulting & Insurance of Physical Gold Bars

GRANT THORNTON Onsite at Vault Inspection & Verification of Physical Gold Bars

5

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Fund Administrator

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2.13

15

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BULLION BAILMENT PROCESS

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PHYSICAL GOLD FUND

3 CIBC BANK Paying Agent Receiving Investor Funds, Paying Transaction Settlement Funds to Refinery, Payment of Fund Costs and Fees

VIGILANT CAPITAL Investment Advisor

AFECC Precious Metals Agent, Acquisition, Gold bar Bailment Logistics, Liquidation

LBMA Refinery 'Good Delivery' Gold Bar Refining and Supply

LBMA SECURITY COMPANY Secure Transport, Vaulting & Insurance of Physical Gold Bars

6

TRIDENT Fund Administrator

1. Precious Metals Agent instructs the Refinery to produce Good Delivery Gold Bars (approximately 400 oz each). Such gold bars are held on a segregated pallet for shipment to vault.

%DLOPHQWLVFRQGXFWHGDW9DXOW/RFDWLRQ,Q DWWHQGDQFHLV¬,QGHSHQGHQW$XGLWRU)XQG and Precious Metals Agent representatives DQG9DXOW5HSUHVHQWDWLYH¬(DFKEDULVVLWHG DQGUHIHUHQFHGDJDLQVW5HILQHUV%DU/LVW¬¬

2. Refinery advises Precious Metals Agent when Good Delivery Gold Bars have been PDQXIDFWXUHG¬DQGSURYLGHV%DU/LVWWR Precious Metals Agent, and Transport and Vaulting Company.

,QGHSHQGHQW$XGLWRUSURYLGHVLQGHSHQGHQW $XGLW5HSRUWWR)XQG0DQDJHUDQG)XQG Administrator.

3. Precious Metals Agent co-ordinates a Bailment of the gold bars and instructs Security Transport Company to transport the bars from the Refinery to the Vault location for Bailment.

6. Vault Company provides Monthly Total %XOOLRQ+ROGLQJ6WDWHPHQWWR)XQG0DQDJHU¬ )XQG$GPLQLVWUDWRUDQG3UHFLRXV0HWDOV$JHQW¬

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2.14

16

GRANT THORNTON Onsite at Vault Inspection & Verification of Physical Gold Bars

5

4

BULLION ACQUISITION AND CUSTODY PERFORMANCE AGREEMENTS

BULLION ACQUISITION AND CUSTODY PERFORMANCE AGREEMENTS

PHYSICAL GOLD FUND

1

CIBC BANK Paying Agent Receiving Investor Funds, Paying Transaction Settlement Funds to Refinery, Payment of Fund Costs and Fees

VIGILANT CAPITAL Investment Advisor

TRIDENT

2

AFECC Precious Metals Agent, Acquisition, Gold bar Bailment Logistics, Liquidation

4

LBMA Refinery 'Good Delivery' Gold Bar Refining and Supply

Secure Transport, Vaulting & Insurance of Physical Gold Bars

3

1. PRECIOUS METALS OPERATING AGREEMENT Between Fund and Precious Metals Agent providing operating rules framework for Gold Bullion Acquisition, Bar Standards, Bailment Rules and Procedures and Reporting Requirements. 2. SUPPLY AND DELIVERY AGREEMENT Between Precious Metals Agent exclusively on behalf of Fund and the Refinery providing operating rules for Gold Bullion Acquisition on behalf of the Fund, Gold Bar Fabrication and Delivery Procedures and Standards.

3. STORAGE AGREEMENT Between Precious Metals Agent exclusively on behalf of Fund and the Security Storage and Vaulting Company providing operating rules for Gold Bullion Bar Transportation, Insurance, Vaulting and Storage and Bailment Procedures. 4. LETTER OF ENGAGEMENT Letter of Engagement confirming that Independent Bullion Auditor is engaged to be present onsite to provide independent verification of Gold Bars at all Bailments on behalf of the Fund

L GOLD FU ICA

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LBMA SECURITY COMPANY

Fund Administrator

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD BULLION CUSTODY PROCEDURES

2.15

17

GRANT THORNTON Onsite at Vault Inspection & Verification of Physical Gold Bars

3

GOLD MARKET SECTOR FUNDAMENTALS

SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Overview of the Gold Market Gold is a precious metal and only rarely occurs in the earth’s crust. According to the Gold Field Mineral Services, in 2014 there were only 179,000 metric tonnes of stock in existence above ground. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure 21 metres in any direction.

The demand for this precious natural commodity is global and encompasses almost every sector in our modern world. Approximately 60% of today’s gold demand becomes jewellery. Gold demand from investment, central bank reserves, and the technology sectors are all significant. Many of today’s technologies would not exist without gold’s unique properties. Each sector is driven by different underlying fundamentals adding to gold’s broad demand diversity. Principle demand in recent years has come from the East, particularly China, India, Turkey, and the Middle East. China is the largest miner of gold, however at the same time with India has become the world’s largest net importer of gold from all other regions of the world. Gold mining operations are present on every continent of the earth while these mines account for approximately two thirds of new annual supply. Global distribution of gold deposits and mining operations help provide a stable supply base in that geopolitical or natural region disruptions are unlikely to significantly impact the global supply. After mine supply, recycling accounts for approximately one third of all current supply. The amount of gold available for recycling has been inconsistent over the last 10 years, and is currently in decline. In addition, although central banks can also contribute to supply through official sector sales of gold reserves, the current trend in central banking has shifted to gold accumulation. Over centuries gold has maintained a very constant purchasing power. An ounce of gold today will buy relatively the same quantity of goods and services that it would have two decades, five decades or a century ago. In this respect gold has historically been very stable when compared to national currencies that are constantly losing purchasing power through inflation. Further, national currencies can be susceptible to geopolitical factors and economic uncertainty. Historically gold has performed strongly in the face of financial turmoil and is considered by some central bankers in particular as the ultimate form of currency, as it is issued by no government, cannot be printed at will, and does not rely on a sovereign’s solvency to provide it value.

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Pricing In 1919 with the help of the Bank of England the London Gold Fix was established. Since that time, the daily London fixing has acted as the world’s benchmark pricing mechanism. In March 2015 the nearly century old London Gold Fix was replaced with the LBMA Gold Price auction. The London Gold Price auction happens twice a day at 10:30 AM and again at 3:00PM GMT with the price set in US dollars per fine troy ounce. Sterling and Euro prices are available but they are indicative prices for settlement only.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Throughout the day in every time zone around the world, gold trades on physical, derivatives, and OTC exchanges. Given the importance of US markets and the dollar as the world’s reserve currency, traders most frequently quote the US dollar price. An Introduction to the Gold Industry and Its Participants There are several different participants in the world gold market: the Mining and Producer Sector, the Bullion Banking Sector, the Official Sector, the Investment Sector, and the Manufacturing Sector. The Mining and Producer Sector: Mining includes mining companies that focus on producing gold deposits. Further, there are mining companies that produce gold as a by-product of other production such as copper or silver producers. Producers include scrap merchants and recyclers. The Bullion Banking Sector: This sector is composed of bullion banks that provide a variety of services to the gold market and its participants, thereby facilitating interactions between other parties. Services provided by bullion banks include traditional banking products as well as physical gold purchases and sales, hedging and risk management, inventory management for industrial users and consumers, mine financing, and gold deposit and loan instruments. The Official Sector: This sector includes the activities of the various central banking operations of gold-holding countries. Central Banks can be net sellers of gold into the physical market and at other times may be net buyers of gold from the physical market. Central Banks may also lease office reserves to other market participants. Usually this leased gold may be used for producer hedging and other purposes. The Central Bank may lease gold so as to earn an interest rate return on their official reserves. The Investment Sector: This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge funds, mutual funds, physical gold funds, day-traders on futures exchanges, retail coin dealers, and collectors. The Manufacturing Sector: This sector represents commercial, industrial, and technological users of gold for whom gold is a daily part of their business. The jewellery industry is a large industrial user of gold. Other industrial users of gold include the electronics, technology and dental industries. Sources of Gold Supply Sources of gold supply include both mine production and recycling or mobilizing of existing above-ground stocks. The largest portion of new gold supplied into the market annually is from gold mine production. Gold scrap, which is gold that has been recovered from jewellery and other fabricated products, can also be converted back into marketable gold. Since the late 1980’s until recently, official sector sales from central banks outstripped official sector purchases creating additional supply of gold into the marketplace; however, in recent years this trend has reversed to where now central banks are net buyers of gold. The effect of this shift in Official Sector activity has added to annual demand whereas before it added to the supply side. Net producer hedging accelerates the sale of physical gold and can therefore positively or negatively affect supply in a given year. Mine Production

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Mine production includes gold produced from both primary deposits and secondary deposits where the gold is recovered as a by-product metal from other mining activities. Since the late 1990s the amount of new gold that is mined each year has been substantially lower than the level of physical demand. This trend has continued through to the present day. The shortfall in total supply has been met by additional supplies from existing above-ground stocks predominantly coming from the recycling of fabricated gold products, official sector sales, and net producer hedging.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Peak Gold Reports surfacing in recent years suggest the world may have reached or be reaching a peak in gold production. By some market participant’s definition, “peak gold” is the date at which the maximum rate of global gold extraction is reached, after which the rate of production is expected to decline over time. A Goldman Sachs report of March 2015 warned that peak gold may happen as early as 2015. The Goldman report relies on the following data: 1) discoveries of new sources of gold production peaked in 1995 despite major bull market since that time, 2) at the time of the Goldman report there were 20 years of known mineable gold reserves left in the world, 3) gold mining production lags new discoveries by around 20 years, 4) mining production in all major producer countries has declined in recent years, 5) following the 1995 peak, new discoveries have been in a dramatic downward trend since, for example, the 1995 peak of new discoveries was approximately 140 million ounces. By comparison, 2013 new discoveries were just 7.5% of the 1995 peak, at less than 10 million ounces in total, and 6) almost all gold mining companies worldwide, large or small, are experiencing great difficulty in increasing their mine production. The high grading of gold deposits by miners is considered to be a practice that can accelerate the arrival of peak production. High grading refers to mining the portions of the orebody that have the highest grades of gold to ore while leaving the remaining lower grades for another time. When an orebody is processed as a whole without the practice of high grading, the higher processing costs of the lower ore grades are generally amortized over the more efficient and therefore lower processing costs of the higher ore grades. However, in an attempt to accelerate production levels and achieve quicker profits, miners may resort to high grading a deposit. However, in many cases after high grading, the remaining unrecovered lower grade ores become uneconomical and non-commercial to process, effectively losing that gold from future supply. As mine supply contributes up to two thirds of new annual supply, peak gold production may substantially impact the supply side of the gold market in the future. Gold Scrap Gold scrap is gold that has been recovered from fabricated products, melted, refined, and cast into bullion bars for subsequent resale into the gold market. The predominant source of gold scrap is recycled jewellery, the supply of which is largely a function of price and economic circumstances. Other sources of gold scrap include electrical wiring and dental implants. Official Sector Sales Historically, the Official Sector including central banks, other governmental agencies, and multi-lateral institutions have retained gold as a strategic reserve asset. From 1989 through 2008 this sector has been a net seller of gold to the private sector. According to Gold Fields Mineral Services, the Official Sector averaged 490 tonnes of gold sales a year in the decade between 1998 and 2008. This resulted in net movements of gold from the official to the private sector. Owing to the attention given by market commentators to this activity and the size of Official Sector gold holdings, this area became a well-documented source of supply during that decade. Since 2008 central banks have become net buyers of gold, which reverses the dynamic of being a supplier and places central banks on the demand side of the market. The Official Sector is expected to continue to play an important role in the dynamics of the gold market moving forward.

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Net Producer Hedging

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Net producer hedging is where a mining company wishing to protect itself from the risk of a decline in the gold price may decide to sell some or all of its anticipated production for delivery at a future date. This practice creates incremental supply in the market by accelerating the timing of the sale of un-mined gold. A bullion dealer accepting such a transaction will finance it by borrowing an equivalent quantity of gold (typically from a central bank), which is immediately sold into the market. The bullion dealer then invests the cash proceeds from that sale of gold and uses the yield on these investments to pay the gold mining company the premium available on gold for future delivery, referred to as the “contango.”

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

When the mining company delivers the gold it has contracted to sell to the bullion dealer, the dealer returns the gold to the lender or rolls the loan forward in order to finance similar transactions in the future. While over time hedging transactions involves no net increase in the supply of gold to the market, they do accelerate the timing of the sale of gold sold prior to production, which has an impact on the balance between supply and demand at any time. Sources of Gold Demand Demand for gold is driven primarily by demand for jewellery, which is used for adornment and, in much of the developing world, as an investment. Retail investment and industrial applications represent increasingly important, though relatively small, components of overall demand. Retail investment is measured as customer purchases of bars and coins. Gold bonding wire and gold-plated contacts and connectors are the two most frequent uses of gold in industrial applications. Gold demand is widely dispersed throughout virtually all countries in the world.

Demand for gold comes from diverse market sectors. The above chart shows a typical year of sectors as percentage of total demand.

Jewellery The primary source of gold demand is gold jewellery. The motivation for jewellery purchases differ in various regions of the world. In the industrialized world, gold jewellery tends to be purchased purely for adornment purposes, while gold’s attributes as a store of value and a means of saving provide an additional motivation for jewellery purchases in much of the developing world. Price and economic factors, such as available wealth and disposable income, are the primary factors in jewellery demand. Jewellery purchased purely for adornment purposes is generally of lower caratage or purity, but with greater added value in terms of design input and improved finishes. In those parts of the world where the additional motivation of savings or investment applies to the purchase of jewellery (such as Asia, the Indian subcontinent, and the Middle East), gold jewellery is generally of higher caratage, and the purchase price more closely reflects the value of the gold contained in each item.

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Retail investment demand refers to coins, medallions, and smaller bars meeting the standards for investment gold usually of no less than 99% purity and to bars or coins which are likely to be worn as jewellery in certain countries. The retail investment market is global as can be seen by the presence of retail coin and bullion dealer shops in every major city in the world.

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Retail and Institutional Investment

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Institutional investment demand refers to professional investment products such as Investment and Hedge Funds, Physical Gold Funds, and Exchange Traded Funds. These investment products will invest a given portion of their assets into physical gold. Depending on the investment product type, in some cases this physical gold will be purchased in the market in the form of physical bars which are then placed into long-term, high-security storage. Technical, Electronics, Dentistry, and Other Industrial Applications Gold has been used for jewellery and decorative purposes for thousands of years. However, over the last 100 years, it has also had an increasingly important role as a key component in other industries due to its unique properties. Gold’s unique properties include its outstanding resistance to corrosion, pliability and malleability, ease of manufacture, and high thermal and electrical conductivity. In today’s world it plays a critically important role in the production of medicines and medical devices, pollution control, air bags, water purification systems, mobile telephones, laptop computers, space travel, satellite technology, and many other technology related uses. Approximately 11% of demand for gold comes from technological applications. Automotive Gold is used by the automotive industry in catalytic convertors, which convert harmful emissions from engine exhausts into safer substances. Nanoparticles of gold alloyed with other precious metals are effective in reducing harmful emissions from the engine exhaust. Only precious metals offer the necessary levels of performance to meet the required targets. Electronics Manufacturers in this sector use gold to create components for mobile phones, computer systems, and a variety of high-performance and safety-critical electronic systems. Gold’s advantage over silver and copper as electrical conductors is its resistance to tarnishing or corrosion which is a critically important factor in many applications. Medicine The use of gold in medicine and dentistry dates back thousands of years, and the metal continues to be widely used today. Modern-day dentistry still generates a significant demand for gold, while in medicine the metal is at the heart of treatments for rheumatoid arthritis and is under investigation as a potential treatment in a number of other diseases such as cancer. In addition to this, gold is highly resistant to bacteria and can be used for implants where there is a high risk of infection such as in the inner ear. Nanotechnology Gold nanoparticles have unique properties which suit them for use in a variety of applications such as chemical catalysts and diagnostic devices. Examples include the First Response pregnancy testing kit and the Merck Singlepath assay used to detect salmonella among other applications. Recent years have seen the development of more advanced systems based on gold nanoparticles such as a system specifically designed to monitor the progression of HIV in patients in the developing world.

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For decades, gold has been a key component in space technology and exploration. In addition to its use as a component in electronic systems on the ground and in spacecraft, it is used to protect astronauts and equipment from heat and the high levels of radiation present in space.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Engineering In this sector, gold is used as a lubricating material, as a coating on architectural glass, in fuel cells, jet engines, and in many other applications. The corrosion resistance and high conductivity of gold makes it ideal for engineering uses. For example, incorporating a thin layer of conductive gold in a fuel cell provides good corrosion resistance and reduces contact resistance between the plate and diffusion media in the cell. “Good Delivery” Gold Markets The global trade in gold consists of Over-the-Counter (OTC) transactions in spot, forwards, and options and other derivatives, together with exchange-traded futures and options. The OTC gold market includes spot, forward, and option and other derivative transactions conducted on a principal-to-principal basis. While this is a global 24-hour per day market, its main centres are Zurich, London, and New York. In recent years both Dubai and Shanghai have also been emerging as important gold centres. The London Bullion Market Association or ‘LBMA’ is the London-based trade association that acts as the coordinator for activities conducted on behalf of its members and other participants in the London and global bullion market. Members of LBMA can act as OTC market-makers, and most OTC market trades are cleared through London. The LBMA plays an important role in setting OTC gold trading industry standards globally. The LBMA’s ‘‘London Good Delivery Lists’’ identify approved refiners of gold. In the OTC market, gold that meets the specifications for weight, dimensions, fineness (or purity), identifying marks (including the assay stamp of an LBMA-acceptable refiner), and appearance set forth in ‘‘The Good Delivery Rules for Gold and Silver Bars’’ published by the LBMA are ‘‘London Good Delivery Bars’’ (see Appendix A “Good Deliver Rules”). A primary function of the LBMA is its involvement in the promotion of refining standards by maintenance of the ‘‘London Good Delivery Lists,’’ which are the lists of LBMA-accredited smelters and assayers of gold. The LBMA also coordinates market clearing and vaulting, promotes good trading practices, and develops standard documentation. Rationale for Investing in Gold PLEASE REFER TO THE SPECIFIC RISK FACTORS SET OUT IN SECTION 9.11 "Specific Risk Factors" AND TO THE MARKET RISKS OUTLINED IN SECTION 9.12 "Market Risk." Gold ownership may help to protect a portfolio from inflation, deflation, stagflation, systemic failure, financial collapse, and currency devaluation. Investors may purchase gold because of the view that, unlike other investments, gold’s tangible physical properties, negative correlation to other asset classes, and when used as an inflation or deflation hedge, provides a way to balance the risk in a portfolio. Unlike traditional stocks, bonds, and money market instruments, gold is an asset whose price generally is independent of earnings, future growth or promised payments due to its certain physical and tangible properties. These properties allow gold to be converted into other goods and investments, which may provide investors with more immediate liquidity than alternative investments. Unlike paper-backed assets, gold cannot be created at will. Gold has historically acted as a store of value in times of geopolitical and economic uncertainty because it generally is independent of country, industry, and company-specific issues. As one of the few financial assets that does not rely on an issuer's promise to pay, gold may offer investors a better option for protection against systemic risk than other asset classes which rely on the performance of specific counter-parties for valuation or liquidity.

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Gold to Stocks Comparison

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At the close of 2014, the collective market capitalization of all the elite stocks of the flagship S&P 500 stock index was approximately $19.5 trillion. Private investment gold holdings of the entire world were at the same time approximately 32,000 metric tonnes with a market value of a $1.2 trillion. In other words, the size of total global gold investment was just 6.3% of the S&P 500.

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Most investment portfolios primarily hold traditional financial assets such as stocks and bonds. However some widely recognised sovereign wealth managers believe that by using gold to diversify their portfolio, they can achieve added protection against fluctuations in the value of any single asset or assets group. Risk factors that may affect the gold price can be quite different in nature from those that affect other assets. Market Cycles Broader markets tend to cycle between growth and contraction. Gold is viewed as a means to be able to even out market cycles over the long term. This is largely due to its ability to retain its value and purchasing power. Gold’s value, in terms of the real goods and services that it can buy, has remained remarkably stable for centuries. Currency Hedge Gold is employed as a hedge against fluctuations in currencies, particularly the world’s reserve currency, the US dollar. If the world’s main trading currency appreciates, the dollar gold price generally falls. On the other hand, a fall in the dollar relative to the other main currencies produces a rise in the gold price. For the past 15 years, we have seen gold perform strongly against all key global currencies.

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SUPPLEMENTAL OFFERING MEMORANDUM GOLD MARKET SECTOR FUNDAMENTALS

Portfolio Diversification

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HUMAN RIGHTS AND ENVIRONMENTAL POLICY

The Fund maintains the strictest approach towards its human rights and environmental standards and practices. The Fund acknowledges that in the past the gold mining and processing industry has inflicted large-scale damage on the natural environment and been responsible for multiple human rights abuses. To alleviate potential contributions to any such abuse, the Fund has adopted the following beliefs and practices: a) b)

c) d) e)

To achieve lasting business success and growth, all business practices must be carried out on a sustainable basis. The Fund will promote and continue to work with organisations to promote the development of strict national and international regulations for environmental protection in mining operations and restoration to pre-existing conditions at the closure of mining projects. The Fund will promote and continue to work with organisations to promote the development of strict national and international occupational laws around safe and fair working conditions, particularly within mining operations in developing economies. The Fund works only with third party suppliers who are committed to the most rigorous regulations and practices in their operations and approach to human rights and environmental practices within their own supply chain. The sourcing of physical gold from mining operations will be done when all efforts have been made to ensure mining operations observe and maintain responsible human rights and environmental standards and practices.

The Fund intends to report on its ongoing compliance with this Human Rights and Environmental Policy statements in its annual reports.

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SUPPLEMENTAL OFFERING MEMORANDUM HUMAN RIGHTS AND ENVIRONMENTAL POLICY

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SUPPLEMENTAL OFFERING MEMORANDUM PORTFOLIO ADVISORY COMMITTEE

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PORTFOLIO ADVISORY COMMITTEE

The Fund has appointed a committee of three persons (the 'Committee') each of whom has broad experience in the physical gold market or as a finance professional to provide the Directors with advice and guidance on all matters relating to the management of the Fund’s portfolio of physical gold bullion. In addition, the Board has delegated to the Committee certain responsibilities in respect of the day-to-day operations of the Fund. Where the Committee undertakes any action, it will do so on behalf of the Fund. Notwithstanding the above, the Directors will retain overall responsibility for the management of the Company including, for the avoidance of doubt, the management of the Fund. Each member is appointed by the Company for initial terms of 12 months, and such appointments may be renewed at the discretion of the Company. The members of the Committee are not separately remunerated by the Company for their services on the Committee. One member of the Committee, James Rickards, is remunerated by the Investment Advisor for his services on the Committee. The mini-bios for each member of the Committee can be found below and on the website http://www.physicalgoldfund.com/.

JAMES RICKARDS James Rickards is the author of the national bestseller Currency Wars: The Making of the Next Global Crisis and a Partner in Tangent Capital Partners, a merchant bank based in New York. He is a counselor and investment advisor and has held senior positions at Citibank, Long-Term Capital Management, and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve. His clients include institutional investors and government directorates. He has been interviewed in The Wall Street Journal and has appeared on CNBC, Bloomberg, Fox, CNN, BBC, and NPR and is an Op-Ed contributor to the Financial Times, New York Times, and The Washington Post. Mr. Rickards is a visiting lecturer at Johns Hopkins University and the School of Advanced International Studies, has delivered papers on risk at Singularity University, the Applied Physics Laboratory, and the Los Alamos National Laboratory, and has written numerous articles on risk management. He is an advisor on capital markets to the Director of National Intelligence and the Office of the Secretary of Defense. Mr. Rickards holds an LL.M. (Taxation) from the NYU School of Law, a J.D. from the University of Pennsylvania Law School, an M.A. in economics from SAIS, and a B.A. from Johns Hopkins University. During his career Mr. Rickards has worked at and advised several organizations including: 1976 to 1985 - Citibank, N.A. 1985 to 1994 - Greenwich Capital Markets, Inc. 1994 to 1999 - Long-Term Capital Management, L.P. 1999 to 2001 - Optimark Technologies, Inc. 2001 to 2002 - Caxton Associates, LLC 2002 to 2005 - Azimuth Trust LLC 2005 to 2006 - Ritchie Capital Management, LLC 2006 to 2007 - Fairstream Capital Management LLC 2007 to present - Omnis, Inc. 2007 to 2007 - Nikko Alternative Asset Management, Inc. 2011 to 2011 - Lincoln Square Advisors LLC 2011 to present - Tangent Capital Partners LLC 2011 to present - JAC Capital Advisors, LLC

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SUPPLEMENTAL OFFERING MEMORANDUM HUMAN RIGHTS AND ENVIRONMENTAL POLICY

JUAN LUIS SURGEON, CFA From 2008 to 2010, Mr. Surgeon served as Treasury & Investments Officer for Multibank Panama. During his position he managed the bank´s liquidity portfolio and trading of spot and forward currencies as well as derivatives and commodities trading with over 600 million dollars in assets under management. In 2010 Juan Luis joined MMG Bank in Panama. He holds the position of Treasury Manager responsible for the oversight and execution of strategic goals for the Treasury Department and the bank's own investments. He is President of the Asset Liability Committee, which is responsible for the monitoring of liquidity risk, interest rate risk, and market risk as well establishing parameters for the management of these risks and providing a strategic plan for the bank’s balance sheet allocation. Juan Luis is also responsible for the management of the bank’s Investment and Liquidity Portfolios. He is a member of the MMG Fixed Income Fund Committee, which actively manages over 110 million dollars. MMG Bank has over 1 billion dollars under management. Among his certifications and achievements, he is a licensed securities broker and principal executive in the Republic of Panama, and he holds a Bachelor of Science in Finance from Smeal College of Business with a Minor in Economics from the College of Arts and Sciences of The Pennsylvania State University.

SIMON HEAPES Simon is presently a director at AFE Custodial Company and provides precious metals logistics. Simon worked with Scotts Petroleum for nine years providing petroleum logistics and thereafter with Anglo Far-East Bullion Company where he was a precious metals research analyst. Simon’s research and analysis has focused primarily on the market fundamentals of supply and demand and more recently specialized in commodity and resource fundamentals. Simon is a director of numerous private companies and has written and lectured on the precious metals and resources markets for many years. 5.1

INVESTMENT ADVISOR

The Company has appointed Vigilant Capital (Cayman) Limited (formerly Las Bóvedas Company (Cayman) Limited) as Investment Advisor to the Fund pursuant to an Investment Advisory Agreement dated September 18, 2012. The Investment Advisor is incorporated in the Cayman Islands and is registered with CIMA under the Securities Investment Business Law as an Excluded Person.The Investment Advisor will liaise with the PAC and assist with promoting the Fund. It also provides the Fund with short-term investment advice together with broader gold market sector analysis and recommendations on its investment objectives, strategies, and operational procedures. Further, the Investment Advisor will provide regular and ongoing analysis to the Company into global trends that may affect future price movements in the global gold market such as global supply trends including mining production levels, scrap supply, and demand trends including industrial, jewellery, and investment demand factors.

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The Investment Advisory Agreement will continue until terminated by either party giving three months’ notice, or otherwise in accordance with the provisions for termination contained therein.

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SUPPLEMENTAL OFFERING MEMORANDUM METHODOLOGY FOR CALCULATION OF FUND NET ASSET VALUE PHYS

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METHODOLOGY FOR CALCULATION OF FUND NET ASSET VALUE

The calculation of the value of net assets of the Fund is the responsibility of the Fund Administrator who may consult with the Fund, Precious Metals Agent, Custodian Bank, Secure Vault Company, Refinery, Bullion Verification Auditor, and Fund Auditors. The calculation of the value of the net assets of the Fund (‘NAV’) will include the valuation of each class of Participating Shares issued by the Fund. The calculation of the NAV will be as of 4:00 p.m. Cayman Islands time on the last Business Day of each week and shall be published on Bloomberg and notified to the Cayman Islands Stock Exchange immediately upon calculation. A “Business Day” shall refer to any day in which the banks in the Cayman Islands are ordinarily open for business. Further to the weekly NAV, the Fund may request the Fund Administrator to conduct a NAV calculation on any other Business Day of the week at which time the same Net Asset Valuation methodology outlined in this section will apply. 6.1

BASE CURRENCY OF THE FUND

The value of the net assets of the Fund will be determined for the purposes of subscriptions and redemptions of Participating Shares as of the valuation time on the valuation day. As the base currency of the Fund is in US dollars, the Net Asset Valuation will be calculated and reported in US dollars. 6.2

VALUATION METHODOLOGY

The value of the net assets of the Fund as of the valuation time on the valuation day will be the amount obtained by deducting from the aggregate fair market value of the assets of the Fund as of such date from an amount equal to the fair value of the liabilities of the Fund (excluding all liabilities represented by outstanding Participating Shares) as of the valuation day. The value of net assets per Fund Share will be determined by dividing the value of the net assets of the Fund on the valuation day by the total number of Participating Shares outstanding on the valuation day. 6.2.1 Subject to directions from the Fund, the value of the net assets of the Fund as of the valuation time on the valuation day will be determined by the Fund Administrator in accordance with the following: a)

b) c) 6.2.2

The assets of the Fund will be deemed to include the following: i.) all physical gold bullion owned by the Fund currently being held on account with the Refinery for manufacturing into gold bars, ii.) all gold bullion owned by the Fund in the form of gold Good Delivery Bars currently being armour transported to the Secure Vault Company at the time of the valuation, and iii.) all gold bars Bailed and being held in storage by the Secure Vault Company (see Section 2.4 "Transaction Stages and Processes"). All cash on hand or on deposit, including any interest accrued on the Fund’s cash account, adjusted for and accruals of cash deriving from Fund Transactions executed by the Fund but not yet settled (see Section 2.12 "Bullion Custody Organizational Chart"). Any Fund expenses that may have been prepaid at the time of the valuation.

The fair market value of the Fund’s assets will be determined as follows: a)

Physical gold will be valued at the prevailing international market price of gold published daily on the London Bullion Market Association’s website. Gold will be valued at the afternoon LBMA Gold Price (formally London Gold Fix). The LBMA Gold Price Auction takes place twice daily by ICE Benchmark Administration (IBA) at 10:30 AM and 3:00 PM GMT with the price set in US dollars per fine troy ounce. Once published, it provides an international benchmark for the price of gold. For the purposes of determining the value of physical gold bullion owned by the Fund, the Fund Administrator will rely solely on weights provided to the Administrator by third parties including the Precious Metals Agent, Refinery, Secure Vault Company, and Independent Bullion Verification Auditor (see Section 2.6 "Instructions and Advice").

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SUPPLEMENTAL OFFERING MEMORANDUM METHODOLOGY FOR CALCULATION OF FUND NET ASSET VALUE

Cash assets including cash on hand will be valued at nominal value plus any accrued interest. The value of all cash assets and liabilities not expressed in the base currency of the Fund will be converted into the Fund’s base currency at rates last quoted by Bloomberg. If such quotations are not available, the rate of exchange will be determined in good faith by or under procedures established by the Directors. The Directors do not intend to use borrowings, leverage, derivatives, or other hedging techniques to enhance the performance of this Fund.

6.2.3 The liabilities of the Fund will be calculated on a fair value basis and will be deemed to include the following at the time of calculation of the NAV: a) b) c) d) e) f)

All invoices and accounts payable. All fees including management fees and administrative and operating expenses payable and/or accrued by the Fund. Any contractual obligations for the payment of money or property. All accruals authorized or approved by the Fund for other contingencies. Unsettled Fund Transactions being gold purchases made by the Fund but not yet settled. All other liabilities of the Fund of whatsoever kind and nature except liabilities represented by outstanding Participating Shares issued by the Fund.

Fund Transactions being purchases or sales of gold made by the Fund between NAV calculations will be reflected in the first calculation of the Fund’s net assets after the date on which the transaction is executed. 6.3

SUSPENSION OF CALCULATION OF NAV

The Directors may, in circumstances set out in the OM, declare a suspension of the calculation of the NAV in certain circumstances. Where any such suspension is declared, the Directors shall notify the CSX as soon as reasonably practicable. These circumstances will include times when the Directors deem it is not possible to accurately or fairly calculate the assets of the Fund due to market disturbances or anomalies such as a closure of international markets, market disruption, break down in international market pricing systems, lack of clearing of gold bullion on international markets, currency crisis or any other external factors that could prevent the Fund from accurately providing a fair valuation of the Fund assets and therefore unfairly jeopardizing the Fund and its Shareholders.

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b)

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SUBSCRIPTION OF PARTICIPATING SHARES

SUPPLEMENTAL OFFERING MEMORANDUM SUBSCRIPTION OF PARTICIPATING SHARES

The Fund is an open-ended Fund. Up to 2,495,000 Participating Shares are being offered. As at the date of this SOM, 185,031.835 Participating Shares are in issue, and there are no other classes of Shares listed. The minimum initial subscription for the relevant class of Participating Shares is set out in Section 13 "Offering Summary." The Directors may from time to time, in their absolute discretion, determine the minimum additional subscription requirements. The Participating Shares were admitted to the Official List of the Cayman Islands Stock Exchange in December 2012. Participating Shares are subscribed and issued, subject to the receipt by the Administrator of a duly completed Subscription Application form, Know Your Client declaration, and the cleared Subscription Funds in the relevant currency, not later than one (1) clear Business Day before the Subscription Date. The Subscription Date is hereby defined as the last Business Day of each week or on any other additional Business Day of the week as approved by the Directors. Only Eligible Investors may subscribe for the Participating Shares. The Fund is offering for subscription three (3) Classes of Participating Shares in the Fund: a) b) c)

A Class Shares B Class Shares I Class Shares

For applicable subscription and management/annual fees for each Share Class, see Section 13 "Offering Summary." Subscription fees may be used to defray certain costs and expenses relating to third-party service providers. The Directors may, in their sole discretion waive or vary any subscription fee. 7.1

INITIAL SUBSCRIPTIONS AND INITIAL PRICE

Participating Shares in the Fund were subscribed and allotted during the Initial Offering Period at the Initial Issuing Price of USD100 per Share plus the applicable subscription fees relevant to the Class of the Participating Share. The Initial Offering Period for the Fund closed on December 21, 2012. 7.2

SUBSEQUENT SUBSCRIPTIONS AND SUBSCRIPTION PRICE

After the close of the Initial Offering Period, investors may subscribe for Participating Shares in the Fund at the relevant Subscription Price on the next Subscription Day, generally the last business day of the week as determined by the calculation of the NAV of the Fund on the Subscription Day (see Section 6 "Methodology for Calculation of Fund Net Asset Value") plus the applicable subscription fees relevant to the Class of the Participating Share providing the Fund Administrator has received a duly completed Subscription Application form, Know Your Client declaration, and cleared funds as payment for such Participating Shares not later than one (1) Business Days before such Subscription Date. The Valuation Date is hereby defined as the last Business Day of each calendar week. The NAV of the Participating Shares is published on the Cayman Islands Stock Exchange (http://www.csx.com.ky), Bloomberg, Six Financial, and Morningstar platforms. The Directors may from time to time resolve to close the Fund to new subscriptions on such basis and on such terms as the Directors may in their absolute discretion determine.

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SUBSCRIPTION PROCEDURE

The Administrator will be responsible for providing administration services to the Fund including serving as the Fund's registrar and transfer agent in relation to the issue of Participating Shares in the Fund.

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7.3

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SUPPLEMENTAL OFFERING MEMORANDUM SUBSCRIPTION OF PARTICIPATING SHARES

The Directors reserve the right to reject subscriptions in whole or in part, without giving any reason, in which event subscription payments will be refunded at the applicant's risk without interest in the same currency and by the same method in which the application monies were received at the expense of the applicant (where applicable). When accepted by the Directors and/or the Fund Administrator, subscriptions will be irrevocable. Applicants for Participating Shares in the Fund should complete the Subscription Application provided with this SOM and send it to the Fund Administrator by mail (with a copy by e-mail or facsimile) along with any requisite documentation and cleared Subscription Funds to be received by the Fund Administrator no later than one (1) clear Business Day prior to the next Subscription Day. In the event that the Subscription Application and cleared Subscription Funds are not received by the Fund Administrator one (1) clear Business Day prior to the next Subscription Day, such Subscription Application and funds will be held over until the next following Subscription Day, and Participating Shares will be issued at the relevant Subscription Price applicable on that following next Subscription Day or, alternatively, will be rejected and the subscription monies returned to the applicant. The Directors may, in their sole discretion, instruct the Administrator to accept subscriptions received after the stated time or require a completed Subscription Application and/or cleared Subscription Funds at an earlier or later time or date. Trident Fund Services: Email [email protected] Phone +1-345-949-0880 The Fund Administrator will issue a written confirmation to successful applicants confirming acceptance of their subscription. Applications for Participating Shares will not be dealt with and Participating Shares will not be issued until receipt of notification that an applicant’s funds have been cleared in the full amount of the subscription. If the applicant does not receive an acknowledgement of its Subscription Agreement within one (1) Business Day of submission to the Fund Administrator, such applicant should contact the Fund or the Fund Administrator to confirm the status of their Subscription Application. Neither the Fund nor the Fund Administrator accepts any liability for any Subscription Application which is submitted to the Fund Administrator but to which no acknowledgement has been issued to the applicant. Neither the Fund nor the Fund Administrator shall be responsible for any mis-delivery or non-receipt of any original or e-mail/facsimile if they have not acknowledged receipt of the original or e-mail/facsimile. In the case of mis-receipt or corruption of any message, the applicant will be required to re-send the documents. Notwithstanding the method of communication, the Fund or Fund Administrator (at their absolute discretion) reserves the right to ask for the production of original documents or other information to authenticate the communication. Subject to the foregoing, Participating Shares in the Fund shall be deemed to be issued on the Business Day following the relevant Subscription Day. The Directors reserve the right to accept subscriptions-in-kind at their sole discretion. 7.4

MINIMUM INVESTMENT AND MINIMUM HOLDING

The Minimum Holding per Shareholder and minimum initial investment per subscriber in the Fund will be as set out in Section 13 "Offering Summary." Subscriptions in Kind may also be made and accepted at the sole discretion of the Directors. Any subscription of gold bullion assets into the Fund will be done at the sole discretion of the Directors and must be made in accordance with the standards of LBMA member service providers and in accordance to the Fund’s Gold Bullion Custody Procedures (see Section 2 "Gold Bullion Custody Procedures").

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7.5

ELIGIBLE INVESTORS

Investors and prospective investors should note that there are no statutory investor compensation schemes or requirements in the Cayman Islands.

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SUPPLEMENTAL OFFERING MEMORANDUM SUBSCRIPTION OF PARTICIPATING SHARES

Investment in Participating Shares is limited to investors who represent and warrant that they possess the knowledge, expertise, and experience in financial matters to evaluate the risks of investing in the Company and that they are eligible to apply for the Participating Shares. Unless otherwise stipulated in this SOM, an Eligible Investor will include any person who: a) b) c) d) e)

in respect of B Class or I Class Participating shares, is a sophisticated investor (i.e., someone who has the knowledge, expertise, and experience in financial matters to evaluate the risks of investing in the Company) is aware of the risks inherent in investing in the assets in which the relevant Fund will invest and the method by which these assets will be held and/or traded can bear the loss of their entire investment in the Fund is able to acquire and hold Participating Shares without violating applicable laws, and is not an Ineligible Applicant (see Section 7.6 "Ineligible Applicants").

All potential investors of B Class or I Class participating shares must represent and warrant on the appropriate Subscription Application that he, she or it is an Eligible Investor. Any transferee of Participating Shares will be required to warrant in like terms before any transfer is registered. 7.6

INELIGIBLE APPLICANTS

Participating Shares in the Fund may not be offered, issued or transferred to any person in circumstances which, in the opinion of the Directors, might result in the Fund incurring any liability to taxation or suffering any other pecuniary disadvantage which the Fund might not otherwise incur or suffer or would result in the Fund being required to register under any applicable United States securities laws. Participating Shares in the Fund may not be issued or transferred to any US Person. Each applicant for, and transferee of, Participating Shares will be required to provide such representations, warranties or documentation as may be required by the Directors to ensure that these requirements are met prior to the issue or the registration of any transfer of Participating Shares. If the transferee is not already a Shareholder, they will be required to complete the appropriate Subscription Agreement. 7.7

FORM OF PARTICIPATING SHARES

All Participating Shares will be in registered book form only, and therefore Share certificates will not be issued. However, upon the acceptance of the Fund Administrator of a duly completed Subscription Application, investors will receive written confirmation of the number of Participating Shares held by them, ownership of which shall be evidenced by entry in the relevant Register of Shareholders. 7.8

SUSPENSION OF SUBSCRIPTIONS

The Directors may, in its sole discretion, declare a suspension of the calculation of the NAV in certain circumstances (see Section 6.3 "Suspension of Calculation of NAV"). No Participating Shares in the Fund will be issued during any period of such suspension. Any such suspension shall terminate when the Directors declare that the suspension is at an end. The Directors shall notify the Cayman Islands Stock Exchange of any such suspension.

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7.9

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ANTI-MONEY LAUNDERING

Measures aimed at the prevention of money laundering may require an applicant for Participating Shares in the Fund to verify their identity and the source of funds to the Fund or the Fund Administrator. Depending on the circumstances of each application, verification may not be required where the applicant makes the payment from an account held in the applicant’s name at a recognised financial institution or the application is made through a recognised intermediary. These exceptions will only apply if the financial institution or intermediary referred to above is within a country recognised by the Cayman Islands as having equivalent anti-money laundering regulations.

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SUPPLEMENTAL OFFERING MEMORANDUM SUBSCRIPTION OF PARTICIPATING SHARES

The details given above are by way of example only, and the Fund or the Fund Administrator will request such information and documentation as it considers is necessary to verify the identity or source of funds of an applicant. In the event of delay or failure by the applicant to produce any information required for verification purposes, the Fund or the Fund Administrator may refuse to accept the application and the Subscription Funds relating thereto or may refuse to process a redemption request until proper information has been provided. Shareholders should note specifically that redemption proceeds will not be paid to a third party account. Each applicant for Participating Shares in the Fund will be required to make such representations as may be required by the Fund or the Fund Administrator in connection with anti-money laundering programmes. Each applicant will also be required to represent that Subscription Funds are not directly or indirectly derived from activities that may contravene any international laws and regulations including anti-money laundering laws and regulations. Each applicant for Participating Shares in the Fund acknowledges that the Fund and the Fund Administrator shall be held harmless against any loss arising as a result of a failure to process his application for Participating Shares or redemption request if such information and documentation as has been requested by the Fund or the Fund Administrator has not been provided by the applicant. If any person in the Cayman Islands or elsewhere involved in the business of the Fund has knowledge or suspicion that a payment to the Fund (by way of subscription or otherwise) is derived from or represents the proceeds of criminal conduct, that person is required to report such knowledge or suspicion to the Cayman Islands Financial Reporting Authority pursuant to The Proceeds of Crime Law of the Cayman Islands.

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By way of example, an individual may be required to produce the original passport or identification card or copy duly certified by a public authority such as a notary public, the police or the ambassador in his country of residence, together with two original documents evidencing his address such as a utility bill or bank statement or duly certified copies. In the case of corporate applicants, this may require production of a certified copy of the Certificate of Incorporation (and any change of name) and the Memorandum and Articles of Association (or equivalent), and the names and residential and business addresses of all directors and beneficial owners.

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES PHYS

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REDEMPTION OF PARTICIPATING SHARES

8.1

REDEMPTION IN CASH

Section 8.1 "Redemption in Cash," Section 8.2 "Redemption Days," Section 8.3 "Redemption Price," Section 8.4 "Procedure," Section 8.5 "Settlement," Section 8.6 "Deferred Redemptions," Section 8.7 "Suspension of Redemptions," and Section 8.8 "Compulsory Redemptions" apply to Redemption of Participating Shares in Cash. Subject to the foregoing, Participating Shares are redeemable to cash at the option of the Shareholder on any Redemption Day. 8.2

REDEMPTION DAYS

A Redemption Day is hereby defined at the last Business Day of each week or on any other additional Business Day of the week as approved by the Directors. 8.3

REDEMPTION PRICE

The redemption price of a Participating Share will be equal to the NAV of that class of Participating Share as at the relevant Valuation Day immediately preceding the relevant Redemption Day. 8.4

PROCEDURE

The Fund Administrator is responsible for providing administration services to the Fund including serving as the Fund's agent in relation to the redemption of Participating Shares in the Fund. The Fund Administrator may delegate some or all of its duties to third parties in accordance with the terms of the Administration Agreement. Shareholders should send a completed Redemption Request in the form provided with this SOM. The completed Redemption Request must be received by the Fund Administrator no later than one (1) clear Business Day prior to the next Redemption Day. In the event that the Redemption request is not received by the Fund Administrator one (1) clear Business Day prior to the next Redemption Day, the Redemption request will be held over until the next following Redemption Day, and the Participating Shares will be redeemed at the relevant Redemption Price applicable on that following Redemption Day. The Shareholder must sign each Redemption Request and, when required by the Fund Administrator, verification of the authenticity of the signature must be provided. Redemption requests may be sent by e-mail or facsimile, but redemption proceeds will not be remitted until the Administrator has received the original of the Redemption request. A Redemption Request, once given, is irrevocable save with the consent of the Directors (after consultation with the Fund Administrator). Such consent may be withheld in the Directors’ sole discretion. In order for a Redemption Request to be effective, it must be acknowledged by the Fund Administrator. If the Shareholder does not receive an acknowledgement of its Redemption Request within one (1) Business Day of submission to the Fund Administrator, such Shareholder should contact the Fund Administrator to confirm the status of the Redemption Request. Neither the Fund nor the Fund Administrator accepts any liability for any Redemption Request which is submitted to the Fund Administrator to which no acknowledgement has been issued to the redeeming Shareholder. Neither the Fund nor the Fund Administrator shall be responsible for any mis-delivery or non-receipt of any e-mail/facsimile or original if they have not acknowledged receipt of the e-mail/facsimile or original. In the case of mis-receipt or corruption of any message, the Shareholder will be required to re-send the documents. Notwithstanding the method of communication, the Fund and/or the Fund Administrator reserve the right to ask for the production of original documents or other information to authenticate the communication.

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

A request for a partial redemption of Participating Shares in the Fund may be refused or the holding redeemed in its entirety if, as a result of such partial redemption, the NAV of the Participating Shares in the Fund retained by the Shareholder would be less than the Minimum Holding requirement. 8.5

Payment of redemption proceeds will generally be made as soon as practicable after the relevant Redemption Day and will normally be made no later than 14 full Business Days from the Redemption Day. Payment of redemption proceeds will be made in the base currency of the Fund by direct wire transfer. No interest will be paid on the redemption proceeds between the Redemption Day and the date of actual payment. Except in accordance with the provisions of this SOM, the Fund will not make any redemption payouts to third parties. 8.6

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DEFERRED REDEMPTIONS

The Directors intend not to exercise their powers to defer redemptions except to the extent they consider that existing Shareholders would otherwise be materially prejudiced or that such exercise is necessary to comply with applicable law or regulation. 8.7

SUSPENSION OF REDEMPTIONS

The Directors may declare a temporary suspension of the calculation of the NAV in certain circumstances (see Section 6 "Methodology for Calculation of Fund Net Asset Value"). No Participating Shares in the Fund will be redeemed during any such period of suspension. Any such suspension shall terminate when the Directors declare that the suspension is at an end. The Directors may withhold payment to any person whose Participating Shares have been tendered for redemption until after such suspension has been lifted. Notice of any such suspension will be given to any Shareholder who has tendered his Participating Shares for redemption and to whom full payment of the redemption proceeds has not yet been remitted. If a Redemption Request is not withdrawn by a Shareholder following notification of such a suspension, the redemption will be completed on the basis of the relevant Redemption Price on the relevant Valuation Day immediately preceding the relevant Redemption Day on which the Participating Shares are eventually redeemed. The Directors may declare an indefinite suspension of the redemption of Participating Shares in the Fund without the requirement of a suspension of the calculation of the NAV in one or more of the following circumstances: a) b) 8.8

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SETTLEMENT

where the Directors determine to conduct a controlled wind down of the operations of the Fund for any reason including where they determine that the Fund is no longer economically viable, with a view to returning assets of that Fund to Shareholders of that Fund; or for any other reason that the Directors in their discretion deem is in the best interests of the Shareholders of the Fund.

COMPULSORY REDEMPTIONS

The Directors have the right to require the compulsory redemption of all or part of the Participating Shares held by or for the benefit of a Shareholder at any time including, without limitation, if the Directors determine that the Participating Shares are held by or for the benefit of any Shareholder who is or becomes an Ineligible Applicant and/or is not or is no longer an Eligible Investor. Shareholders are required to notify the Fund or Fund Administrator immediately if at any time they cease to be Eligible Investors or become Ineligible Applicants. If the Directors become aware that a Shareholder: i.) has ceased to be an Eligible Investor or has become an Ineligible Applicant; ii.) is holding Participating Shares in breach of any law or regulation or otherwise in circumstances having or which may have adverse regulatory, tax, pecuniary or material administrative disadvantages for the Fund or its Shareholders;

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

or iii.) has failed to provide any information or declaration required by the Directors or Fund Administrator within fourteen (14) Business Days of being requested to do so, the Directors may either direct such Shareholder to redeem or to transfer the relevant Participating Shares to a person who is qualified or entitled to own or hold such Participating Shares. Any person who becomes aware that he is holding Participating Shares in contravention of any of the above provisions and who fails to transfer his Participating Shares pursuant to the above provisions shall indemnify and hold harmless each of the Fund, the Directors, and the Shareholders (each an 'Indemnified Party') from any claims, demands, proceedings, liabilities, damages, losses, costs, and expenses directly or indirectly suffered or incurred by such Indemnified Party arising out of or in connection with the failure of such person to comply with his obligations pursuant to any of the above provisions. 8.9

Section 8.19 "Redemption of Participating Share in Kind," Section 8.10 "Redemption in Kind Type," Section 8.11 "Redemption in Kind Valuation," Section 8.12 "Redemption in Kind Application," Section 8.13 "Gold Release and/or Delivery," Section 8.14 "Release into Safe Custody," Section 8.15 "Secure Shipment and Delivery into Safe Custody," Section 8.16 "Remittance of Cash Balance," Section 8.17 "Redemption in Kind Gold Bar Types," Section 8.18 "Redemption in Kind Gold Bar Costs," Section 8.19 "Changes to Redemption in Kind Policy and Procedures," Section 8.20 "Non-Approval of Redemption in Kind and Request of Know Your Client Information," and Section 8.21 "Force Majeure Applying to Redemption in Kind" apply to Redemption of Participating Shares in Kind. Shareholders may have the option of redeeming their Participating Shares for physical gold (hereafter 'Redemption in Kind'). Redemption in Kind is the redemption of Participating Shares in the Fund for physical gold bars and Release Into Safe Custody or safe delivery of gold bars equal to the amount of precious metals represented by the Participating Shares being redeemed less required fees and charges. An application for Redemption in Kind must be filed with the Fund Administrator. Approval of any request for Redemption in Kind is entirely at the discretion of the Directors. The Fund has appointed the Precious Metals Agent to provide Redemption in Kind services to the Fund in conjunction with the Fund Administrator. Redemption in Kind, pursuant hereto, will not materially prejudice the interest of the remaining Shareholders. 8.10

REDEMPTION IN KIND VALUATION

The Redemption in Kind valuation, including the calculation of fees and charges and the net total of amount of gold bullion to be supplied in bar form, will be calculated usually at the next Valuation Day of the Fund after the Redemption in Kind Application has been approved (see Section 8.12 "Redemption in Kind Application"). This Redemption in Kind valuation is determined using the Fund NAV price calculated by the Fund Administrator using the London PM Gold Fix on that Valuation Day (see Section 6 "Methodology for Calculation of Fund Net Asset Value"). Within two (2) Business Days after the Valuation Day, the Precious Metals Agent will provide the Shareholder with a Redemption in Kind Statement.

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REDEMPTION IN KIND TYPE

The Fund holds all of its assets in physical gold Good Delivery Bars (see Section 2 "Gold Bullion Custody Procedures"). Every Participating Share in the Fund represents a certain portion of gold bullion held by the Fund as outlined in this SOM. Under the Fund’s Redemption in Kind procedures, a certain amount of gold bullion will be delivered according to the total amount of Participating Shares being redeemed and the type and amount of gold bars requested for pickup or delivery. Fees and costs are associated with Redemption in Kind, and these fees and costs are deducted from the total redemption value versus the amount of gold bullion redeemed (see Section 8.16 "Remittance of Cash Balance," Section 8.17 "Redemption in Kind Gold Bar Types," and Section 8.18 "Redemption in Kind Gold Bar Costs"). A Redemption in Kind minimum of 500 Participating Shares applies. 8.11

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REDEMPTION OF PARTICIPATING SHARES IN KIND

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

The Redemption in Kind Statement will show the total fine ounces of gold for release or delivery, number of gold bars to be supplied and bar numbers (if available), total fees and costs deducted, and any cash balance. Depending on the type of bars to be released(i), it may not always be possible to calculate the exact total fine ounces that will be released until the final Gold Bar Delivery List is provided twenty four hours prior to the release or delivery (see Section 8.13 "Gold Release and/or Delivery" and Section 8.14 "Release into Safe Custody"). Therefore, the final cash balance remitted may vary from the Redemption in Kind Statement amount. Fees deducted from the redemption value to be released or delivered against the Redemption in Kind will include but not be limited to the costs of security transportation, insurance, holding costs of gold bars prior to release or delivery, Precious Metals Agent’s administration fees, and international shipping and insurance if applicable. The Shareholder who is taking delivery of the gold will be responsible to pay any applicable VAT or customs duty as the Fund and/or the Precious Metals Agent do not calculate nor pay VATs or import taxes in destination countries of the shipped or delivered gold bars resulting from Redemption in Kind. Note: Some gold bar types such as 400 ounce Good Delivery Bars vary in the fine gold weight contained in each individual bar. Please see the specifications for Good Delivery Bars to understand these possible variations in weight (see Appendix A “Good Delivery Rules”).

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8.12

REDEMPTION IN KIND APPLICATION

When a Shareholder of the Fund chooses to redeem Participating Shares in the Fund for physical gold, he must submit an application to the Fund Administrator. The Shareholder is required to complete a Redemption in Kind Application. A Redemption in Kind minimum of 500 Participating Shares applies. In this application the Shareholder will provide certain information which will include the amount of Participating Shares to be redeemed, the type of gold bars requested (i.e., 12.5 kilo, 5 kilo, or 1 kilo bars), and Release Into Safe Custody and/or secure shipping requirements. This Redemption in Kind Application must be received by the Fund Administrator by 4:00 PM GMT five (5) Business Days before the elected Valuation Day. Failure to provide the Redemption in Kind Application to the Fund Administrator by the cut-off time will result in the Redemption in Kind, if approved, being deferred to the next Valuation Day at the Fund Administrator’s or Precious Metals Agent’s discretion. Upon receiving the Redemption in Kind Application, the Fund Administrator in conjunction with the Precious Metals Agent will assess the application and either approve the application or reply to the Shareholder with any restrictions or special requirements that will apply to the Redemption in Kind Application. Redemption in Kind approval will be provided by the Precious Metals Agent through the Fund Administrator to the Shareholder and include specific details of the transaction including any additional special shipping costs or requirements, customs or other details. 8.13

GOLD RELEASE AND/OR DELIVERY

Twenty-four hours prior to release or delivery, the Precious Metals Agent will provide a final Precious Metals Delivery List. This list will provide the complete details of bars for release/shipment including total number of bars, fine weight in gold of each bar, bar numbers (when applicable), and total weight in fine ounces. All precious metals weights are measured and reported to 0.001 of a troy ounce and/or grams.

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The Precious Metals Agent will arrange for the gold bars to be provided on behalf of the Fund for Release Into Safe Custody and/or delivery no more than forty five (45) days from the Valuation Day. Please note, this does not include additional shipping days which may be required for Secure Shipment and Delivery Into Safe Custody of physical gold bars if gold is being shipped outside of the jurisdiction in which the gold is vaulted for the Fund. This also does not include any delays incurred due to gold being held with customs or delays due to any other regulatory approval of the jurisdiction into which the gold is being shipped. These additional days may vary depending on shipping destination and size and value of total shipment.

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

8.14

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RELEASE INTO SAFE CUSTODY

Release Into Safe Custody occurs when the Precious Metals Agent releases the possession of redeemed gold bars into the custody and safekeeping of the redeeming Shareholder. Release Into Safe Custody is executed under the following procedures: The redeeming Shareholder is required to elect Release Into Safe Custody when completing their Redemption in Kind Application. When the redeeming Shareholder’s application is approved, the Precious Metals Agent will provide the redeeming Shareholder with a Release Into Safe Custody Form. The redeeming Shareholder is required to complete this form including information on the Responsible Person who will be present on behalf of the redeeming Shareholder for the Release Into Safe Custody. The redeeming Shareholder is required to provide legible copies of two forms of identification of the Responsible Person. If the Responsible Person is not the same person as the Shareholder, the Shareholder must provide the Responsible Person with a duly executed limited power of attorney ('Limited Power of Attorney'), authorising the Responsible Person to accept Release into Safe Custody on behalf of the Shareholder. At the Release Into Safe Custody, the Responsible Person of the Shareholder will be required to present the originals of the two forms of identification provided by the redeeming Shareholder in the Release Into Safe Custody Form, together with the original Limited Power of Attorney, where applicable. The location of the Release Into Safe Custody will be at the premises of an LBMA-member Secure Storage and Transport Company in Kloten, Zurich, Switzerland or another approved location of an LBMA member. The time and physical location of the Release Into Safe Custody will be provided to the redeeming Shareholder approximately seven (7) days prior to the release. At the Release Into Safe Custody, the Responsible Person will be present on behalf of the redeeming Shareholder together with a representative of the Precious Metals Agent and one or more personnel of the Secure Storage Company. The Responsible Person will be provided with the Gold Bar Delivery List in original form. The Responsible Person will inspect the gold bars in the presence of the other attendees. The Responsible Person will be required to sign that they have accepted the possession of the physical gold bars at which time the physical gold bars will be released into the safe custody of the Responsible Person on behalf of the redeeming Shareholder. At this time, full legal responsibility of the safekeeping of the physical gold bars has been transferred over to the Responsible Person. The redeeming Shareholder is required to cover any and all risks, responsibilities, costs, fees, VATs, and taxes associated with the physical gold bars transportation, insurance, exportation and/or importation from the point of Release Into Safe Custody onwards. 8.15

SECURE SHIPMENT AND DELIVERY INTO SAFE CUSTODY

Secure Shipment and Delivery Into Safe Custody occurs when the Precious Metals Agent provides secure shipping of redeemed gold bars to the physical delivery location and country elected by the redeeming Shareholder. Secure Shipment and Delivery Into Safe Custody is executed under the following procedures: The redeeming Shareholder is required to elect Secure Shipment and Delivery Into Safe Custody when completing their Redemption in Kind Application which will include city and country of the proposed delivery. The Precious Metals Agent will provide the redeeming Shareholder with a quotation for Secure Shipment and Delivery Into Safe Custody. If the redeeming Shareholder accepts the quotation for Secure Shipment and the redeeming Shareholder’s Redemption in Kind Application is approved, the Precious Metals Agent will provide the redeeming Shareholder with a Secure Shipment and Delivery Into Safe Custody Form. The Shareholder is required to complete this form including full delivery location information and information on the Responsible Person who will be present on behalf of the redeeming Shareholder for the delivery in safe custody of the precious metals. Approval of delivery location is subject to the approval of the Secure Storage and Transportation Company. Where, for the purposes of this Section 8.15, the Responsible Person is not the same person as the shareholder, the Limited Power of Attorney should authorise the Responsible Person to accept Delivery Into Safe Custody on behalf of the Shareholder. The redeeming Shareholder is required to provide legible copies of two forms of identification of the Responsible Person. At the Delivery Into Safe Custody, the Responsible Person of the redeeming Shareholder will be required to present the originals of the two forms of identification provided by the Shareholder in the Release Into Safe Custody Form, together with the original Limited Power of Attorney. Secure Shipment and Delivery Into Safe Custody will be provided by an LBMA-member Secure Storage and Transport Company and/or its local agent in the destination country. The time of Delivery Into Safe Custody will be provided to the redeeming Shareholder approximately twenty-four hours prior to the delivery. At the Release Into Safe Custody, the Responsible Person will be present together with the personnel of the Secure Transportation Company and a representative of the Precious Metals Agent. The Responsible Person will be provided with the Gold Bar Delivery List in original form.

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

The Responsible Person will be required to sign that they have accepted the possession of the physical gold bars at which time the physical gold bars will be released into the safe custody of the Responsible Person on behalf of the redeeming Shareholder. At this time, full legal responsibility of the safekeeping of the physical gold bars has been transferred over to the Responsible Person on behalf of the redeeming Shareholder. The redeeming Shareholder is required to cover any and all risks, responsibilities, costs, fees, VATs, and taxes associated with the physical gold bars transportation, insurance, exportation and/or importation from the point of Release Into Safe Custody onwards. The redeeming Shareholder is required to provide the Precious Metals Agent with all documentation demonstrating that the physical gold bars have been approved for importation and all relevant VATs and taxes have been paid within the destination country forty-eight hours prior to any precious metals being shipped. 8.16

REMITTANCE OF CASH BALANCE

The Cash Balance is the cash balance that remains from the Redemption in Kind transaction after total fine ounces to be released or delivered less all fees and costs have been deducted. All fees and costs are calculated on the Valuation Day of the Redemption in Kind transaction. However, the exact final amount of gold fine ounces to be released or delivered may not be known until the final Gold Bar Delivery List has been released twenty-four hours prior to the release or shipment for delivery (see Section 8.11 "Redemption in Kind Valuation" and Section 8.14 "Release into Safe Custody"). Therefore, in line with the exact final amount of gold fine ounces to be released or delivered, there may be an adjustment made to the Cash Balance prior to remittance. In this instance, a Cash Balance Adjustment Statement will be provided by the Fund Administrator to the Shareholder. The Cash Balance will be remitted to the redeeming Shareholder no later than 48 hours after the Release of Delivery Into Safe Custody. 8.17

REDEMPTION IN KIND GOLD BAR TYPES

Redemption in Kind is the redemption of Participating Shares, substantially, for physical gold bars. Generally Redemption in Kind applies only to the following three (3) physical gold bar types: Bar Type (grams) 1 Kilo 5 Kilo 12.5 Kilo (approx) 8.18

The following prices apply to bars available under these Redemption in Kind procedures. All prices are inclusive of all costs and fees associated with Redemption in Kind for Release Into Safe Custody (see Section 8.14 "Release into Safe Custody"). The following fees do not include additional costs such as shipping and insurance associated with Delivery Into Safe Custody. Costs associated with Secure Shipping and Delivery Into Safe Custody are quoted on an individual basis (see Section 8.15 "Secure Shipment and Delivery into Safe Custody").

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Less than $1M USD 2.75% 2.25% 2.00%

Above USD1M 1.50% 1.50% 1.25%

The Percentage amount is determined using the Fund NAV price calculated by the Fund Administrator using the London PM Gold Fix on the Valuation Day of the Redemption in Kind transaction (see Section 6 "Methodology for Calculation of Fund Net Asset Value" and Section 8.11 "Redemption in Kind Valuation").

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Bar Specifications 999.9 stamp fabricated 999.9 stamp fabrication 999 poured ‘Good Delivery’

REDEMPTION IN KIND GOLD BAR COSTS

Bar Type 1 Kilo 5 Kilo 12.5 Kilo (approx)

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Bar Type (troy oz) 32.1507 160.76 400 oz (approx)

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CHANGES TO REDEMPTION IN KIND POLICY AND PROCEDURES

The Redemption in Kind Policies and Procedures contained within this SOM are accurate at the time of its publication and distribution; however, the Fund reserves the right entirely at their discretion to change the operation, procedures, and fee structure applicable to Redemptions in Kind at any time. Shareholders will be notified of any changes to the Fund’s Redemption in Kind Policies and Procedures. 8.20

NON-APPROVAL OF REDEMPTION IN KIND AND REQUEST OF KNOW YOUR CLIENT INFORMATION

The Fund reserves the right to decline a Redemption in Kind application and/or the right to request further background information including Know Your Client information on the redeeming Shareholder and/or the Responsible Person acting on behalf of the Shareholder or any other counterparties of the redeeming Shareholder. Should such request, such additional information, and/or documentation be requested, the Redemption in Kind Application will not be processed until such additional information and/or documentation has been supplied to the Fund. 8.21

FORCE MAJEURE APPLYING TO REDEMPTION IN KIND

The Redemption in Kind policies and procedures contained within this SOM will not bind the Fund, Fund Administrator, and/or Precious Metals Agent to any of its agreements or obligations relating to Redemption in Kind in the course of any unforeseeable events beyond their control preventing the Fund, Fund Administrator, and/or Precious Metals Agent from fulfilling their respective or collective obligations under the Offering Memorandum or this SOM. Neither the Fund, Fund Administrator nor the Precious Metals Agent will be held liable or responsible for delays, non-performance, and/or loss resulting in whole or in part from acts of God, uncharacteristic market behavior or volatility, civil uprisings, government intervention, wars, technological or mechanical failure, or any other circumstance in any way outside the Fund, Fund Administrator, and/or Precious Metals Agent's control.

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SUPPLEMENTAL OFFERING MEMORANDUM REDEMPTION OF PARTICIPATING SHARES

8.19

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SUPPLEMENTAL OFFERING MEMORANDUM RISK PROFILE OF AN INVESTMENT IN THE FUND

9

RISK PROFILE OF AN INVESTMENT IN THE FUND

There are certain risks with any investment, investment in the gold sector, and specifically investment in the Fund. As with all investments, risk cannot be eliminated, and there can be no assurance or guarantee that the Fund will meet its investment objectives. Investment in the Fund is only available to investors who certify that they fully understand and are willing to assume the risks involved. Below are certain risk factors that must be taken into consideration before investing in the Participating Shares. While the Directors believe the following to be the most significant, this list is not intended to be exhaustive. Prospective investors are urged to consult their financial advisor before investing in the Fund. 9.1

GENERAL RISKS OF INVESTING

An investment in the Fund is subject to all direct and indirect risks incidental to the ownership of gold assets which the Fund may directly own. These factors include, without limitation, changes in government rules and fiscal and monetary policies, changes in laws and political and economic conditions throughout the world, and changes in general market conditions. There can be no guarantee that losses will not be realized by a Shareholder, and a Shareholder may lose some or even all of its investment. Under certain circumstances, the Fund may be unable to liquidate its assets due to the absence of a liquid market and consequently may not be able to redeem its Participating Shares. 9.2

LACK OF PORTFOLIO DIVERSIFICATION

Subject to the investment strategies, objective, and restrictions disclosed in this SOM (see Section 1 "Investment Overview"), the Fund does not intend to utilize common diversification techniques and strategies employed in many diversified investment Funds. The Fund intends to invest all or substantially all of the Fund’s assets into physical gold bullion bars. This lack of portfolio diversification may cause the relevant NAV of the Participating Shares to fluctuate more than that of a diversified investment fund. The portfolio of the Fund will not be diversified out of physical gold bullion into assets that are considered traditional assets. Generally the correlation between price movements in traditional assets classes and physical gold bullion may be negative. This may see the assets of the Fund lose value while other assets classes may be rising. 9.3

LIMITED TRANSFERABILITY AND LACK OF LIQUIDITY OF PARTICIPATING SHARES

The Participating Shares are freely transferable except that the Directors may decline to register any transfer of the Participating Shares to a natural person, firm or company who is not, or in the reasonable opinion of the Directors is not, an eligible investor and to any natural person, firm or company who does not provide the representations and warranties required of an eligible investor. The Directors may also decline to register any transfer of Participating Shares if the proposed transferee is unable to satisfy the anti-money laundering requirements of the Fund or the Administrator.

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Accordingly, Shareholders may not be able to sell their Participating Shares on an open or secondary market and therefore would be required to utilize the Fund's Redemption procedures, which itself may be subject to restrictions (see Section 8 "Redemption of Participating Shares"). As there is no recognised secondary market for the Participating Shares, Participating Shares have very limited or no liquidity. Investors should be fully aware of the long-term nature of their investment in the Fund and should have other financial reserves and be able to bear the economic risk of the loss of their entire investment.

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SUPPLEMENTAL OFFERING MEMORANDUM RISK PROFILE OF AN INVESTMENT IN THE FUND

9.4

EFFECT OF SUBSTANTIAL REDEMPTIONS

Substantial redemptions by Shareholders within a short period of time could require the Fund to liquidate assets more rapidly than would otherwise be desirable, which could adversely affect the value of the Fund’s assets. The resulting reduction in the Fund’s assets could make it more difficult to generate a positive rate of return or to recoup losses due to a reduced equity base. 9.5

LEGAL STRUCTURE, DIRECTORS, AND AFFILIATES ENTITIES

The Fund is a segregated portfolio which constitutes a sub-fund of the Physical Hard Assets Fund SPC, a Cayman Islands segregated portfolio company. The Companies Law (as revised) of the Cayman Islands provides that a segregated portfolio company may create one or more segregated portfolios to segregate the assets and liabilities of the segregated portfolio company held within a segregated portfolio from the assets and liabilities held within all other segregated portfolios of the company or the assets and liabilities of the company which are not held within a segregated portfolio of the company. The Companies Law (as revised) also provides that segregated portfolio assets shall only be available and used to meet the liabilities of creditors of that segregated portfolio and shall not be available or used to meet liabilities of other creditors of the segregated portfolio company. This type of structure does not exist in most jurisdictions, and these provisions of the Companies Law (as revised) have not been subject to judicial scrutiny in any jurisdiction. Accordingly, there is a risk that upon such review a court may not be willing to uphold the limited liability feature of each segregated portfolio. 9.6

NO VOTING RIGHTS

Participating Shares in the Fund have no voting rights in the Fund. As contemplated by Section 95(2) of the Companies Law, the rights of Participating Shareholders to petition for the winding up of the Company on any ground permitted by law may be contractually limited and, if so, any such petition that shall be presented at any time may be considered void and of no effect. If any holder of Participating Shares shall present such a petition in breach of such limitation, he shall be liable to pay all costs, losses, damages, and expenses of the Company arising out of the presentation of such petition including, but not limited to, legal costs on a full indemnity basis. 9.7

COMPULSORY REDEMPTIONS

The Fund has the right to require the compulsory redemption or transfer of all Participating Shares held by a Shareholder in certain circumstances (see Section 8 "Redemption of Participating Shares"). 9.8

CHANGES IN APPLICABLE LAW

The Fund must comply with various legal requirements including requirements imposed by the securities laws, tax laws, and pension laws in various jurisdictions. At times any of these applicable laws may change the legal requirements to which the Fund must comply, which could adversely affect Shareholders in the Fund. 9.9

TAXATION

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The Fund and Investment Advisor will attempt to structure the investments of the Fund in a manner that is generally tax efficient for the Fund and its Shareholders; however, there is no assurance that the structure of the Fund or its investments will be tax efficient for the Fund or any particular Shareholder or that any particular tax result will be achieved. Prospective investors must consult their own professional advisors with respect to the tax consequences to them of an investment in the Fund under the laws of the jurisdictions in which they are subject to taxation.

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9.10

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INVESTMENT ADVISOR

The Investment Advisor may advise on the Fund’s investment strategies. The Fund's success depends, to a large extent, upon the Investment Advisor’s ability. In addition, if any of the principal officers of an Investment Advisor cease to participate in the operation of the Investment Advisor to the extent they relate to the operations of the Fund for any reason, the investment operations, objectives, and activities of the Fund may be adversely affected 9.11

SPECIFIC RISK FACTORS

The main factors that may cause the greatest impact on the Fund are those that affect the price of physical gold bullion. The value of Participating Shares relate directly to the value of the physical gold bullion held by the Fund, and fluctuations in the international price of gold could adversely affect the investment in Participating Shares. Physical gold bullion is quoted in U.S. dollars. The price will fluctuate depending on the movement in the international gold market. Physical gold bullion prices may be affected at any time by international, economic, monetary, and political factors, many of which are unpredictable. These factors include but are not limited to: i.) volatility of interest rates; ii.) Investors’ expectations of future inflation; iii.) global, regional, political or economic incidents; iv.) volatility in the exchange rate of the U.S. Dollar being the currency in which the gold price is quoted; and v.) global gold market supply and demand factors (see Section 3 "Gold Market Sector Fundamentals"). 9.12

MARKET RISK

Physical gold bullion which comprises the principle asset of the Fund is subject to fluctuations in price, which can be influenced by many external factors including but not limited to economic, market, and geopolitical conditions. This could impact the Fund’s assets’ market value and therefore the value of the Participating Shares. There may be risks associated with the activity of purchase and sale of physical gold bullion bars. Prices are volatile and can be affected by many factors including changes in global supply and demand, fluctuations in interest rates, international events, and government policies and actions with regard to their economies, exchange controls, exports/imports, etc. Global gold supply and demand are influenced by factors such as: i.) forward selling of gold by miners and producers; ii.) physical gold purchases made in the spot markets by miners and producers to unwind their gold hedge positions; iii.) market activities of scrap gold suppliers; iv.) central bank gold purchases, sales, and leasing; v.) mine production factors including cost of recovery, energy, and wages; vi.) cost levels and general economic conditions in major gold-producing countries; and vii.) new gold mining and recovery projects globally (see Section 3 "Gold Market Sector Fundamentals"). 9.13

NO GUARANTEED RETURN

Although the Directors of the Fund believe the investment policies of the Fund are consistent with the objectives set for the Fund, it does not guarantee that these objectives will be achieved. The performance of the assets of the Fund is subject to many factors including fluctuations in the financial and money markets and other factors that may or may not affect the price of physical gold bullion. The growth and performance of the assets of the Fund will fluctuate, and it cannot be guaranteed that the overall growth in the value of the assets will be achieved consistent with the investment objectives of the Fund. An investment in Participating Shares will only yield long-term gains if the value of physical gold increases in an amount in excess of the Fund expenses. The Fund will not actively trade physical gold in an attempt to take advantage of short-term market fluctuations in gold prices. Accordingly, the Fund's long-term performance is wholly dependent on the long-term performance in the price of physical gold bullion. As a result, an investment in the Participating Shares will only yield long-term gains if the value of the Fund's physical gold bullion increases in amounts greater than the Fund's expenses. .

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BUSINESS AND PERFORMANCE RISKS

The Physical Gold Fund shall comply with the investment policies of the Fund in order to deliver on the Fund’s investment objectives (see Section 1 "Investment Overview"); however, it is not guaranteed that these objectives will be achieved. 9.15

FEES AND INDEMNITIES

The Fund’s Directors, Investment Advisor, Auditors, Fund Administrator and their respective affiliates, directors, officers, and employees may be entitled to be indemnified in certain circumstances by the Fund to satisfy certain liabilities which may arise as a result of their activities in relation to the Fund. 9.16

MARKET AND LIQUIDITY RISKS

The Fund and the Investment Advisor have adopted a liquidity management policy to meet redemptions and cash expenses of the Fund. The Fund’s liquidity is wholly dependent on there being a market for physical gold and a clearing mechanism to sell gold in the international market. Neither the Fund, Investment Advisor nor the Precious Metals Agent can guarantee there will be a market for the selling or clearing of physical gold in the international marketplace should the Fund be required to sell some or all of its assets to meet redemptions of Fund expenses. The Fund is required to purchase physical gold bullion upon receiving subscriptions in the Fund. The Fund’s ability to acquire physical gold assets for the Fund is wholly dependent on there being a market for physical gold and a clearing mechanism to buy gold in the international market. Neither the Fund, Investment Advisor nor the Precious Metals Agent can guarantee there will be a market for the buying or clearing of physical gold in the international marketplace should the Fund be required to buy gold assets from new subscriptions in the Fund. 9.17

SHORT SELLING AND MARKET MANIPULATION

The international gold markets may be exposed to short selling, leasing, and other forms of price manipulation by market participants, which may adversely affect the market price of physical gold bullion in the international markets. Such market activity could adversely affect the value of the Fund’s assets. The foregoing list of risk factors does not purport to be a complete enumeration or explanation of the risks involved in an investment in the Fund. Prospective investors should read this entire SOM in conjunction with the Principle Investment Memorandum and consult their own counsel and advisors before deciding to invest in the Fund. 9.18

CROSS CLASS LIABILITY

Because each Class of Participating Shares of the Fund is not a separate legal entity, the assets attributable to any one Class will not be legally segregated or isolated from the liabilities attributable to any other Class. Therefore, if one of the Classes should become insolvent (i.e. the assets attributable to that Class are insufficient to meet the liabilities attributable to that Class), creditors of that Class may have recourse to the assets of the other Classes. However, in practice the risk of such cross-Class “contamination” is remote. Care will be taken to ensure, as far as possible, that any lender in respect of any Class may only have recourse contractually to the assets of that Class.

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9.14

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FEES, EXPENSES, AND OTHER DETAILS

The Fund is responsible to pay certain fees and operational costs and expenses for the running and management of the Fund. These fees include: a) Investment advisory fees payable to the Investment Advisor; b) Administration Fees payable to the Fund Administrator; and c) Banking fees payable to the Custodian Bank. Legal costs and fees payable to the Fund’s legal counsel, government fees, auditing fees payable to the Fund Auditor, and other miscellaneous expenses involved in managing the Fund shall be defrayed by the Investment Advisor. All fees of the Fund are outlined in the Offering Summary (see Section 13 "Offering Summary"). The Investment Advisor at its discretion has the ability to reimburse the Fund without any recourse. 10.1

REPORTING

In accordance with the Investment Advisor Agreement entered into between the Fund and the Investment Advisor, the Investment Advisor will report a minimum of twice annually on the Fund’s performance. Further, the Investment Advisor will provide short-term investment advice together with broader gold market sector analysis on a regular basis. The Investment Advisor will provide the Fund with recommendations on its investment objectives, strategies, and operational procedures. 10.2

BASE CURRENCY

The base currency of the Fund is United States Dollars. The Net Asset Valuation of the Fund is reported in United Sates Dollars. Physical gold bullion is bought and sold in United States Dollars.

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SUPPLEMENTAL OFFERING MEMORANDUM FEES, EXPENSES, AND OTHER DETAILS

10

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LEGAL ADVISORS

Solomon Harris, Cayman Islands Attorneys at Law, acts as Cayman Islands counsel to the Fund and the Company. In connection with the Fund’s offering of Participating Shares and subsequent advice to the Fund, the Company, the Investment Adviser and their affiliates, Solomon Harris will not be representing Shareholders. No independent counsel has been retained to represent Shareholders. Each Shareholder is encouraged to consult with its, his or her own counsel. In addition, Solomon Harris relies on the information furnished to it by the Company on behalf of the Fund and the Investment Adviser and does not investigate or verify the accuracy or completeness of the information set forth herein concerning such entities or any of their affiliates and personnel or any other service providers to the Fund. Solomon Harris does not monitor or oversee the Fund’s investment activities.

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SUPPLEMENTAL OFFERING MEMORANDUM LEGAL ADVISORS

11

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DIRECTORY

THE FUND: The Physical Gold Fund SP, a segregated portfolio of the Physical Hard Assets Fund SPC

c/o Trident Fund Services Cayman One Capital Place PO Box 847 Grand Cayman KY1-1103 Cayman Islands

FUND SPONSOR: Vigilant Capital (Cayman) Limited

First Caribbean House PO Box 1990 George Town Grand Cayman KY1 – 1104 Cayman Islands

INVESTMENT ADVISER: Vigilant Capital (Cayman) Limited

First Caribbean House PO Box 1990 George Town Grand Cayman KY1 – 1104 Cayman Islands

FUND ADMINISTRATOR: Trident Fund Services Cayman

One Capital Place PO Box 847 Grand Cayman KY1-1103 Cayman Islands

FUND AUDITOR: Ernst & Young Ltd.

62 Forum Lane PO Box 510 Camana Bay Grand Cayman – KY1-1106 Cayman Islands

BULLION AUDITOR: Grant Thornton

Im Tiergarten 7 8055 Zürich, Switzerland

PRECIOUS METALS AGENT: AFE Custodial Company

Level 23, Monticello Building, Marbella, Panama City, Panama

LEGAL COUNSEL: Solomon Harris Attorneys-at-Law

FirstCaribbean House 3rd Floor PO Box 1990, George Town Grand Cayman KY1 – 1104 Cayman Islands

PAYING BANK: CIBC FirstCaribbean International Bank

FirstCaribbean International Bank (Cayman) Limited P.O. Box 68 25 Main Street, George Town Grand Cayman KY1-1102 Cayman Islands

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SUPPLEMENTAL OFFERING MEMORANDUM DIRECTORY

12

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13

OFFERING SUMMARY

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OPEN-ENDED ALTERNATIVE INVESTMENT FUND

Reference Currency

A Class: US Dollar B Class: US Dollar I Class: US Dollar

Share Class: A Class

Retail Investor

Share Class: B Class

Sophisticated Investor

Share Class: I Class

Institutional Investor

Share Type

Capitalisation Shares

Form of Participating Shares

Registered share by book entry without certificate

Fraction of Shares

Up to three decimals

Duration

Unlimited

Valuation Day

Last Cayman Business Day of each week and/or on any other additional day as determined by the Directors from time to time

Subscription Fee

A Class: 5% subscription fees and commission B Class: 3% subscription fees and commission I Class: 1% subscription fees and commission

Redemption Price

Redemption in Cash: Redemption fee not applicable Redemption in Kind: Cost on application

Initial Subscription Price

A Class: USD100 per share B Class: USD100 per share I Class: USD100 per share

Minimum Subscription

A Class: USD500 B Class: USD100,000 I Class: USD500,000

Minimum Holding Amount

A Class: USD500 B Class: USD100,000 I Class: USD500,000

Annual Operational and Management Fees

A Class: 2% per annum B Class: 1.5% per annum I Class: 0.4% per annum

Subscription Cut-Off

4:00 PM one (1) full Grand Cayman bank day before applicable valuation day

Redemption Cut-Off

4:00 PM one (1) full Grand Cayman bank day before applicable Valuation Day

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SUPPLEMENTAL OFFERING MEMORANDUM OFFERING SUMMARY

FUND TYPE

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OPEN-ENDED ALTERNATIVE INVESTMENT FUND

Conversion Cut-Off

4:00 PM thirty (30) full Grand Cayman bank days before applicable Valuation Day

Subscription Payments

4:00 PM one (1) full Grand Cayman bank day before applicable Valuation Day in base currency of the Fund. Subscriptions take place in nominal dollar amounts, not Participating Shares. In case of non-payment of the subscription orders’ monies, the orders can be cancelled by the Directors. In case of late payment of the subscription orders’ monies, the order may be executed at the next Valuation Day.

Redemption Payments

Redemption in cash is paid in the base currency of the Fund within fourteen (14) full Business Days after the Valuation Day of the redemption. Redemption in cash orders can be placed for nominal dollars or a determined number of Participating Shares.

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SUPPLEMENTAL OFFERING MEMORANDUM OFFERING SUMMARY

FUND TYPE

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CONFIDENTIAL OFFERING MEMORANDUM

OF THE

PHYSICAL HARD ASSETS FUND SPC AN OPEN-ENDED INVESTMENT FUND ESTABLISHED AS AN EXEMPTED SEGREGATED PORTFOLIO COMPANY LIMITED BY SHARES IN THE CAYMAN ISLANDS

Private placement of Participating Shares in the various segregated portfolios/Funds of the Company

August 2015

NOTICE : THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN ANY DOUBT ABOUT THE CONTENTS OF THIS DOCUMENT, YOU SHOULD CONSULT WITH YOUR ACCOUNTANT, LEGAL ADVISER OR OTHER INDEPENDENT PROFESSIONAL ADVISER. Number:_________

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DIRECTORY

Company

Physical Hard Assets Fund SPC

Registered Office

Trident Trust Company (Cayman) Ltd One Capital Place PO Box 847 Grand Cayman KY1-1103 Cayman Islands Tel + 1 345 949 0880 Fax + 1 345 949 0881

Sponsor

Vigilant Capital (Cayman) Limited c/o Solaris Corporate Services Ltd FirstCaribbean Building 3rd Floor PO Box 1990 KY1-1104 Cayman Islands

Directors

Mr. Alex Stanczyk Mr. Nestor Castillero Nuñez Mrs. Perla Nuñez de Cohen

Investment Advisor

Vigilant Capital (Cayman) Limited

Administrator, Registrar, and Transfer Agent

Trident Trust Company (Cayman) Ltd

Custodian(s) (if any)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum

Bank

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum

Legal Counsel as to Cayman Islands Law and Listing Agent

Solomon Harris Attorneys-at-Law PO Box 1990 FirstCaribbean House George Town Grand Cayman KY1-1104 Cayman Islands

Auditors

Ernst & Young Ltd PO Box 510 62 Forum Lane Camana Bay Grand Cayman KY1-1106 Cayman Islands

Other Agents/Advisers (if any)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum

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CONFIDENTIAL OFFERING MEMORANDUM DIRECTORY

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CONFIDENTIAL OFFERING MEMORANDUM IMPORTANT INFORMATION

2

IMPORTANT INFORMATION

2.1

INCORPORATION AND REGISTRATION IN THE CAYMAN ISLANDS

The Company is an open-ended investment fund incorporated on June 26, 2012, with registration number TR - 269886 as a Cayman Islands exempted segregated portfolio company limited by shares. The Company’s registered office is located at the address stated in the Directory. The Company constitutes a mutual fund as defined in Section 2 of the Mutual Funds Law (Revised) of the Cayman Islands (the 'Mutual Funds Law') and is registered with the Cayman Islands Monetary Authority under Section 4(3) of the Mutual Funds Law. The Company is therefore regulated under the Mutual Funds Law. The Company will comply with the Mutual Funds Law on the basis that the minimum initial investment per investor will at all times be at least the equivalent of CI$ 80,000 (namely USD100,000). Notwithstanding this, this Confidential Offering Memorandum ('Offering Memorandum') has not been approved by any regulatory authority or body in any country or jurisdiction (including, without limitation, the Cayman Islands Monetary Authority) (see Section 13.3 “Mutual Fund Registration”). This Offering Memorandum together with the Supplemental Offering Memorandum constitutes a listing document in respect of Participating Shares of any class or segregated portfolio for which an application is made for the admission of such Participating Shares to the Official List of the Cayman Islands Stock Exchange. This listing document includes information given in compliance with the listing rules of the Cayman Islands Stock Exchange. The Directors of the Fund collectively and individually accept full responsibility for the accuracy of the information contained in this listing document and confirm, having made reasonable enquiry, that to the best of their knowledge and belief there are no facts the omission of which would make any statement within this listing document misleading. The Cayman Islands Stock Exchange takes no responsibility for the contents of this document, makes no representations as to its accuracy or completeness, and expressly disclaims any liability whatsoever for any loss arising from or in reliance upon any part of this document. As at the date of this Offering Memorandum, no other classes of Participating Shares have been admitted to listing on the Cayman Islands Stock Exchange. During its duration, which is unlimited, the Company may create several segregated portfolios which will constitute separate segregated portfolios or sub-funds of the Company (each a 'Fund'). Each Fund of the Company will invest into its own portfolio of assets. The assets and liabilities of each Fund will be legally segregated from the assets and liabilities of every other Fund and from the general assets and liabilities of the Company. The Company intends to issue redeemable, non-voting participating shares in each Fund of the Company ('Participating Shares') pursuant to the terms of this Offering Memorandum and a specific confidential supplemental information memorandum issued in respect of each Fund (each a 'Supplemental Offering Memorandum'). The Company’s constitution is defined in its Memorandum and Articles of Association and its objects, as set out in the Company’s Memorandum of Association, are unrestricted and accordingly include the carrying on of the business of an open-ended investment fund. There is no investment compensation scheme available to investors in the Cayman Islands.

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The Company is generally subject to the laws of the Cayman Islands and currently has one segregated portfolio, namely the Physical Gold Fund SP. As at the date of this Offering Memorandum, there is no litigation or claims of material importance pending or threatened by or against the Company or the Physical Gold Fund SP. The Company intends to seek approval for use of the Pershing platform.

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CONFIDENTIAL OFFERING MEMORANDUM IMPORTANT INFORMATION

2.2

RELIANCE ON OFFERING MEMORANDUM AND ANY SUPPLEMENTAL OFFERING MEMORANDUM

The Directors of the Company, whose names appear in the Directory, accept responsibility for the information contained in this Offering Memorandum and each Supplemental Offering Memorandum (together the 'Offering Documents' and each an 'Offering Document'). To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in the Offering Documents is in accordance with the facts and does not omit anything likely to affect the import of such information. The Participating Shares of each Fund are made available solely on the basis of the information and representations contained in the Offering Documents, and any further information given or representations made by any person may not be relied upon as having been authorised by the Company or the Directors. Neither the Company nor the Directors accept(s) responsibility for any further information so given or any representations so made. Neither the delivery of the Offering Documents nor the allotment or issue of Participating Shares in a Fund shall under any circumstances create any implication that there has been no change in the affairs of the Company since the date hereof or thereof. This Offering Memorandum should be read in conjunction with the relevant Supplemental Offering Memorandum in respect of the Fund in which an investor wishes to invest. In the event of a conflict between the terms of this Offering Memorandum and the relevant Supplemental Offering Memorandum, the terms of the relevant Supplemental Offering Memorandum shall prevail at all times. Certain information contained in this Offering Memorandum and each Supplemental Offering Memorandum constitutes “forward looking statements”, which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, including those described under Section 15 “Risk Factors” and Section 14 “Potential Conflicts of Interest,” actual events or results or the actual performance of the Company or a Fund may differ materially from those reflected or contemplated in such forward-looking statements. This Offering Memorandum and each Supplemental Offering Memorandum may be translated into other languages. Where this Offering Memorandum or any Supplemental Offering Memorandum is translated into another language, the translation shall be as close as possible to a direct translation from the English text and changes therefrom shall be only as necessary to comply with the requirements of the regulatory authorities of other jurisdictions. In the event of any inconsistency or ambiguity in relation to the meaning of any word or phrase in any translation, the English text shall prevail and all disputes as to the terms thereof shall be governed by, and construed in accordance with, the laws of the Cayman Islands. This Offering Memorandum and each Supplemental Offering Memorandum should be read in conjunction with the Articles of Association of the Company (the 'Articles'). In the event of a conflict between the terms of this Offering Memorandum and/or any Supplemental Offering Memorandum and the Articles, the terms of the Articles shall prevail at all times.

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The Offering Documents should also be read in conjunction with the Material Agreements and the subscription agreement entered into by each investor with the Company. In the event of a conflict between the terms of the Offering Documents and the Material Agreements and/or the subscription agreement entered into by each investor with the Company, the terms of the Material Agreements and/or the subscription agreement entered into by each investor with the Company shall prevail at all times. This Offering Memorandum and each Supplemental Offering Memorandum are based on the law and practice in force in the Cayman Islands at the relevant time and is subject to changes therein. In the event of any dispute between the Company and an investor, such dispute shall be determined by the courts of the Cayman Islands.

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CONFIDENTIAL OFFERING MEMORANDUM INVESTMENT OVERVIEW

2.3

Any reproduction or distribution of this Offering Memorandum or any Supplemental Offering Memorandum, in whole or in part, or the disclosure of its contents, without the consent of the Company, is prohibited except as required by law or by any regulatory or governmental authority. By accepting delivery of this Offering Memorandum and the relevant Supplemental Offering Memorandum, each prospective applicant for Participating Shares agrees to keep confidential all information contained herein and therein that is not already in the public domain and to use this Offering Memorandum and the relevant Supplemental Offering Memorandum for the sole purpose of evaluating a possible investment in the Company. Notwithstanding the foregoing, prospective applicants for Participating Shares are permitted to consult their accountant, legal adviser or other independent professional adviser on the contents of this Offering Memorandum and the relevant Supplemental Offering Memorandum as part of the evaluation process. 2.4

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RESTRICTIONS ON DISTRIBUTION

The distribution of this Offering Memorandum and each Supplemental Offering Memorandum and the offering of Participating Shares in certain jurisdictions may be restricted, and accordingly persons into whose possession this Offering Memorandum and any Supplemental Offering Memorandum may come are required by the Company to inform themselves of and to observe any such restrictions. The Offering Documents do not constitute an offer for sale of Participating Shares by the Company. Further, they do not constitute a solicitation or an offer to any person in any jurisdiction in which such solicitation is not authorised or to any person to whom it would be unlawful to make such solicitation. The Participating Shares have not been registered under the Securities Act of 1933 of the United States (as amended) (the '1933 Act') or the securities laws of any of the states of the United States, nor is such registration contemplated. The Participating Shares may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “US Person” except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and any applicable state laws. Any re-offer or resale of any of the Participating Shares in the United States or to US Persons may constitute a violation of United States law. The Company will not be registered under the Investment Company Act of 1940 of the United States (as amended) (the '1940 Act'). The foregoing information is for general guidance only, and it is the responsibility of any person or persons in possession of this Offering Memorandum and any Supplemental Offering Memorandum and wishing to make application for Participating Shares to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Prospective applicants for Participating Shares should inform themselves as to legal requirements also applying and any applicable exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile. If any jurisdictional disclaimers are deemed necessary or are mandatory in relation to any jurisdiction which any Fund wishes to target, then these will be specified in the relevant Supplemental Offering Memorandum. 2.5

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RISKS

This Offering Memorandum and any Supplemental Offering Memorandum do not constitute a recommendation by the Company, the Directors, any Investment Manager or any other person, or advice to any recipient of this Offering Memorandum or any Supplemental Offering Memorandum on the merits of acquiring Participating Shares. This Offering Memorandum and each Supplemental Offering Memorandum do not necessarily identify, or purport to identify, all the risk factors associated with the Company. Prospective applicants for Participating Shares must make their own independent assessment, after making such investigations as they consider necessary, of the merits of acquiring Participating Shares. Prospective applicants for Participating Shares should consult and rely upon their own investment, accounting, legal and tax representatives, and advisers as to such matters concerning the Company and to evaluate independently the financial risks, consequences, and suitability of an investment in the Company, or if in any doubt about the contents of this Offering Memorandum or the relevant Supplemental Offering Memorandum.

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There can be no assurance that the Company’s objective in respect to any of its Funds will be achieved, and investment results may vary substantially over time. Investment in the Company is not intended to be a complete investment programme for any investor. Prospective applicants for Participating Shares should carefully consider whether an investment in Participating Shares is suitable for them in light of their circumstances and financial resources. Prospective applicants for Participating Shares should inform themselves as to the legal requirements within the countries of their nationality, residence, ordinary residence or domicile for such acquisition, any foreign exchange restrictions or exchange control requirements which they might encounter on acquisition or disposal of Participating Shares and the income tax and other taxation consequences which might be relevant to the acquisition, holding or disposal of Participating Shares. Requirements which may be deemed necessary for the protection of retail or unsophisticated investors do not apply to the Company, which is therefore not suitable for retail or unsophisticated investors. IF THE PROSPECTIVE APPLICANT FOR PARTICIPATING SHARES IS IN ANY DOUBT ABOUT THE CONTENTS OF THIS DOCUMENT, THEY SHOULD CONSULT WITH THEIR ACCOUNTANT, LEGAL ADVISER OR OTHER PROFESSIONAL ADVISER BEFORE INVESTING.

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CONFIDENTIAL OFFERING MEMORANDUM IMPORTANT INFORMATION

Investment in the Company carries substantial risk and may involve special risks that could lead to a loss of all or a substantial portion of such investment (see Section 15 “Risk Factors”). Unless prospective applicants for Participating Shares fully understand and accept the nature of the Company and the potential risks inherent in the Company, they should not invest in the Company. Each prospective applicant for Participating Shares is wholly responsible for ensuring that all aspects of the Company are acceptable to them.

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3

DEFINITIONS AND INTERPRETATION

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CONFIDENTIAL OFFERING MEMORANDUM DEFINITIONS AND INTERPRETATION

3.1 DEFINITIONS Capitalised terms used in this Offering Memorandum and in each Supplemental Offering Memorandum shall have the following meanings unless the context otherwise requires: 1993 Act

The Securities Act of 1933 of the United States (as amended).

1940 Act

The Investment Company Act of 1940 of the United States (as amended).

Administration Agreement

An agreement between the Company on behalf of a particular Fund and the Administrator (as supplemented, amended or replaced from time to time) as described in the relevant Supplemental Offering Memorandum.

Administrator

Trident Trust Company (Cayman) Ltd.

Articles

The Articles of Association of the Company (as amended or replaced from time to time).

Auditors

In relation to the Company, Ernst & Young Ltd., Cayman Islands.

Bank(s)

In relation to a particular Fund as specified in the relevant Supplemental Offering Memorandum.

Base Currency

In relation to the Company generally, USD, and in relation to a particular Fund as specified in the relevant Supplemental Offering Memorandum.

Broker(s)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum.

Brokerage Agreement

Any agreement between the Company on behalf of a particular Fund and any relevant Broker (as supplemented, amended or replaced from time to time) as described in the relevant Supplemental Offering Memorandum.

Business Day

In relation to a particular Fund as specified in the relevant Supplemental Offering Memorandum.

CI$

The Cayman Islands Dollar.

CIMA

The Cayman Islands Monetary Authority.

Companies Law

The Companies Law (Revised) of the Cayman Islands.

Company

Physical Hard Assets Fund SPC, Cayman Islands.

Custodian(s)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum.

Custody Agreement

Any agreement between the Company on behalf of a particular Fund and any relevant Custodian (as supplemented, amended or replaced from time to time) as described in the relevant Supplemental Offering Memorandum.

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CONFIDENTIAL OFFERING MEMORANDUM DEFINITIONS AND INTERPRETATION

The members of the board of directors of the Company for the time being and any duly constituted committee thereof and any successors to such members as may be appointed from time to time.

Distributor(s)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum.

Eligible Investor

An eligible investor as defined in Section 7 “Subscription of Shares”.

Fund

Each segregated portfolio established by the Company pursuant to part XIV of the Companies Law, each being a sub-fund or class or group of classes of the Company, the details of the offering for each Fund being contained in this Offering Memorandum and the relevant Supplemental Offering Memorandum for each Fund.

Gross Negligence

In relation to a person; generally means a standard of conduct beyond negligence whereby a person acts with reckless disregard for the consequences of his action or inaction.

Ineligible Applicant

An ineligible applicant as described in Section 7 “Subscription of Shares,” and more particularly described in the relevant Supplemental Offering Memorandum.

Initial Offer Period

The period determined by the Directors during which Participating Shares in a Fund are available for subscription at a fixed price (plus any applicable subscription fee) as specified in the relevant Supplemental Offering Memorandum.

Initial Price

The fixed price (plus any applicable subscription fee) at which Participating Shares in a Fund or in a particular sub-class of a Fund are available for subscription during the relevant Initial Offer Period described in Section 7 “Subscription of Shares” and in the relevant Supplemental Offering Memorandum.

Investment Advisor

Vigilant Capital (Cayman) Limited or such other investment advisor as specified in the relevant Supplemental Offering Memorandum.

Investment Advisory Agreement

An agreement between the Company on behalf of a particular Fund and any relevant Investment Advisor or, alternatively, between the relevant Investment Manager and any relevant Investment Advisor (as supplemented, amended or replaced from time to time) as described in the relevant Supplemental Offering Memorandum.

Investment Management Agreement

An agreement between the Company on behalf of a particular Fund and the relevant Investment Manager (as supplemented, amended or replaced from time to time) as described in the relevant Supplemental Offering Memorandum.

Investment Manager(s)

In relation to a particular Fund as specified in the relevant Supplemental Offering Memorandum.

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Directors

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Material Agreements

Any relevant Administration Agreement, any relevant Brokerage Agreement, any relevant Custody Agreement, any relevant Investment Advisory Agreement, any relevant Investment Management Agreement, any relevant Prime Brokerage Agreement, and any other relevant agreements so specified, which relate to the operations of a Fund entered into by the Company on behalf of a particular Fund with any other agents/advisers.

Minimum Holding

In relation to a particular Fund as specified in the relevant Supplemental Offering Memorandum.

Month

A month of the Gregorian calendar.

Mutual Funds Law

The Mutual Funds Law (Revised) of the Cayman Islands.

Net Asset Value

The net asset value of a particular Fund or of a particular sub-class of a Fund determined in accordance with this Offering Memorandum and the Articles.

Net Asset Value per Share

The Net Asset Value per Participating Share of a particular Fund or of a particular sub-class of a Fund being the Net Asset Value of that particular Fund or of that particular sub-class of that Fund divided by the number of Participating Shares in issue or deemed to be in issue in respect of that particular Fund or of that particular sub-class of that Fund.

Offering Memorandum

This confidential offering memorandum (as amended or replaced from time to time).

Participating Shares

Redeemable, non-voting, participating shares in a particular Fund of the Company having the rights as set out in this Offering Memorandum and in the Articles, being “segregated portfolio shares” as defined in the Companies Law, as further described in the relevant Supplemental Offering Memorandum.

Prime Broker(s)

In relation to a particular Fund, if any, as specified in the relevant Supplemental Offering Memorandum.

Redemption Day

The Business Day on which Participating Shares in a particular Fund or in a particular sub-class of a Fund may be redeemed, subject to any restrictions in that regard, as specified in the relevant Supplemental Offering Memorandum.

Redemption Price

The price per Participating Share (less any applicable redemption fee) at which Participating Shares in a particular Fund or in a particular sub-class of a Fund are redeemed by the Company calculated in the manner described in Section 8 “Redemption of Shares” or in the relevant Supplemental Offering Memorandum.

Register of Shareholders

The Company’s Register of Shareholders in relation to Participating Shares in a particular Fund.

Shareholder

A person recorded as a holder of Participating Shares in the relevant Register of Shareholders.

Sponsor

Vigilant Capital (Cayman) Limited.

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CONFIDENTIAL OFFERING MEMORANDUM DEFINITIONS AND INTERPRETATION

Subscription Day

The Business Days (falling after the close of the relevant Initial Offer Period) on which investors may, if applicable, subscribe for Participating Shares in a particular Fund or in a particular sub-class of a Fund, as specified in the relevant Supplemental Offering Memorandum.

Subscription Price

The price per Participating Share (plus any applicable subscription fee) at which Participating Shares in a particular Fund or in a particular sub-class of a Fund may be issued (after the close of the relevant Initial Offer Period) calculated in the manner described in Section 7 “Subscription of Shares.

Supplemental Offering Memorandum

The confidential Supplemental Information Memorandum issued in respect of each Fund, (as amended or replaced from time to time).

USD or US$

The US Dollar.

US Person

A citizen or resident of the United States, a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organised in the United States or any political subdivision thereof, an estate the income of which is subject to United States federal income taxation regardless of its source, a partnership or other entity created or organised in or under the laws of the United States, a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust or (ii) the trust was in existence on Ausust 10, 1996, and properly elected to be treated as a US Person, or any person falling within the definition of the term “United States Person” under the 1933 Act or under rule or regulation promulgated thereunder, or any other persons as the Directors may in their absolute discretion determine.

United States

The United States of America (including the states and District of Columbia) and any of its territories, possessions and other areas subject to its jurisdiction.

Valuation Day

The Business Day on which the Net Asset Value per Participating Share of a particular Fund or of a particular sub-class of a Fund or of a particular series of a Fund is determined, as specified in the relevant Supplemental Offering Memorandum.

Voting Shares

Non-redeemable, full voting, non-participating shares of par value USD 1.00 each in the Company having the rights as set out in this Offering Memorandum and the Articles.

3.2

INTERPRETATION

In this Offering Memorandum and each Supplemental Offering Memorandum unless the context otherwise requires:

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(a) (b) (c)

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(d)

words importing the singular include the plural and vice versa; words which are gender neutral or gender specific include each gender; other parts of speech and grammatical forms of a word or phrase defined in this Offering Memorandum or the relevant Supplemental Offering Memorandum have a corresponding meaning; an expression importing a natural person includes a company, partnership, joint venture, association, corporation or other body corporate and a government agency;

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(g) (h) (i) (j) (k)

a reference to “includes” means to include without limitation; a reference to a clause, schedule or attachment is a reference to a clause of this Offering Memorandum or the Supplemental Offering Memorandum (as the context requires), and a schedule or attachment to this Offering Memorandum or the relevant Supplemental Offering Memorandum (as the context requires) and a reference to this Offering Memorandum or the relevant Supplemental Offering Memorandum (as the context requires) includes a schedule and attachment to this Offering Memorandum or the relevant Supplemental Offering Memorandum (as the context requires); a reference to a law is a reference to that law as amended, consolidated or replaced; a reference to a document includes all amendments or supplements to that document or replacements or novations of it; a reference to an entity in this Offering Memorandum or the relevant Supplemental Offering Memorandum (as the context requires) including that entity’s successors and permitted assigns; all references to currencies shall include any successor currency; and a reference to a date is to a date of the Gregorian calendar.

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(e) (f)

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INVESTMENT OBJECTIVE, STRATEGY, GUIDELINES, RESTRICTIONS, ETC.

INVESTMENT OBJECTIVE, STRATEGY, GUIDELINES, RESTRICTIONS, ETC.

4.1 INVESTMENT OBJECTIVE The investment objective of the Company in respect of each of its Funds is detailed in the relevant Supplemental Offering Memorandum. 4.2

INVESTMENT STRATEGY

The specific strategy or strategies by which the Company seeks to achieve its investment objective in respect of each of its Funds is detailed in the relevant Supplemental Offering Memorandum. 4.3

HOLDING OF INVESTMENTS

It may be necessary, in relation to some of the investments made in respect of a particular Fund, for the Company to register the purchase of such investments in the name of a nominee or a locally based vehicle. The Company will put in place suitable arrangements to help protect the investment of any such Fund registered in the name of any such nominee or locally based vehicle. 4.4

CURRENCY HEDGING POLICY

Any currency hedging policy to be employed in respect of a particular Fund will be as specified in the relevant Supplemental Offering Memorandum. 4.5

LEVERAGE POLICY

Under the Articles of Association, the Company has the power to borrow money and to mortgage or charge property or assets. However, the Directors may decide not to utilize this power, and the Company may vary the power to borrow through an amendment to the Articles. The leverage policy to be employed in respect of a particular Fund will be as specified in the relevant Supplemental Offering Memorandum. 4.6

DISTRIBUTION/DIVIDEND POLICY

The distribution/dividend policy in respect of a particular Fund will be as specified in the relevant Supplemental Offering Memorandum. 4.7

INVESTMENT RESTRICTIONS

Investment restrictions in respect of a particular Fund will be as specified in relevant Supplemental Offering Memorandum. THE COMPANY’S INVESTMENT PROGRAMME IN RESPECT OF EACH OF ITS FUNDS IS SPECULATIVE AND ENTAILS SUBSTANTIAL RISKS. MARKET RISKS ARE INHERENT IN ALL INVESTMENTS TO VARYING DEGREES. NO ASSURANCE CAN BE GIVEN THAT THE COMPANY’S OBJECTIVE IN RESPECT OF ANY OF ITS FUNDS WILL BE REALISED. AN INVESTOR MAY LOSE SOME OR ALL OF THEIR INVESTMENT (SEE SECTION 15 “RISK FACTORS”).

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CONFIDENTIAL OFFERING MEMORANDUM

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CONFIDENTIAL OFFERING MEMORANDUM MANAGEMENT AND SERVICE PROVIDERS

5

MANAGEMENT AND SERVICE PROVIDERS

5.1

DIRECTORS

The Directors are responsible for the overall management, control, and operation of the Company in accordance with the Articles (which incorporate provisions of this Offering Memorandum and each Supplemental Offering Memorandum by reference) and the respective service agreements entered into with them. The Directors are entitled to delegate any of their powers and duties to third parties at their absolute discretion. The Directors will review the operations of the Company in respect of each of its Funds at regular meetings. For this purpose, the Directors will receive periodic reports detailing the performance of the Company in respect of each of its Funds and providing an analysis of each investment portfolio. The Investment Advisor will provide such other information as may from time to time be reasonably required by the Directors. For the purposes of this Offering Memorandum, the address of the Directors is the registered office of the Company. The Directors are Alex Stanczyk, Nestor Castillero Nunez, and Perla Nunez de Cohen whose biographical details are as follows :

ALEX P. STANCZYK Alex Stanczyk is a seasoned entrepreneur, executive, and technologist with over 26 years of experience in capital markets, portfolio management, risk management, product structuring, regulation, compliance, negotiations, marketing, operations, security, information technology, and is an expert in the physical precious metals industry. Mr. Stanczyk is one of several principle architects of Physical Gold Fund SP and the proposed Physical Gold Fund US SP. He has been involved in all aspects of the Fund design and structuring of strategic relationships required to launch the Fund. In 2011, Mr. Stanczyk was a founding member, designer, and advisor of the world’s first non-bank private custody fully SICAV compliant precious metals fund, Precious Metals Fund – LFP Prime SICAV SIF. From 2007 through 2015, Mr. Stanczyk served in a range of capacities for the Anglo Far-East Group of companies where he specialized in physical precious metals logistics for the groups’ global operations and developed and implemented the flagship company programs such as Chain of Integrity, private allocated custody, and institutional allocated custody. He has consulted and lectured globally to and for family office, institutional, and government clients on gold and gold’s role in the international monetary system.

NESTOR CASTILLERO NUNEZ Mr. Castillero was one of the minds responsible for the architecture of Physical Gold Fund SP. While acting as an advisor to the Luxembourg Precious Metals Fund – LFP Prime SICAV SIF, the fund saw performance of 13.46% over the operating period March 2011 to December 20111.

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Mr. Castillero joined Athena Capital in 2007 where he provides financial advice and wealth management services for high net worth individuals. Through Athena Real Estate, Mr. Castillero has provided advice since 2006 to investors in real estate projects.

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Experience in the financial, securities, law, and real estate sectors have provided Mr. Castillero with a broad range of knowledge which provides an excellent perspective in understanding the needs of investors seeking ways to safeguard wealth during today’s turbulent economic environment. Mr. Castillero holds licenses as a registered Fund Manager, Stock Broker, Investment Manager, Real Estate Broker, and Certified Public Translator for the jurisdiction of Panama. Mr. Castillero holds a degree in Law and Political Sciences from the Universidad Santa Maria la Antigua (2007) and a Graduate Diploma in Banking and Financial Services from Boston University (2008). He was legal intern with Ben Rubi & Miro from January 2005 to October 2005.

PERLA NUNEZ DE COHEN Perla Nunez de Cohen brings over 21 years of experience in the securities and financial services sector to the Fund’s Board. Perla Nunez de Cohen is currently working at Julius Baer Investments (Panama) S.A. as Head of Compliance and is also a member of the Board. Perla Nunez de Cohen worked for 7 years with Athena Capital Inc. serving as Senior Vice President of the wealth advisory firm in Panama. Prior to Athena Capital, Perla Nunez de Cohen served as Head of International Business for 12 years with Wall Street Securities, a firm with over $1 Billion USD assets under management.

The Directors are entitled to remuneration for their services, however neither Mr Alex Stanczyk, Mr Nestor Castillero Nunez nor Mrs. Perla Nunez de Cohen currently receives remuneration for their services. Directors may also be paid all travelling, hotel, and other reasonable expenses properly incurred by them in attending and returning from general meetings of the Company or in connection with the business of the Company (see Section 11 “Fees and Expenses”). A Director may vote on a proposal or arrangement or contract in which he or she is materially interested, provided that such Director discloses his or her interest in that matter. There is no provision for the retirement of the Directors on their attaining a certain age and the Articles do not provide for retirement of the Directors by rotation. The Articles of Association contain provisions that every Director or other officer or servant of the Company and their heirs and personal representatives shall be entitled to be indemnified out of the assets of a particular Fund, if incurred in respect of a particular Fund, and otherwise out of the assets of every Fund (apportioned according to the Net Asset Values of the respective Funds) against all actions, proceedings, costs, damages, expenses, claims, losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto, including any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted except such (if any) as he shall incur or sustain by or through his own fraud, willful default or dishonesty. The amount for which the indemnity is given shall immediately attach as a lien and charge over the property of the Fund or Funds and shall have priority over all other claims. It is acknowledged that such indemnification will be from and limited to the assets of a particular Fund, if incurred in respect of a particular Fund, and otherwise out of the assets of every Fund. The Articles of Association also contain provisions that no Director or other officer or servant of the Company shall be liable for the acts, receipts, neglects or defaults of any other Director or other officer or servant, or for joining in any receipt or other act for conformity, or for any loss or expense happening to the Company or any Fund through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company, or for the insufficiency or deficiency of any security in or upon which any of the moneys of any Fund shall be invested, or for any loss or damage arising from the bankruptcy,

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insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited, or for any loss occasioned by any error of judgment, omission, default, or oversight on his part, or for any other loss, damage, or misfortune whatever which shall happen in relation to the execution of the duties of his office or in relation thereto, unless the same happen through his own fraud, willful default or dishonesty. 5.2

INVESTMENT ADVISOR

The Company has appointed Vigilant Captial (Cayman) Limited (formerly Las Bóvedas Company (Cayman) Limited) as the Investment Advisor to Company and each Fund pursuant to an Investment Advisory Agreement dated September 18, 2012. Vigilant Capital (Cayman) Limited is incorporated in the Cayman Islands on April 3, 2012, as an exempt company, with registration number SC- 267681. The Investment Advisor may provide Company and any particular Fund with investment advice and recommendations on its investment objectives, strategies, and operational procedures. At the date of this approval for Listing, the Investment Advisor had no funds under management. The Investment Advisory Agreement will continue until terminated by either party giving three months’ notice, or otherwise in accordance with the provisions for termination contained therein. Nestor Castillero and Philip Judge are directors of the Investment Advisor, and Mr. Castillero is also an employee. For further details of see Section 5.2 “Investment Advisor" in the relevant Supplement Offering Memorandum. 5.3

ADMINISTRATOR

The Directors have appointed Trident Trust Company (Cayman) Ltd., as administrator to each Fund (the 'Administrator') pursuant to an to an administration agreement dated July 6, 2012, between the Company and the Administrator (the 'Administration Agreement'). The Administrator is authorised and regulated by CIMA. Pursuant to the Administration Agreement, the Administrator is responsible, under the overall supervision of the Fund’s Directors, for matters pertaining to the day-to-day administration of the Fund, namely: (i) calculating the net asset value of the Fund and the net asset value per share of each class of shares of the Fund in accordance with the Fund’s valuation policies and procedures; (ii) maintaining the Fund’s financial books and records so far as may be necessary to give a complete record of all transactions carried out by the Fund; and (iii) providing registrar and transfer agency services in connection with the issuance, transfer, and redemption of Participating Shares. The registrar and transfer agency services to be provided by the Administrator will include (i) verifying the identity of prospective investors in accordance with applicable anti-money laundering policies and procedures, (ii) maintaining the Fund’s Register of Shareholders (including the register of Voting Shares), (iii) generally performing all actions related to the issuance, transfer, and redemption of the Participating Shares, (iv) disseminating the Net Asset Value of the Participating Shares to Shareholders, (v) furnishing annual financial statements as well as monthly Participating Shareholder statements to Shareholders, and (vi) performing certain other administrative and clerical services in connection with the administration of the Fund as agreed between the Fund and the Administrator.

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For the purposes of determining the Net Asset Value of the Fund and the Net Asset Value per Participating Share of each Class, the Administrator will follow the valuation policies and procedures adopted by the Fund as set out in the relevant Supplemental Offering Memorandum. If and to the extent that the Directors or the Portfolio Advisory Committee are responsible for or otherwise involved in the pricing of any of the Fund’s portfolio securities or other assets, the Administrator may accept, use, and rely on such prices in determining the Net Asset Value of the Fund and shall not be liable to the Fund, any investor in the Fund, the Directors or any other Person in so doing.

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The Administrator in no way acts as guarantor or offeror of the Participating Shares or any underlying investment, nor is it responsible for the actions of the Fund’s sales agents, their prime broker(s), custodian(s), any other brokers or any relevant Investment Manager.

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CONFIDENTIAL OFFERING MEMORANDUM MANAGEMENT AND SERVICE PROVIDERS

The fees payable to the Administrator are based on its standard schedule of fees charged by the Administrator for similar services. The Administration Agreement is for an indefinite term; provided, however, that the Administration Agreement is subject to termination by the Administrator or by the Fund upon ninety (90) days written notice, or immediately in certain other circumstances specified therein. Under the Administration Agreement: (a)

(b)

the Fund has agreed to indemnify and hold harmless the Administrator, its subsidiaries, affiliates, directors and other officers, servants, employees, agents, and permitted delegates under the Administration Agreement (together 'Indemnified Parties') against any liabilities, obligations, losses, damages, penalties, judgments, actions, claims, demands, costs, suits, expenses or disbursements in connection therewith which may be imposed on, incurred by or asserted against the Administrator or any other Indemnified Parties howsoever arising other than by reason of dishonesty, fraud, willful neglect, willful misconduct or bad faith on the part of the Administrator of any of the Indemnified Parties in connection with the provision of services under the Administration Agreement; and in the absence of dishonesty, fraud, willful neglect, willful misconduct or bad faith in the performance of its duties under the Administration Agreement, neither the Administrator nor any of the other Indemnified Parties shall be liable to the Fund on account of anything done, omitted or suffered by the Administrator or any of the other Indemnified Parties in good faith pursuant to the Administration Agreement in the performance of the services to be performed by the Administrator thereunder.

THE ADMINISTRATOR WILL NOT PROVIDE ANY INVESTMENT ADVISORY OR MANAGEMENT SERVICE TO THE FUND AND THEREFORE WILL NOT BE IN ANY WAY RESPONSIBLE FOR THE FUND’S PERFORMANCE. THE ADMINISTRATOR WILL NOT BE RESPONSIBLE FOR MONITORING ANY INVESTMENT RESTRICTIONS OR COMPLIANCE WITH THE INVESTMENT RESTRICTIONS AND THEREFORE WILL NOT BE LIABLE FOR ANY BREACH THEREOF. 5.4

BANK(S)

The Directors may appoint one or more banks to a particular Fund (each a 'Bank'). Please refer to the relevant Supplemental Offering Memorandum for details of any Bank so appointed. 5.5

AUDITORS

The Directors have appointed Ernst & Young Ltd., Cayman Islands, as the Company’s auditors (the 'Auditors'). The Auditors are a firm of auditors approved by the Cayman Islands Monetary Authority. The audit will be conducted in accordance with International Financial Reporting Standards (IFRS). The Directors have entered into an engagement letter with the Auditors containing provisions limiting the liability of the Auditors arising out of or in connection with their engagement. 5.6

LEGAL COUNSEL

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The Directors have appointed Solomon Harris, Attorneys-at-Law, Cayman Islands, as the Company’s legal counsel in respect of matters of Cayman Islands law and as Listing Agent to the Fund. In connection with the Company’s offering of Participating Shares and provision of advice, Solomon Harris will not be representing Shareholders.

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PERSHING LLC

The Directors have instructed the Investment Advisor to enter into an operating agreement on behalf of the Company with Pershing LLC ('Pershing') and the Administrator (the 'Operating Agreement'). Pursuant to the Operating Agreement, Pershing will process and settle orders for transactions in Participating Shares in its capacity as clearing agent for the Company. Pershing will be entitled to receive fees payable by the Investment Advisor for the services it performs under this Operating Agreement. Each party to the Operating Agreement may terminate this agreement by giving 90 days notice. 5.8

OTHER AGENTS/ADVISORS

The Directors may appoint other agents or advisors to a particular Fund. For details of any such other agents, see the relevant Supplement Offering Memorandum.

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5.7

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CONFIDENTIAL OFFERING MEMORANDUM SHARE CAPITAL

6

SHARE CAPITAL

6.1

COMPANY AUTHORISED SHARE CAPTIAL

The authorised share capital of the Company is USD50,000 divided into 4,990,000 Participating Shares of USD0.01 par value and 100 Voting Shares of USD1.00 par value each. The Sponsor holds all the Voting Shares. The Company may, by resolution of the Sponsor as holder of the Voting Shares, increase its authorised share capital at any time. The pools of unissued Participating Shares will be at the disposal of the Directors who will be able to issue these in respect of any Fund and will designate these as allocable to a particular Fund upon their issue. Only the investors who purchase Participating Shares in a particular Fund will participate in the assets, liabilities, profits, and losses of that Fund. Investors invest in the Company with limited liability and, subject to the provisions of any warranties granted by an investor when investing into the Fund, cannot lose more than the amount of their investment. Shareholders will not be liable to make any further payment after they have paid the price of their Participating Shares, and no further liability for the debts of the Company can be imposed on any Shareholder in respect of the Participating Shares held by them. The rights attaching to the Participating Shares and the Voting Shares respectively are as follows: 6.2

PARTICIPATING SHARES

Subject to the terms of this Offering Document, the Articles, and the relevant Supplemental Offering Document, Participating Shares are redeemable at the option of the holder. The holder of a Participating Share is not entitled to receive notice of, attend or vote at meetings of Shareholders save with respect to such matters that may vary the rights of the Shareholders either where the matter concerns that Fund or that sub-class of the Fund or that series of the Fund specifically or in respect of every Fund where the matter concerns every Shareholder in the Company (as the case may be). The rights attached to the Participating Shares may be varied only with the consent in writing of the holders of three-fourths of the issued Participating Shares either where the matter concerns that Fund or that sub-class of the Fund or that series of the Fund specifically or in respect of every Fund where the matter concerns every Shareholder in the Company (as the case may be) or with the sanction of a resolution passed by a three-fourths majority of the votes cast at a meeting of the holders of the Participating Shares either where the matter concerns that Fund or that sub-class of the Fund or that series of the Fund specifically or in respect of every Fund where the matter concerns every Shareholder in the Company (as the case may be). Except as otherwise stated in the relevant Supplemental Offering Memorandum, all Participating Shares in the same Fund or in the same sub-class of a Fund shall rank pari passu with each other and all Participating Shares in the Company shall rank pari passu with each other as far as any matter affecting every Shareholder is concerned. In a winding up, each holder of a Participating Share has a preferential right of return of the paid up par value and a right to share in surplus assets of a particular Fund or of a particular sub-class of a Fund represented by those Participating Shares after the paid-up par value on the Voting Shares allocable to that Fund or that sub-class of the Fund has been returned.

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VOTING SHARES

Voting Shares do not carry any right to dividends. The Sponsor as the holder of all the Voting Shares has the right to receive notice of, attend, and vote at a general meeting. Accordingly, other than rights which the Directors may have themselves, they have the exclusive right to appoint or remove Directors of the Fund, and only holders of Voting Shares are entitled to place the Company in voluntary liquidation. In a winding up, the holder of a Voting Share is entitled only to the return of the paid up par value of the Voting Share after the paid up par value of Participating Shares has been returned.

SP ND

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6.3

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CONFIDENTIAL OFFERING MEMORANDUM SUBSCRIPTION OF SHARES

7

SUBSCRIPTION OF SHARES

7.1

NUMBER OF PARTICIPATING SHARES INITIALLY AVAILABLE

The number of Participating Shares available in relation to a particular Fund or to a particular sub-class of a Fund will be specified in the relevant Supplemental Offering Memorandum. 7.2

INITIAL SUBSCRIPTIONS AND INITIAL PRICE

Participating Shares may be subscribed for during the relevant Initial Offer Period at the relevant Initial Price (plus any applicable subscription fee) both as specified in the relevant Supplemental Offering Memorandum. The Directors may extend or shorten the Initial Offer Period in respect to a particular Fund or to a particular sub-class of a Fund or to a particular series of a Fund at their absolute discretion. 7.3

SUBSEQUENT SUBSCRIPTIONS AND SUBSCRIPTION PRICE

After the close of the Initial Offer Period, investors may subscribe for Participating Shares in a particular Fund at the relevant Subscription Price on the relevant Subscription Day as specified in the relevant Supplemental Offering Memorandum. The Directors are authorised from time to time to resolve to close any Fund to new subscriptions on such basis and on such terms as the Directors may in their absolute discretion determine. 7.4

SUBSCRIPTION PROCEDURE

The Directors have the right to reject subscriptions in whole or in part, without giving any reason, in which event subscription payments will be refunded at the applicant's risk, without interest, in the same currency and by the same method in which the application monies were received at the expense of the applicant (where applicable). When accepted by the Company, subscriptions will (save as determined by the Directors) be irrevocable. Applicants for Participating Shares in a particular Fund or in a particular sub-class of a Fund during the relevant Initial Offer Period should complete a subscription agreement in the form provided with the relevant Supplemental Offering Memorandum and, as directed, send it to the Administrator by email or facsimile with a copy to follow by mail or courier along with any requisite documentation and cleared funds in respect of the subscription monies so as to be received by the Administrator no later than the time stated in the relevant Supplemental Offering Memorandum failing which the subscription agreement will be held over until the next following Subscription Day, and Participating Shares will be issued at the relevant Subscription Price applicable on that following Subscription Day or, alternatively, will be rejected and the subscription monies returned to the applicant. The Company may (in the absolute discretion of the Directors) accept subscriptions received after the stated time or require a completed subscription agreement and/or cleared funds at an earlier or later time or date. Applicants for Participating Shares in a particular Fund should refer to the relevant Supplemental Offering Memorandum for the applicable subscription procedure. 7.5

MINIMUM INVESTMENT AND MINIMUM HOLDING

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Subscriptions may also be made in kind at the sole discretion of the Directors.

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The minimum initial investment, the minimum additional investment, and the Minimum Holding per Shareholder will be as specified in the relevant Supplemental Offering Memorandum.

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7.6

ELIGIBLE INVESTORS

CONFIDENTIAL OFFERING MEMORANDUM SUBSCRIPTION OF SHARES

Investors and prospective investors should note that there are no statutory investor compensation schemes or requirements in the Cayman Islands. Investment in Participating Shares may be limited to Eligible Investors as stipulated in the relevant Supplemental Offering Memorandum. An Eligible Investor is any person who: (a) (b) (c) (d) (e)

is a sophisticated investor (i.e., someone who has the knowledge, expertise, and experience in financial matters to evaluate the risks of investing in the Company); is aware of the risks inherent in investing in the assets in which the relevant Fund will invest and the method by which these assets will be held and/or traded; can bear the loss of their entire investment in the Fund; is able to acquire and hold Participating Shares without violating applicable laws; and is not an Ineligible Applicant.

Investors must represent and warrant on the appropriate subscription agreement that they are Eligible Investors. Any transferee of Participating Shares will be required to warrant in like terms before any transfer is registered. 7.7

INELIGIBLE APPLICANTS

The Participating Shares may not be offered, issued or transferred to any person in circumstances which, in the opinion of the Directors, might result in the Company or any of its Funds incurring any liability to taxation or suffering any other pecuniary disadvantage which the Company might not otherwise incur or suffer, or would result in the Company being required to register under any applicable United States securities laws. Participating Shares may not be issued or transferred to any US Person except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and any applicable state laws. Each applicant for, and transferee of, Participating Shares will be required to provide such representations, warranties or documentation as may be required by the Directors to ensure that these requirements are met prior to the issue or the registration of any transfer of Participating Shares. If the transferee is not already a Shareholder, it will be required to complete the appropriate subscription agreement. 7.8

FORM OF SHARES

All Participating Shares will be in registered form only and therefore share certificates will not be issued. However, upon the acceptance of the Company of a duly completed subscription agreement, investors will receive written confirmation of the number of Participating Shares held by them, ownership of which shall be evidenced by entry in the relevant Register of Shareholders. 7.9

SUSPENSION OF SUBSCRIPTIONS

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The Directors may in their sole discretion (and in the circumstances described below or where applicable, as more particularly set out in the relevant Supplemental Offering Memorandum) declare a suspension of the calculation of the Net Asset Value per Share of any Fund, or payments of redemption proceeds for the whole or any part of any period and/or the issue and redemption of any Participating Shares in such Fund, as well as the right to convert Participating Shares of any Fund into shares of the same Fund or any other Fund. The suspension of the calculation of the Net Asset Value of any Fund shall not affect the valuation of other Funds unless those Funds are also affected.

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The Directors may declare a suspension of the calculation of the Net Asset Value per Share of any Fund:

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CONFIDENTIAL OFFERING MEMORANDUM SUBSCRIPTION OF SHARES

7.9.1 during any period when any of the principal stock exchanges or any other regulated market on which any substantial portion of the Company's investments of the relevant Fund for the time being are quoted is closed (other than for ordinary holidays) or during which dealings are restricted or suspended; or 7.9.2 during the existence of any state of affairs which constitutes an emergency as a result of which disposal or valuation of investments of the relevant Fund by the Company is impracticable; or 7.9.3 during any breakdown in the means of communication normally employed in determining the price or value of any of the Company's investments or the current prices or values on any market or stock exchange or other market in respect of the assets of the Company; or 7.9.4 during any period when none of the requests for redemption which have been made may be lawfully satisfied by the Company in the currency of the relevant Fund; or 7.9.5 during any period when the Company is unable to repatriate funds for the purpose of making payments on the redemption of such Participating Shares or during which any transfer of funds involved in the realisation or acquisition of investments or payments due on redemption of such Participating Shares cannot in the opinion of the Directors be effected at normal rates of exchange; or 7.9.6 if the Company or the relevant Fund is being or may be wound up or terminated or subject to a controlled winding down as from the date on which the decision is made to wind up or terminate the Company or the relevant Fund or initiate a controlled winding-down, or as from the date on which notice is given to Shareholders of the decision to wind up or terminate the relevant Fund or initiate a controlled winding down; or 7.9.7 if the Directors have determined that there has been a material change in the valuations of a substantial proportion of the investments of the Company attributable to a particular Fund in the preparation or use of a valuation or the carrying out of a later or subsequent valuation; or 7.9.8 during any period when the valuation of any underlying asset which constitutes an important part of the portfolio of any Fund is itself suspended; or 7.9.9 during any other circumstance or circumstances where a failure to do so might result in the Company or its Shareholders incurring any liability to taxation or suffering other pecuniary disadvantages or other detriment which the Company or its Shareholders might so otherwise have suffered; or 7.9.10 if the Directors consider it to be in the best interests of the Company or the relevant Fund. 7.10

ANTI-MONEY LAUNDERING

Measures aimed at the prevention of money laundering may require an applicant for Participating Shares in any Fund to verify his identity and/or the source of funds to the Company or the Administrator (as the case may be). Depending on the circumstances of each application, verification may not be required where the applicant makes the payment from an account held in the applicant’s name at a recognised financial institution or the application is made through a recognised intermediary. These exceptions will only apply if the financial institution or intermediary referred to above is within a country recognised by the Cayman Islands as having equivalent anti-money laundering regulations. By way of example, an individual may be required to produce the original passport or identification card or copy duly certified by a public authority such as a notary public, the police or the ambassador in his country of residence together with two original documents evidencing his address such as a utility bill or bank statement or duly certified copies. In the case of corporate applicants, this may require production of a certified copy of the Certificate of Incorporation (and any change of name), and of the Memorandum and Articles of Association (or equivalent), and of the names and residential and business addresses of all directors and beneficial owners.

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CONFIDENTIAL OFFERING MEMORANDUM SUBSCRIPTION OF SHARES

Each applicant for Participating Shares in a particular Fund will be required to make such representations as may be required by the Company in connection with anti-money laundering programmes. Each applicant will also be required to represent that subscription monies are not directly or indirectly derived from activities that may contravene any international laws and regulations including anti-money laundering laws and regulations. Each applicant for Participating Shares in a particular Fund acknowledges that the Company and/or the Administrator (as the case may be) shall be held harmless against any loss arising as a result of a failure to process his application for Participating Shares or redemption request if such information and documentation as has been requested by the Company or the Administrator (as the case may be) has not been provided by the applicant. If any person in the Cayman Islands involved in the business of the Company has knowledge or suspicion that a payment to the Fund (by way of subscription or otherwise) is derived from or represents the proceeds of criminal conduct, that person is required to report such knowledge or suspicion to the Cayman Islands Financial Reporting Authority pursuant to The Proceeds of Crime Law of the Cayman Islands.

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The details given above are by way of example only, and the Company or the Administrator (as the case may be) will request such information and documentation it considers necessary to verify the identity or source of funds of an applicant. In the event of delay or failure by the applicant to produce any information required for verification purposes, the Company or the Administrator (as the case may be) may refuse to accept the application and the subscription monies relating thereto or may refuse to process a redemption request until proper information has been provided. Except in accordance with the provisions of this Offering Memorandum, the Company will not make any redemption payouts to third parties. Shareholders should note specifically that where redemption proceeds are requested to be remitted to an account which is not in the name of the investor (e.g., upon the death of a Shareholder), the Company or the Administrator (as the case may be) reserves the right to request such information as may be reasonably necessary in order to verify the identity of the Shareholder and the owner of the account into which the redemption proceeds will be paid. The redemption proceeds will not be paid to a third party account if the investor and/or owner of the account fail(s) to provide such information.

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CONFIDENTIAL OFFERING MEMORANDUM REDEMPTION OF SHARES

8

REDEMPTION OF SHARES

8.1

GENERAL

All redemptions are subject to certain restrictions imposed by the Offering Documents, the Articles, and Cayman Islands law. Subject to the foregoing, Participating Shares are redeemable at the option of the Shareholder on any Redemption Day. 8.2

REDEMPTION DAYS

Redemption Days will be the Business Days specified in the relevant Supplemental Offering Memorandum. 8.3

REDEMPTION PRICE

The Redemption Price will be determined in the manner as prescribed in the relevant Supplemental Operating Memorandum. 8.4

PROCEDURE

The procedures for redemption of Participating Shares of a Fund will be set out in the respective Supplemental Offering Memorandum, and any minimum redemption amount per investor in respect of a Fund (if applicable) will be as specified in the relevant Supplemental Offering Memorandum. 8.5

SETTLEMENT

Payment of redemption proceeds will generally be made as soon as practicable after the relevant Redemption Day in accordance with the relevant Supplemental Offering Memorandum. Payment of redemption proceeds will be made in the Base Currency of a particular Fund by direct transfer in accordance with instructions given by the redeeming Shareholder to the Company and at the Shareholder’s risk and cost. No interest will be paid on the redemption proceeds between the Redemption Day (other than provided for herein) and the date of actual payment. Except in accordance with the provisions of this Offering Memorandum, the Company will not make any redemption payouts to third parties. Redemption proceeds may also be remitted in kind at the absolute discretion of the Directors. 8.6

DEFERRED REDEMPTIONS

Under the Articles, the Directors have the power to defer redemption requests in certain circumstances. Please refer to the relevant Supplemental Offering Memorandum for further details. 8.7

SUSPENSION OF REDEMPTIONS

The Directors may declare a temporary suspension of the calculation of the Net Asset Value per Share of any Fund in certain circumstances as described in the respective Supplemental Offering Memorandum.

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8.8

COMPULSORY REDEMPTIONS

The Directors have the right to require the compulsory redemption of all or part of the Participating Shares held by or for the benefit of a Shareholder at any time including, without limitation, if the Directors determine that the Participating Shares are held by or for the benefit of any Shareholder who is or becomes an Ineligible Applicant and/or is not or is no longer an Eligible Investor. Please refer to the relevant Supplemental Offering Memorandum for further details.

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9

RESTRICTIONS ON TRANSFER

Subject to any restrictions set out in the Offering Documents and the Articles, Participating Shares are transferable by written instrument of transfer signed by (or in the case of a transfer by a body corporate, signed on behalf of or sealed by) the transferor and containing the name and address of the transferor and the transferee. The instrument of transfer shall be in such form as the Directors approve. The Participating Shares are freely transferable except that the Directors may decline to register any transfer of the Participating Shares to a natural person, firm or company who is not, or in the reasonable opinion of the Directors is not, an eligible investor and to any natural person, firm or company who does not provide the representations and warranties required of an eligible investor. The Directors may also decline to register any transfer of Participating Shares if the proposed transferee is unable to satisfy the anti-money laundering requirements of the Fund or the Administrator. Please refer to the relevant Supplemental Offering Memorandum for further details of any limitations on the transferability of the Participating Shares in a Fund. 9.2

PROCEDURE

Unless otherwise specified in the relevant Supplement Offering Memorandum, the Administrator will serve as the Company's agent in relation to the transfer of Participating Shares in a Fund. Shareholders wishing to transfer Participating Shares must sign the written instrument of transfer in the exact name or names in which the Participating Shares are registered, indicate any special capacity in which they are signing, and supply all other required details. The completed form of transfer, duly stamped if applicable, together with such other evidence as the Company may reasonably require to show the right of the transferor to make the transfer, must be sent to the Administrator. The transfer shall take effect upon the registration of the transferee in the register of Shareholders. If the transferee is not already a Shareholder, he will be required to complete a subscription agreement. In order for a transfer to be effective, it must be accepted by the Company and acknowledged by the Administrator. If the transferor/transferee does not receive an acknowledgement of the written instrument of transfer within five (5) Business Days of submission to the Administrator, such transferor/transferee should contact the Administrator to confirm the status of the transfer. Neither the Company nor the Administrator accepts any liability for any transfer which is submitted but in relation to which no acknowledgement has been issued to the transferor/transferee. Neither the Company nor the Administrator shall be responsible for any mis-delivery or non-receipt of any facsimile or original if they have not acknowledged receipt of the facsimile or original. In the case of mis-receipt or corruption of any message, you will be required to re-send the documents. Notwithstanding the method of communication, the Company and/or the Administrator reserve(s) the right to ask for the production of original documents or other information to authenticate the communication. The Company reserves the right to require any transferee to execute an application form as if such transferee were an original subscriber for the Participating Shares the subject of the transfer.

L GOLD FU ICA

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PHYS

CONFIDENTIAL OFFERING MEMORANDUM RESTRICTIONS ON TRANSFER

9.1 GENERAL

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10

CALCULATION OF NET ASSET VALUE

The liabilities of the Company shall be deemed to comprise: (a) (b) (c) (d) (e)

all bills and accounts payable; all fees and expenses payable and/or accrued; all contractual obligations for the payment of money or the acquisition of property; all provisions authorised or approved by the Directors for taxes or contingencies; and/or all other liabilities of the Company in respect of that Fund of whatsoever kind and nature except liabilities represented by outstanding Participating Shares and surplus of the Company in respect of that Fund.

In determining the Net Asset Value and Net Asset Value per Share of a particular Fund, the Directors will follow the valuation policies and procedures adopted by the Company as may be set out in the relevant Supplemental Offering Memorandum. The Directors may also use and rely on industry standard financial models in pricing any relevant assets. Prospective investors should be aware that situations involving uncertainties as to the valuation of portfolio positions may occur and could have an adverse effect on the net assets of a particular Fund. Absent of bad faith or manifest error, the Net Asset Value and Net Asset Value per Share of a particular Fund as determined by the Company is conclusive and binding on all Shareholders. The Company may temporarily suspend the calculation of the Net Asset Value and Net Asset Value per Share in respect to any particular Fund. Please refer to the relevant Supplemental Offering Memorandum for further details of the circumstances in which a suspension may occur.

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CONFIDENTIAL OFFERING MEMORANDUM CALCULATION OF NET ASSET VALUE

The Net Asset Value per Share, or Class of Share, of each Fund will be determined by the Directors in accordance with the methodology provide in each respective Supplemental Offering Memorandum.

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11

FEES AND EXPENSES

11.1

REMUNERATION OF DIRECTORS

The remuneration of the Directors shall from time to time be determined by the Company. The Directors may also be reimbursed for all travelling, hotel, and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or general meetings of the Company or in connection with the business of a Fund. At the date of this OM, no directors’ fees are payable. 11. 2

ORGANISATIONAL/OPERATING COSTS AND EXPENSES

The Company will bear its own organisational and operating costs and expenses including, but not limited to, its investment expenses, administrative expenses, marketing expenses, legal and licensing expenses, government fees, audit, interest and Shareholder communication expenses, and other expenses associated with the operation of the Company. The organisational costs and expenses of the Company and Physical Gold Fund SP is approximately USD200,000 which sum may be amortized over a period of up to five (5) years from the commencement of the operation of the Company. Whilst the Directors consider that such an accounting policy is appropriate, such policy conflicts with International Financial Reporting Standards and may result in a qualification to the Auditors’ report of the Company’s financial statements if the Auditors determine that such costs and expenses are material to such financial statements. The operating and organisational costs and expenses of the Company (which are not specific to any particular Fund or Funds) will be borne by each Fund on a pro rata basis (according to the respective Net Asset Values of the Funds in existence at any given time). The operating costs and expenses of each particular Fund will be payable in accordance with the relevant supplemental offering memorandum. 11. 3

REDEMPTION FEES

Any redemption fees payable in respect of a particular Fund will be specified in the relevant Supplemental Offering Memorandum. 11. 4

OTHER FEES

Any other fees payable in respect of a particular Fund will be specified in the relevant Supplemental Offering Memorandum.

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CONFIDENTIAL OFFERING MEMORANDUM FEES AND EXPENSES

All fees and expenses payable in respect to a particular Fund will be specified in the relevant Supplemental Offering Memorandum.

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CONFIDENTIAL OFFERING MEMORANDUM TAXATION

12

TAXATION

The following information in this section is based on the Directors’ understanding of certain aspects of the law and practice currently in force in the Cayman Islands. There can be no guarantee that the tax position or proposed tax position at the date of this Offering Memorandum or at the time of an investment will endure indefinitely. 12.1

CAYMAN ISLANDS

Under current legislation in the Cayman Islands, no direct taxes will be imposed upon the Company or its Shareholders by the Cayman Islands Government. Under current legislation in the Cayman Islands, there are no exchange control laws or regulations in effect. The Company has been incorporated under the laws of the Cayman Islands as an exempted segregated portfolio company and, as such, applied for and received an undertaking from the Governor-in-Cabinet of the Cayman Islands that for a period of 20 years from July 10, 2012, (the date of the undertaking), no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations or any tax in the nature of estate duty or inheritance tax will be payable on or in respect of the shares, debentures or other obligations of the Company or by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (1999 Revision) of the Cayman Islands The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax, gift tax or withholding tax. No stamp duty is levied in the Cayman Islands on the transfer or redemption of Participating Shares. 12.2

SHAREHOLDER TAXATION

Prospective investors should ascertain from their professional advisers the consequences to them of acquiring, holding, redeeming, transferring or selling Participating Shares under the relevant laws of the jurisdictions to which they are subject including the tax consequences and any exchange control requirements. Prospective investors should note that the Company may be subject to irrecoverable withholding taxes on investment income in the country of origin. The receipt of dividends (if any) by Shareholders, the redemption, switching or transfer of Participating Shares, and any distribution on a winding up of the Company may result in a tax liability for the Shareholders according to the tax regime applicable in their various countries of residence, citizenship or domicile. Shareholders resident in or citizens of certain countries that have anti-offshore fund legislation may have a current liability to tax on the undistributed income and gains of the Company. None of the Directors, the Company or any of the Company’s agents shall have any liability in respect of the individual tax affairs of Shareholders. 12.3

EUROPEAN UNION

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The Reporting of Savings Income Information (European Union) Law, 2005 of the Cayman Islands (the 'Savings Income Law') came into force on July 1, 2005, for the purpose of implementing into Cayman Islands law the European Union Council Directive 2003/48/EC on the Taxation of Savings Income ('EUSD'). The Reporting of Savings Income Information (European Union) Regulations, 2005 made under the Savings Income Law excludes from the scope of the Savings Income Law investment companies which are considered as "non-UCITS equivalent." As the Company is not licensed as a Mutual Fund under Section 5 of the Mutual Funds law, it is not subject to the Savings Income Law and will be treated as outside the scope of the EUSD as a matter of Cayman Islands law.

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12.4

FOREIGN ACCOUNT TAX COMPLIANCE ACT

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On November 29, 2013, the Government of the Cayman Islands signed a “Model 1” Intergovernmental Agreement with the United States in response to FATCA ('Model 1 IGA'). These arrangements will result in a requirement for the Company to obtain a Global Intermediary Identification Number ('GIIN') from the United States Internal Revenue Service and to disclose certain information regarding its U.S. investors to the Cayman Islands Department for International Tax Cooperation in accordance with implementing regulations (together with the Model 1 IGA, the 'C.I. FATCA Requirements'). In order to assist the Company to meet any FATCA and C.I. FATCA Requirements, each Shareholder may be asked to provide the Company with certain information, representations, certificates or forms relating to such Shareholder (or its direct or indirect owners) as may be requested from time to time by the Company, which the Directors may determine, in their sole discretion, to be necessary or appropriate in order to: (i) (ii)

satisfy any requirements imposed under FATCA including under any C.I. FATCA Requirements, and comply with any applicable reporting or withholding requirements and other obligations which exist or may arise as a result of FATCA and/or the C.I. FATCA Requirements.

In addition, each Shareholder may be required to take such actions as the Directors may reasonably request in connection with the foregoing. In the event that any Shareholder fails to provide any of the information, representations, certificates or forms or to undertake any of the actions required, the Directors shall have full authority to: (i) (ii) (iii)

compulsorily redeem such Shareholder’s Participating Shares; effect a transfer of such Shareholder’s Participating Shares to an Eligible Investor; take any steps as the Directors determine in their sole discretion are necessary or appropriate to mitigate the consequences on the Company and the other Shareholders of such Shareholder’s failure to comply with the requirements of this section.

If requested by the Company, a Shareholder shall provide and/or execute any and all documents, opinions, instruments, and certificates as the Directors shall have reasonably requested or that are otherwise required to effectuate the foregoing. By executing a Subscription Agreement, each investor expressly agrees for its information to be passed to relevant regulatory authorities which may make a request pursuant to FATCA or the C.I. FATCA Requirements. For the avoidance of doubt, among the possible effects of the legislation depending on how it is interpreted, and whether and how the Company chooses to comply, are the following: 1.

In order to avoid incurring withholding tax, the Company may require Shareholders to provide identifying information as to themselves and, as applicable, their direct and indirect owners, and to certify such information in such form as may be required.

2.

If the Company allows Shareholders that do not provide the required identifying information to remain as Shareholders, it is possible that a withholding tax might be imposed in respect of certain of the Company’s income to the extent that such income is attributable to such Shareholders. In that case, the Company may withhold redemption proceeds in respect of those Shareholders that have not provided such information so as to ensure that the economic burden of such tax is borne by those Shareholders; and

SP ND

PHYS

CONFIDENTIAL OFFERING MEMORANDUM TAXATION

The Foreign Account Tax Compliance Act ('FATCA') (added as Sections 1471-1474 of the United States Internal Revenue Code of 1986, as amended, by the Hiring Incentives to Restore Employment Act of 2010) may impose certain requirements on the Company.

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Another possibility is that a withholding tax might be imposed in respect of certain of the Company’s income not limited to the portion attributable to Shareholders that do not provide identifying information. This could occur if, for example, the Company does not comply with C.I. FATCA Requirements. In this case, all of the Shareholders could be adversely affected by the tax.

Each Shareholder specifically acknowledges that a failure to comply with the provisions of this section may result in up to a 30% withholding or penalty being assessed on certain payments made to (or on behalf of) such non-compliant Shareholder and/or the Company. Each Shareholder that fails to comply with the requirements of this section and of the C.I. FATCA Requirements shall, together with any other Shareholders that so fail to comply, indemnify and hold harmless the Company and its direct and indirect owners for any cost or loss arising out of such failure to comply including in respect of any sums withheld on payments made to the Company. Requests for Information The Company or any of its directors or agents domiciled in the Cayman Islands may be compelled to provide information subject to a request for information made by a regulatory or governmental authority or agency under applicable law, e.g., by the Cayman Islands Monetary Authority, either for itself or for a recognised overseas regulatory authority, and associated regulations, agreements, arrangements, and memoranda of understanding. Disclosure of confidential information under such laws will not be regarded as a breach of any duty of confidentiality and, in certain circumstances, the Directors may be prohibited from disclosing that the request has been made. The Directors may also be required to provide information regarding investors to U.S. governmental and regulatory authorities including the SEC and the U.S. Internal Revenue Service (the 'IRS'). By subscribing for Participating Shares, each prospective investor consents to the release of its information to relevant authorities. THE FOREGOING IS BASED ON THE COMPANY’S UNDERSTANDING OF CERTAIN ASPECTS OF THE LAW AND PRACTICE CURRENTLY IN FORCE IN THE CAYMAN ISLANDS. THERE CAN BE NO GUARANTEE THAT THE TAX POSITION OR PROPOSED TAX POSITION AT THE DATE OF THIS INFORMATION MEMORANDUM OR AT THE TIME OF AN INVESTMENT WILL ENDURE INDEFINITELY.

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CONFIDENTIAL OFFERING MEMORANDUM TAXATION

3.

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CONFIDENTIAL OFFERING MEMORANDUM GENERAL INFORMATION

13

GENERAL INFORMATION

13.1

REPORTS AND FINANCIAL STATEMENTS

The Company’s fiscal year ends on December 31st of each year. Shareholders will receive audited annual financial reports in relation to the Fund in which they are invested, once prepared, within six months of the end of the Company’s fiscal year. The Company’s audited annual financial reports will be prepared in accordance with International Financial Reporting Standards and are required to be filed with CIMA within six months of the Company’s fiscal year end. The Investment Advisor will provide reports to the Company quarterly for distribution. At the time of admission to listing, the Company has not commenced operations since the date of its incorporation and no accounts have been made up and no dividends have been declared as at the date of this Offering Memorandum. 13.2

CONSTITUTIVE DOCUMENTS, LAWS, ETC.

This Offering Memorandum and the relevant Supplemental Offering Memorandum are not intended to provide a complete description of the Company's Memorandum or Articles of Association, the relevant laws or any relevant agreements entered into by the Company. Copies of any constitutive documents and the items listed below are available at no charge for inspection by Shareholders and prospective investors during normal business hours at the office of the Administrator at the address set out in the Directory. Copies of the following are available upon written request to the Administrator, subject to reimbursement of reasonable costs: (a) (b) (c) (d) (e) (f) (g) 13.3

the Memorandum of Association of the Company; the Articles and Memorandum of Association; the Mutual Funds Law; the Companies Law; copies of the most recent listing documents, any supplemental listing documents, and any circulars to Investors; any interim financial statements published by the Company and the Audited Financial Statements, and the relevant Material Agreements.

MUTUAL FUND REGISTRATION

As a regulated mutual fund, the Company will be subject to the supervision of the Cayman Islands Monetary Authority ('CIMA') who may at any time instruct the Company to have its accounts audited and to submit them to CIMA within such time as it specifies. The Company is required to file an annual return with CIMA and pay an annual fee by or before the last Business Day in January of each year it remains registered as a Mutual Fund. In addition, CIMA may ask the Directors to give it such information or such explanation in respect of the Company as it may reasonably require in order to carry out its duties under the Mutual Funds Law. The Directors must, on request, give CIMA access to or provide at any reasonable time all records relating to the Company, and CIMA may copy or take an extract of a record to which it is given access. Failure to comply with these requests by CIMA may result in substantial fines being imposed on the Directors and may result in CIMA applying to the court to have the Company wound up.

L GOLD FU ICA

SP ND

PHYS

CIMA may take certain actions if it is satisfied that a regulated mutual fund is or is likely to become unable to meets its obligations as they fall due or is carrying on or is attempting to carry on business or winding up its business voluntarily in a manner that is prejudicial to its investors or creditors. The powers of CIMA include, amongst other things, the power to require the substitution of Directors to appoint a person to advise the Company on the proper conduct of its affairs or to appoint a person to assume control of the affairs of the Company. There are other remedies available to CIMA including the ability to apply to the court for approval of other actions.

Au Think outside the Bank

13.4

MISCELLANEOUS

The Company is not, nor has it been since its incorporation, engaged in any litigation or arbitration and the Directors are not aware of any litigation or arbitration or claims pending or threatened against the Company.

79

14

POTENTIAL CONFLICTS OF INTERESTS

Potential conflicts of interests exist in the structure and operation of the Company.

CONFIDENTIAL OFFERING MEMORANDUM POTENTIAL CONFLICTS OF INTERESTS

14.1

The Sponsor holds all the Voting Shares in the Company. Other than the Directors (who may appoint additional Directors themselves), only the holders of the Voting Shares may appoint or remove the Directors. Only the Directors may terminate the services of the relevant Investment Manager, the Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, and any other agents of the Company. One of the Directors, Nestor Castillero Nunez, is also a director and employee of the Investment Advisor. Acccordingly, the agreement between the Investment Advisor and the Company was not negotiated at arm’s length. Notwithstanding this, Mr. Castillero Nunez is mindful of his duties and obligations to each entity. 14.2

SP ND

PHYS

NON-EXCLUSIVITY

The Directors, any relevant Investment Manager, the Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company, and their respective affiliates may manage or provide management, advisory or other services in respect of investments and investment companies other than those of the Company that may create conflicts between the interests of their other clients and the Company. In that respect, the Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company, and any of their respective affiliates may give advice and take action for their own account in the performance of their duties to other clients that may differ from the timing and nature of action taken with respect to the Company. Because of different investment objectives and strategies, situations may occur where an asset is bought or sold for one or more managed investment companies (including the Company) and accounts, while one or more of the other investment companies and accounts to which the Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company or any of their respective affiliates are providing services in buying or selling the same assets. Moreover, if the purchases or sales of assets for two or more of such other investment companies and accounts arise at or about the same time, transactions in such assets will be allocated, insofar as it is feasible, for the respective investment companies and accounts in a manner determined to be equitable to all. Circumstances may arise when the purchases or sales of assets for one or more of the investment companies and accounts to which the Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company or any of their respective affiliates are providing services have an adverse effect on other investment companies (including the Company) and accounts to which the Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company or any of their respective affiliates are providing services. 14.3

L GOLD FU ICA

VOTING SHARES AND DIRECTORS/AGENTS

NON-PUBLIC INFORMATION

The Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company or any of their respective affiliates, in the course of their other business activities, may obtain non-public information that would be of value to the Company. However, the Directors, the relevant Investment Manager, any Investment Advisor, the Administrator, any Custodian, any Prime Broker, any Broker, the relevant Bank, any Distributor, any other agents of the Company or any of their respective affiliates will be under no obligations to use and may, depending upon the circumstances, be legally prohibited from using such information for the benefit of the Company. Each will at all times have regard in such event to its obligations to the Company and will endeavour to ensure that such conflicts are resolved fairly. When making investments where a conflict of interest may arise, the Directors will act in a fair and equitable manner as between the Company and its other clients. Any other perceived potential conflicts of interests specific to a Fund will be detailed in the relevant Supplemental Offering Memorandum.

Au Think outside the Bank

80

RISK FACTORS

As with all investments, risk cannot be eliminated and there can be no assurance or guarantee that the Company will meet its objective in respect of any Fund. Investment in the Company is only available to investors who fully understand and are willing to assume the risks involved. Please refer to the respective Supplemental Offering Memorandum for a list of certain risk factors that must be taken into consideration before investing in Participating Shares of a Fund. THE LIST OF RISK FACTORS IN THE OFFERING DOCUMENTS DOES NOT PURPORT TO BE A COMPLETE ENUMERATION OR EXPLANATION OF THE RISKS INVOLVED IN AN INVESTMENT IN THE COMPANY. PROSPECTIVE INVESTORS SHOULD READ THIS ENTIRE INFORMATION MEMORANDUM AND CONSULT THEIR OWN COUNSEL AND ADVISERS BEFORE DECIDING TO INVEST IN THE COMPANY.

L GOLD FU ICA

SP ND

PHYS

CONFIDENTIAL OFFERING MEMORANDUM RISK FACTORS

15

Au Think outside the Bank

81

The Good Delivery Rules for Gold and Silver Bars Specifications for Good Delivery Bars and Application Procedures for Listing

October 2010

© The London Bullion Market Association, October, 2010

LBMA

Good Delivery Rules

October, 2010

Contents 1.

Introduction ................................................................................................................................... 3

2.

Criteria .......................................................................................................................................... 4

3.

Procedure for Submission of an Application ................................................................................ 4

4.

Technical Assessment Procedure .................................................................................................. 5

5.

Results ........................................................................................................................................... 8

6.

Charges and Accounting ............................................................................................................... 8

7.

General Specifications for Good Delivery Bars ............................................................................ 8

8.

Specifications for a Good Delivery Gold Bar ............................................................................. 10

9.

Specifications for a Good Delivery Silver Bar............................................................................ 10

10.

Proactive Monitoring .................................................................................................................. 11

11.

Retesting of Bars ......................................................................................................................... 11

12.

Further Information ..................................................................................................................... 12

Annex A – Application Form for Good Delivery Listing ..................................................................... 13 Annex B – LBMA Vaults...................................................................................................................... 17 Annex C – Referees............................................................................................................................... 18 Annex D – Supervisors.......................................................................................................................... 19 Annex E – List of Security Transport Companies................................................................................. 20 Annex F – Approved Weighers ............................................................................................................. 21 Annex G – Weighing, Packing and Delivery Procedures ..................................................................... 23 Annex H – Sample Weight Lists ........................................................................................................... 26 Annex I – Proactive Monitoring – Procedures and Criteria .................................................................. 29 Annex J – Specimen Technical Line Drawings .................................................................................... 34 Annex K – End Stamping of Silver Bars............................................................................................... 36 Annex L – Facilitators ........................................................................................................................... 37 Annex M – Residual Elements .............................................................................................................. 37

2

LBMA

Good Delivery Rules

October, 2010

Preamble This edition of the Good Delivery Rules contains two significant additions relative to the October 2008 version, namely the paragraph (shown boldened in section 7) relating to possibility of marking Non Good Delivery bars produced in the same format as Good Delivery bars as "NGD"; and the requirement that, if a refiner changes its bar marks or dimensions, the new bar must comply with the recommended dimensions shown in sections 8 and 9. There are two other changes in this version: the replacement of assay values expressed in parts per 100,000 with values in fineness terms; and in Section 9, a clarification that silver bars produced prior to January 2008 which are outside the current range of 750 to 1,100 troy ounces but within the old wider range of 500-1,250 troy ounces will eventually be phased out. The October 2008 edition by contrast was a major revision, the first since April, 2004. It contained new recommendations and specifications which were developed following consultation with Good Delivery Refiners. The new Rules were first circulated to Refiners on the Good Delivery List in July, 2007 and came into effect in January, 2008. The substantive changes in the October 2008 version of the document are the changes to section 6 and Annex I concerning increases in Good Delivery charges and the addition of Annex L

which lists companies that can act as facilitators to applications and

Annex M

which lists the elements typically determined using spectrographic analysis by LBMA Referees.

A summary of the main changes in the Rules since the April, 2004 edition can be found at www.lbma.org.uk/Delivery/GDRules/GD Rules Changes 20100514.pdf. The LBMA recognises that in some instances Good Delivery refiners may need to comply with national standards regarding the production of gold and silver bars. In order to recognise such needs, the LBMA has tried, wherever possible, not to be too prescriptive in formulating these Rules and it is for this reason that some items in the Rules appear as non-mandatory recommendations which are intended to be merely guidance as to best practice.

1.

Introduction

The list of acceptable refiners of gold and silver bars in the London bullion market, the “LBMA Good Delivery List”, has been developed and is maintained by The London Bullion Market Association (“the LBMA”) in order to facilitate the international distribution and acceptability on technical grounds of standard bars produced by those refiners: (a)

who meet the criteria for inclusion in the list; and

(b)

whose bars have passed the testing procedures laid down by the LBMA.

Standard bars are bars of approximately 400 fine troy ounces for gold and approximately 1,000 troy ounces for silver. Bars are listed at the discretion of the Management Committee of the LBMA, which reserves the right to make any investigations that it deems appropriate into an applicant for listing. An entry on the List relates to one refinery at one specific location. Separate applications are required if an applicant wishes to register bars produced in refineries situated at different locations. If a company on the List wishes to change the location of its refinery or the dimensions of, or registered marks on, its standard bars, then it must inform the LBMA in advance, providing all appropriate details. As indicated in Section 7, it must ensure that the dimensions of the modified bar fall within the LBMA's recommendations.

3

LBMA

Good Delivery Rules

October, 2010

If a company on the List is subject to a substantive change in its ownership or the technology used in refining, it must inform the LBMA accordingly. The LBMA reserves the right in such circumstances to ask the company to submit a new application. The Good Delivery List is the copyright of the LBMA. Reproduction and dissemination of the List is permitted only with the express written permission of the LBMA and an acknowledgement of the LBMA‟s copyright.

2.

Criteria

The LBMA is unlikely to give favourable consideration to an application for listing unless the following criteria are met: (a)

the applicant has been in existence for not less than five years and has been involved in refining operations of the metal for which it is applying for Good Delivery status for not less than three years prior to the application;

(b)

the applicant has an established annual refining production (which need not be in the form of standard bars) of not less than 10 tonnes in the case of gold, or not less than 30 tonnes in the case of silver;

(c)

the applicant has a tangible net worth of not less than the equivalent of 10 million pounds sterling or such figure as the LBMA may from time to time determine.

The LBMA believes that the long-term viability of a refinery as well as its ability to meet the required standards of the Good Delivery List depend on it having a certain volume of production as well as a minimum tangible net worth. If a refinery suffers a substantial and sustained fall in refined production relative to the minima mentioned in paragraph (b) above or if its tangible net worth falls significantly below that indicated in paragraph (c) above, it should inform the LBMA of the reasons for the fall and, if appropriate, the likely future development.

3.

Procedure for Submission of an Application

An applicant company wishing to apply for Good Delivery status for its refinery must submit an application to the LBMA Chief Executive using the application form given in Annex A. If an applicant company feels that it is in need of a significant degree of assistance in preparing its application it may wish to contact one of the Facilitators listed in Annex L. In such circumstances the applicant should approach a Facilitator directly to negotiate terms and fees for the provision of any assistance to be provided. The application must be accompanied by a number of documents (which are described in detail in Annex A). These should give a clear description of the ownership, operating history and financial position of the refinery, together with details of the Good Delivery bars produced. The documents include a letter attesting to the applicant‟s standing from the central bank of the country in which the refinery is located. If, however, the applicant‟s central bank is unwilling, as a matter of principle, to provide such a letter, then, by agreement with the LBMA, a letter of support from a suitable alternative organisation may be provided instead. Suitable organisations may include government ministries, industry trade associations or well-known commercial banks that are acquainted with the applicant‟s business and activities. These documents are required firstly, to provide a general description of the operations at the refinery and the standing of the applicant company; and secondly, to ascertain the ownership structure and in particular to meet the compliance requirements for the setting up of a customer account for the applicant to facilitate the subsequent steps in the assaying of samples and the provision of bars for testing. The Application Form also includes declarations relating to the applicant‟s willingness to (a) respond to any complaints from the market about the quality of its bars and (b) have the quality of its refining tested from time to time by the LBMA (by means of the proactive monitoring system). Documents must be provided in English. In the case of documents originally published in the applicant‟s local language, an English translation must be provided. Where copies of official 4

LBMA

Good Delivery Rules

October, 2010

documents are to be provided the LBMA may require such documents to be notarised by a public official. The LBMA Executive will treat the production data and the contents of the video mentioned in Annex A as confidential. This information will normally only be examined by the LBMA Chief Executive and its technical consultant and, if necessary, by members of the Physical Committee. In no circumstances will the contents of the video be shown to the LBMA‟s referees. See attached Annex J for and example of what the LBMA considers to be an acceptable technical line drawing of a bar as is required to be submitted with an application (see attached Annex A for more details. It should be noted that the application fee of £1,400 + VAT at the current rate, must be paid at the time of the application, either in the form of an accompanying cheque in favour of The London Bullion Market Association or by direct bank transfer to the LBMA bank account including all bank charges. Details of the LBMA‟s bank account are given in Annex A. The LBMA will issue a corresponding invoice/receipt when the payment has been received (or if required, an invoice in advance). The application fee is non-refundable in the event that an application is unsuccessful, irrespective of the stage reached. Details of the other charges involved are given in Section 6. The LBMA Chief Executive will normally acknowledge receipt of the application within one working day. As soon as possible after receipt of the application, the Chief Executive will decide on whether the application should be accepted for technical assessment. The Chief Executive will normally consult members of the Physical Committee concerning the application and may, on matters relating to the tangible net worth of the applicant, consult the LBMA‟s accountants. The LBMA reserves the right, where this is considered necessary, to arrange a short inspection visit before accepting an application for technical appraisal. The costs of the inspection visit, including business class flights, local subsistence and travel, must be paid for by the applicant. The inspectors will either consist of members of the LBMA‟s Physical Committee or their suitably qualified colleagues located closer to the applicant's operation. If, having considered all the information submitted, the Chief Executive and the Physical Committee of the LBMA agree that the application meets all the relevant criteria and should therefore be processed further, the applicant will be so advised and will be required to undertake the following procedures for: (a)

the examination of its assaying capability, and

(b)

the examination and testing of its bars.

Throughout the application process, the LBMA will act as the intermediary between the applicant and the referees (see list in Annex C) that will be used in the technical assessment stages. The LBMA will also keep accounts in respect of the charges for the two stages of the technical assessment and the bars that the applicant supplies for testing and any other costs involved. The applicant will not be informed of the identities of the referees carrying out the technical assessment and the referees will only be informed of the identity of the applicant when the application has been successfully completed and the applicant advised of the result.

4.

Technical Assessment Procedure

4.1

Testing the applicant's assaying capability

The first stage of the testing procedure involves the applicant assaying reference samples provided by the LBMA. The reference samples have been manufactured by the LBMA‟s panel of referees and cross-check assayed by at least two other referees. The reference assay values are calculated by the LBMA based on the assays performed on the samples by at least three of the referees. The reference samples will comprise for gold, twenty four samples of approximately 10 grams each within the approximate range 995.0 to 999.9 parts per thousand and

5

LBMA

Good Delivery Rules

October, 2010

for silver, ten samples with assay values varying within the approximate range 999.0 to 999.9 parts per thousand. To initiate the testing phase, the LBMA will request the applicant to pay the Stage 1 fee shown in the Table in section 6. This covers the costs of the reference samples, including the value of the contained gold and/or silver and the LBMA‟s administrative costs. However, the costs incurred by the LBMA of shipping the samples to the applicant will be charged to the applicant in addition to the fees shown. In order to ensure safe delivery of the samples to the applicant‟s refinery, the LBMA will, in general, use the services of a security transport company to ship the samples. When the payment for the Stage 1 fee has been received by the LBMA, the reference samples, each identified by a code number, will be sent to the applicant by the LBMA. The applicant is required to assay the samples and send a report of its results by email and fax to the Chief Executive of the LBMA. Once the samples have been received by the refinery, the report must be submitted: within ten local business days in the case of gold; and within five local business days in the case of silver. Failure to submit the report within this time-frame may result in the application being rejected with the forfeiture of the fees paid. The assay report should list the reference numbers and show the assay determined for each sample to five significant figures and the applicant‟s interpretation of the assays to four significant figures, according to the rules shown below. For the purpose of rounding five-figure assays to four figures, the following principle should be observed (except in the two cases shown below). If the fifth significant figure is a six or greater, then the fourth significant figure should be rounded up by one. The first exception is that assays of 999.86 to 999.89 should not be rounded up to 999.9 and should be reported as 999.8. Secondly, an assay of 999.96 or above should not be rounded up and should be reported as 999.9. The assay report should also state which method of assaying has been used. It should be noted that the LBMA‟s referees normally use direct determinations of the assay contents of their gold samples (i.e. corrected fire assay) though in the case of high-value alloys with assays of 999.5 and above, spectrographic analysis may in addition be used. For silver, however, spectrographic analysis is normally used, though the direct method of potentiometric titration may also be employed. Although an applicant may use alternative methods of assaying, these may introduce additional divergences between its assays and those of the referees, which may contribute to a failure to meet the divergence criteria shown in paragraphs (a) and (b) below. Annex M shows the residual elements that LBMA referees will look for in carrying out spectrographic analyses of gold and silver. All applicants, including those whose standard production is at the 999.9 level, must be able to demonstrate their capability to assay across the range permitted for Good Delivery bars, i.e. approximately 995.0 to 999.9 for gold and 999.0 to 999.9 for silver. In order to pass the assay test on the samples, the criteria shown below should be met. These are shown in terms of fineness (parts per thousand). (a)

assays of 999.5 and above should agree to ±0.05; for example, the assay determined on a sample with a reference value of 999.84 would have to fall within the range 999.79 to 999.89;

(b)

assays of less than 999.5 should agree within ±0.15; for example, the assay determined on a sample with a reference value of 996.73 would have to fall within the range 996.58 to 996.88.

6

LBMA

Good Delivery Rules

October, 2010

However, it will be deemed acceptable if there are not more than a total of three divergences in the case of gold and two divergences in the case of silver from paragraphs (a) and (b) above, provided that all such divergences are no greater than ±0.25 and that there is no significant bias in the set of results. The final decision by the LBMA on whether an applicant has passed the assay test will be based on an examination of all assay results. In marginal cases, the LBMA may request to see the detailed results of all the trials carried out. When determining the assay of sample bars using spectrographic methods, the applicant is responsible for identifying all impurity elements contained therein which will determine the final assay. The LBMA does not prescribe detailed procedures or criteria for assaying bars using spectrographic methods but Annex M lists the elements that LBMA Referees will typically determine. 4.2

Submission and testing of sample bars

If the test of the applicant‟s assaying ability is satisfactory, the applicant will be requested by the LBMA to pay the Stage 2 charges shown in section 6 and then to submit eleven gold and/or silver bars to the LBMA‟s duty and VAT-free warehouse in London (“the nominated vault”). These bars must conform generally to the specifications and standards laid down by the LBMA (see Sections 7 to 9 below). There are, however, additional requirements for bars submitted for testing (a)

One of the bars should be stamped with the identifying stamp of the refinery and other marks as listed in sections 7 to 9 below.

(b)

The remaining ten bars should only be stamped with an identifying code provided by the LBMA (such as LBMA10-1-) plus a number from 1 to 10. The code will be supplied to the applicant by the LBMA.

(c)

Although the permitted weight ranges for standard gold and silver bars as indicated in the specifications laid down by the LBMA are quite wide (see Sections 8 and 9 below), the sample bars submitted by the applicant for examination and testing purposes should, unless specifically agreed by the LBMA, be within the weight range of 395 to 405 troy ounces for gold and 900 to 1050 troy ounces for silver.

(d)

Annex H shows the general format for a weight list which should accompany batches of bars for delivery to the London market. However, in the case of the eleven bars provided for assessment purposes by an applicant, slightly different arrangements apply. These bars should be accompanied by a weight list showing, for gold, the bar number, brand, gross weight, fineness (to five significant figures and the equivalent rounded to four significant figures) and fine weight in troy ounces; and, for silver, the bar number, brand, fineness (to five significant figures and the equivalent rounded to four significant figures) and gross weight in troy ounces.

(e)

The weight list should show weights expressed in troy ounces. However, metric weights will be acceptable subject to agreement with the LBMA, but when the bars are checkweighed in London in troy ounces (using the procedure set out in Annex G) the weights should correspond with the metric weight equivalents shown by the applicant.

Usually the bars must be received by the LBMA‟s nominated vault within four weeks of the applicant being requested to submit them. Failure to submit the bars within this time-frame may, in the absence of specific agreement by the LBMA, result in an application being terminated with the forfeiture of the fees paid. The applicant is required to insure the bars on a vault-to-vault basis and is recommended to use one of the carriers in the United Kingdom, nominated by the LBMA (see list at Annex E), for transporting the bars from the point of entry into the United Kingdom to the nominated vault. All transportation and insurance costs are payable by the applicant. The LBMA‟s nominated vault will check-weigh the sample bars against the accompanying weight list (see paragraph (e) above). A representative of the LBMA will check the bars against the photograph and scale technical drawing submitted with the application (see Annex A) and, together with two representatives of the clearing vaults, will then carry out an initial visual examination of the bars. If 7

LBMA

Good Delivery Rules

October, 2010

found to be satisfactory, five of the unmarked sample bars will then be sent for testing to each of two referees appointed by the LBMA. The two referees will independently examine the bars. The first phase of testing involves visual inspection, weighing and assaying of cut and / or drill samples taken from each of the bars. The referees will then perform full melt assays on four of the five bars, holding one bar each in reserve. In addition to these tests, the referees will carry out a full spectrographic analysis on a cut sample of the remaining un-melted bar, in order to determine the levels of impurities and thence to give an opinion on whether any of these are present in amounts that would be considered deleterious. The LBMA does not set maximum acceptable levels for impurities but seeks to ensure that they are within appropriate limits and the referees‟ reports will include their evaluation of the impurities found in this regard.

5.

Results

An applicant must satisfy the Physical Committee of the LBMA that it has met all the above criteria and testing requirements before it can be included in the list of acceptable refiners. When the Physical Committee has approved an application for listing, the Chief Executive of the LBMA will inform the applicant. The Chief Executive will arrange for the applicant‟s details to be included on the Good Delivery List and will prepare and send to the applicant a certificate marking its acceptance onto the List.

6.

Charges and Accounting

Fees are levied by the LBMA for a Good Delivery application to cover the costs of the LBMA and the work of the referees. Such fees may be reviewed by the LBMA at any time but not retrospectively once an application has commenced. Currently the total fee, excluding VAT, amounts to £26,000 for gold and £19,000 for silver. The fees are payable in three tranches: Fees Payable by Good Delivery Applicants (in £ sterling – subject to VAT where indicated) Fees (all fees are payable to the LBMA)

Gold

Silver

On Application (plus VAT at the applicable rate)

1,400

1,400

Stage 1: Assay Test (not normally subject to VAT)

11,500

4,500

Stage 2: Testing of Applicant‟s bars (not normally subject to VAT)

13,100

13,100

Total

26,000

19,000

The above-mentioned fees are payable in advance at each stage. The fees shown for Stage 1 cover the cost of the samples (including their metal content) provided to the applicant but not the cost of shipping incurred by the LBMA (which will be charged in addition to the fees shown). In the event of an applicant not progressing to the next stage, for whatever reason, no part of the fees already paid is refundable. But in such situations, no fees are payable for the next stage. Once the tests have been completed, the after-melting weight and fine troy ounce content for gold or troy ounce content for silver of the sample bars supplied by the applicant will be notified to the applicant by the LBMA. By separate arrangement with the LBMA, the gold or silver may be sold and the proceeds credited to the applicant. Alternatively, an equivalent weight of gold or silver can be made available to the applicant (subject to the settlement of all outstanding fees) on a loco London basis by book transfer through the London bullion market clearing mechanism.

7.

General Specifications for Good Delivery Bars

The LBMA‟s recommended specifications for Good Delivery bars are shown below. Detailed requirements for gold and silver Good Delivery Bars are given in the Sections 8 and 9 respectively. The LBMA considers that the appearance of bars is important, firstly because of the technical reasons described below and secondly because the maintenance of high standards of surface finish indicates a 8

LBMA

Good Delivery Rules

October, 2010

good level of quality control in general. A poor bar appearance might, on the other hand, suggest that standards of refining or assaying are less than desired. Changes to Bar Dimensions or Marks A refiner intending to change either the marks on the bars or the bar dimensions must give the LBMA at least two months notice of the change and provide a technical drawing of the proposed new bar and the date on which it is intended to be introduced. When the drawing has been approved and the bar has gone into production, the refiner must send to the LBMA photographs of the new bar in plan and perspective views (3 copies of each). See Annex A for a description of the required drawing and photographs. The bar dimensions shown in sections 8 and 9 are mandatory for new refiners. For refiners already listed whose bars are outwith these dimensions, their bars will continue to be acceptable. However, if a refiner wishes to change either the dimensions or marks on the bars, it must ensure that the new bars have dimensions within the recommended range. If a refiner is only intending to change the marks without changing the dimensions, the LBMA will allow it a grace period of 6 months to change the dimensions so that existing moulds can be used while new moulds are obtained. Non-Good Delivery Bars If bars are produced in the general form of Good Delivery bars, but due to their intended use (for example bars produced for and delivered directly to an industrial customer for use as a raw material) they do not meet the Good Delivery specifications (for example, inferior appearance or sub-standard bar marks) then the Good Delivery refiner must stamp the bars NGD (meaning Non Good Delivery) in close proximity to the LBMA-approved manufacturer's mark. General Description of Good Delivery Bars Weighing: Bars should be weighed in accordance with the procedure laid down by the LBMA (see Annex G "Weighing, Packing and Delivery Procedures for Gold and Silver Bars") Shape: Bars must be cast in open moulds and be ingot-shaped (i.e. with the top surface larger than the bottom surface). A bar should be produced at a single pouring so as to avoid any layering. Bars must be easy and safe to handle and convenient to stack with, in the case of gold bars, the larger (top) surface showing the marks and in the case of silver bars the top surface or end of the bar, as detailed below, showing the marks. It is important that the edges of the bars must not be sharp, so as to avoid the risk of injury during handling. As from 1st January, 2008, the use of closed or gated moulds was no longer permitted for the production of Good Delivery bars. Appearance: Bars must be of good appearance. Faults that must be avoided, especially on the top surface of a bar, are irregularities such as surface cavities, cracks, holes or blisters (debris and water can accumulate in such irregularities which can affect the weight of the bar and, accumulated water can cause an explosion when the bars are melted) and excessive shrinkage (i.e. the concavity of the top face of the bar and any concentric cooling rings must not be such that it makes it difficult to either apply or read the bar marks or in the case of concavity bars become unstable when stacked on top of each other). The sides and bottom (smaller) surface should be smooth and free from cavities, lumps and layering. Marks: Gold bars must be marked on the larger surface (the cast surface at the top of the mould) of the two main surfaces of the bar. This is the surface that would normally be uppermost when the bars are stacked. Silver bars may be marked on the larger surface of the two main surfaces of the bar or on the end of the bar if marked using a dot matrix (pneumatic punching) method so that the marks can be read from the top edge downwards (see attached Annex K). The marks should include the stamp of the refiner (which, if necessary for clear identification, should include its location), the assay mark (where used), the fineness, the serial number (which must not comprise of more than eleven digits or characters) and the year of manufacture as a four digit number unless incorporated as the first four digits in the bar number. If bar numbers are to be reused each year, then it is strongly recommended that the year of production is shown as the first four digits of the bar number although a separate four digit year stamp may be used in addition. If bar numbers are not to be recycled each year then the year of production must be shown as a separate four digit number. Marks should be clear and the height of characters used should be a minimum of 12.5 mm. Marks may 9

LBMA

Good Delivery Rules

October, 2010

be applied to bars either by using conventional stamping or by dot matrix (pneumatic punching), provided always that if pneumatic punching is used the marks must be no less clear and at least as durable as if conventional stamping had be used. Weight Stamps: It is strongly recommended that weights should not be stamped on Good Delivery bars. The reason for this is that when bars are weighed in London by an LBMA approved weigher their weights, which may be different, will prevail, and also any adjustment to the weight of a bar caused by future handling or sampling would necessitate alteration to the mark. If bars are so stamped, the unit of weight must be shown. If bars are delivered in to the London market and the recipient vault is of the opinion that the bars do not conform to the above requirements the recipient vault may ask the LBMA to appoint independent inspectors to examine the bars and express an opinion as to whether the bars are acceptable for Good Delivery purposes. For the avoidance of doubt, any proposed recipient of bars has, irrespective of any view expressed by an inspector on the condition of a bar, the absolute right to refuse to accept delivery of a bar if its vault manager considers that the bar does not meet the Good Delivery standards as set out in these Good Delivery Rules.

8.

Specifications for a Good Delivery Gold Bar

The physical settlement of a loco London gold trade is a bar conforming to the following specifications: Weight:

minimum gold content: 350 fine troy ounces (approximately 10.9 kilograms) maximum gold content: 430 fine troy ounces (approximately 13.4 kilograms) The gross weight of a bar should be expressed in troy ounces, in multiples of 0.025, rounded down to the nearest 0.025 of a troy ounce.

Dimensions:

the recommended dimensions for a Good Delivery gold bar are approximately as follows: Length (Top): 250 mm +/- 40 mm Undercut *: 7% to 15% Width (Top): 70 mm +/- 15 mm Undercut *: 15% to 30% Height: 35 mm +/- 10 mm * The undercut refers to the degree of slope on the side and ends of the bar and is calculated by deducting the dimension of the bottom edge of the bar from the dimension of the top edge and dividing the result by the top edge dimension multiplied by one hundred to obtain the percentage undercut.

9.

Fineness:

the minimum acceptable fineness is 995.0 parts per thousand fine gold.

Marks:

Serial number (see additional comments in section 7 above) Assay stamp of refiner Fineness (to four significant figures) Year of manufacture (see additional comments in section 7 above)

Specifications for a Good Delivery Silver Bar

The physical settlement of a loco London silver trade is a bar conforming to the following specifications: Weight:

minimum silver content: 750 troy ounces (approximately 23 kilograms) maximum silver content: 1100 troy ounces (approximately 34 kilograms) However, it is recommended that ideally refiners should aim to produce bars within the following weight range; minimum silver content: 900 troy ounces (approximately 29 kilograms) maximum silver content: 1050 troy ounces (approximately 33 kilograms) Bars produced prior to 1st January 2008 having a weight in the former wider range of 500 to 1250 troy ounces will continue to be acceptable for the time being though

10

LBMA

Good Delivery Rules

October, 2010

it is expected that these will eventually be phased out when the number of such bars in the London vaults has declined to nearly zero. The gross weight of a bar should be expressed in troy ounces in multiples of 0.10, rounded down to the nearest 0.10 of a troy ounce. Dimensions

the recommended dimensions for a Good Delivery silver bar are approximately as follows: Length (Top): 300 mm +/- 50 mm Undercut: * 7% to 15% Width (Top): 130mm +/- 20 mm Undercut: * 15% to 30% Height: 80 mm +/- 20 * The undercut refers to the degree of slope on the side and ends of the bar and is calculated by deducting the dimension of the bottom edge of the bar from the dimension of the top edge and dividing the result by the top edge dimension multiplied by one hundred to obtain the percentage undercut.

Fineness:

the minimum acceptable fineness is 999.0 parts per thousand silver.

Marks:

Serial number (see additional comments in section 7 above) Assay stamp of refiner Fineness, expressed to either three or four significant figures Year of manufacture (see additional comments in section 7 above)

10.

Proactive Monitoring

The LBMA operates a system of monitoring the quality of the production and assaying ability of refiners on the Good Delivery List. This involves refiners providing on request a dip sample from a normal production melt which will be check-assayed by one of the LBMA‟s referees. Special arrangements apply to gold refiners which only produce and market “four-nines” gold. Normally refiners will be subject to monitoring once every three years. A newly listed refiner would not normally be monitored within the first three years of being listed. A separate paper “Proactive Monitoring Procedures and Criteria” for the proactive monitoring of Good Delivery refiners describes the operation of the system in detail and is included as Annex I. 10.1 Annual Monitoring Fee In order to pay for the costs involved in the testing required for proactive monitoring each refiner on the Good Delivery List must pay an annual monitoring fee to the LBMA (of £1,000 per metal with effect from 1st January, 2009). However, the monitoring fee for refiners which are either Members or Associates is included in their annual Membership or Associateship fees. Full membership of the LBMA costs £6,000 per year and Associateship costs £2,500 per year. All the above amounts are subject to UK Value Added Tax where applicable.

11.

Retesting of Bars

The LBMA reserves the right when appropriate to ask refiners on the Good Delivery List to submit bars for testing if, in its opinion, a refiner is unable to demonstrate the required competence in assaying (as revealed by the proactive monitoring system) or if the appearance of a refiner‟s bars gives cause for concern. At its discretion, the LBMA may request a refiner to send two bars to a London vault for inspection and testing. 11.1 Testing Method The methods of inspection and testing specified in section 4.2 of these Rules will generally be followed. 11.2 Charges The refiner will be required to pay for the cost of insurance and shipping the bars to the London vault. If a subsequent inspection by a panel of clearing vaults or other specialists appointed by the LBMA is satisfactory, the LBMA will charge the refiner the sum of £2,000 plus VAT as applicable. However, should the vault inspection indicate the need for further testing of the bars by the LBMA‟s referees, 11

LBMA

Good Delivery Rules

October, 2010

then an additional charge of up to £8,000 plus VAT as applicable will be levied to cover the cost of shipping the bars to the referees and the testing of the bars by the referees. 11.3 Further Information Any questions or requests for further information about the Good Delivery List, specifications or application procedures should be addressed to the Chief Executive of the LBMA. May, 2010

12

Good Delivery Rules

Annex A – Application Form

Annex A – Application Form for Good Delivery Listing GOLD/SILVER † Name of Refinery ..............................................................................................................................................................…..

Address of Refinery..............................................................................................................................….. ........................................................................................................................................................…........ ...........................................................................................................................................................….....

Name of Company and address of Head Office if different from those of Refinery ..........................................................................................................…………………….….…….......…. . ...............................................................................................................….........…………………............ ...............................................................................................................….................................……........

Contact name, title and address to which correspondence should be addressed ………….........................................................................................................................................……... ..............................................................................................................................................……….......... ..............................................................................................................................................……...….......

Telephone No: ………………………….…….Fax No: ……………..………….....................……….…

E-mail:…………………………………………………………….…….. † Delete as applicable. Please complete a separate Application Form for gold and silver if both metals are applied for. See overleaf for documents and payment to be enclosed.

13

Good Delivery Rules

Annex A – Application Form

Documents and other information to be enclosed Unless otherwise specified, the documents must be in English and if provided as a translation into English, they should in each case be authenticated, in a manner acceptable to the LBMA, as being a true translation of the original document. 1.

A letter of support from the applicant‟s central bank, attesting to the financial standing of the applicant. If it is not possible to obtain such a letter, the applicant should explain the reason for this and provide an equivalent letter of support from a suitable alternative organisation (to be approved in advance by the LBMA) such as a government ministry or a major, well-known, commercial bank.

2.

Certificate of Incorporation (or Certificate of Trade)

3.

Latest published annual report and audited financial statements for the most recently available annual accounting period. If these documents are not officially published in English, a translation of the following into English should be provided: Auditor‟s letter approving the Accounts Balance Sheet Profit and Loss Account

4.

Description of the structure of the Company‟s ownership, including: List of five principal shareholders, with their addresses and shareholdings

5.

List of all directors History and description of the company's business and refining operations, including: exact location of refining plant history of refining operations at the plant a general description of the main sources of feedstock a brief description of the main refining processes used a general description of the main customers for the refinery‟s main products a description of the methods and equipment used for assaying gold and/or silver

6.

Figures for the last three years' annual production of refined gold/silver

7. 8.

Estimate of next two years' annual production of refined gold/silver Illustrations of the gold/silver Good Delivery bar as follows; An electronic high quality high resolution coloured digital image in the form of a jpg file (pixel dimensions should be in the order of 2700 by 1800) showing the detailed bar marks on the face of the bar, the bar marks should be clear and in focus An electronic high quality high resolution coloured digital image in the form of a jpg file (pixel dimensions should be in the order of 2700 by 1800) showing the bar in three dimensional view with the bottom surface of the bar uppermost Three high quality hard copies of each of the above (not copies reproduced on ordinary quality paper using an inkjet printer) or alternatively three high quality colour photographs (size 18 cms x 12 cms) showing the face of the bar and three dimensional view as described above a fully dimensioned, black and white scale technical drawing on A4 size paper. This should show the location of the marks on the main surface and a detailed view of the marks (see Annex J as an example) a detailed description of the applicant‟s logo appearing on the bars explaining what the individual characters and / or symbols represent a statement confirming whether bar numbers are re-cycled each year and an explanation of what the individual digits within the bar number represent.

14

Good Delivery Rules 9.

Annex A – Application Form

Short Video (preferably on DVD or alternatively on a VHS, PAL format videotape) showing the plant and operating techniques used in the refinery. This should also show the assaying laboratory, including the equipment used for both instrumental and manual methods. The commentary should either be in English or English subtitles should be provided.

10. Sterling cheque for £1,645 (£1,400 + £245 VAT) in favour of the London Bullion Market Association or confirmation of the payment direct to the LBMA‟s bank account.

15

Annex A – Application Form

Good Delivery Rules

DECLARATION (To be signed by a Director/Authorised Officer of the Applicant, as appropriate.) To: The London Bullion Market Association We confirm that we have read the LBMA paper on The Rules for Good Delivery Gold and Silver Bars which sets out the specifications and procedures applied by the LBMA for the examination of the assaying capability and the testing of bars of Applicants for Good Delivery status. We also agree that this procedure should be applied to assess our melting and assaying capability and that, in order to be included by the LBMA in the list of Acceptable Refiners, we must satisfy the Management Committee of the LBMA that we have met the criteria and requirements of the tests laid down in the Procedures. We agree to pay the initial application fee of the LBMA with this application, and those fees subsequently payable during the course of the testing procedures whether or not our application is successful. We agree that if accepted onto the Good Delivery List, we will respond appropriately to any complaints from the market about the quality of our bars. We agree that if accepted onto the Good Delivery List, we will submit to regular proactive monitoring. Please declare (a) or (b) (a)

We are not a Member or Associate of the LBMA and agree to the payment of an annual monitoring fee in respect of continuing membership of the Good Delivery List

(b)

As a Member/Associate of the LBMA, we understand that the annual Good Delivery List monitoring fee will be included as part of the annual charge for Membership/Associateship

For and on behalf of: .................................................................................................................................................................... (Name of Applicant Company) Signature of Director/Authorised Officer.................................................................................................. Name in BLOCK letters ………………………………………………………………………………… Date............................................................................................................................................................. This application, together with all supporting documents, should be sent to: The Chief Executive The London Bullion Market Association 13/14 Basinghall Street London EC2V 5BQ United Kingdom LBMA Bank Account Details: HSBC Bank plc, 28 Borough High Street, London, SE1 1YB Account Name: London Bullion Market Association Current Account Number: 72017180 Sort Code: 40-06-21 IBAN Code GB87MIDL40062172017180 BIC Code MIDLGB22

16

Annex B – LBMA Vaults

Good Delivery Rules

Annex B – LBMA Vaults Market Making Members of the LBMA who also provide bullion vaulting and clearing services to third parties

Company

Address

Barclays Bank PLC

Barclays Capital 5 The North Colonnade Canary Wharf London E14 4BB

Deutsche Bank AG London

Winchester House 1 Great Winchester Street London EC2N 2DB

HSBC Bank USA NA London Branch

8 Canada Square London E14 5HQ

JP Morgan Chase Bank

125 London Wall London EC2Y 5AJ

The Bank of Nova Scotia – Scotia Mocatta

Scotia House 33 Finsbury Square London EC2A 1BB

UBS AG

100 Liverpool Street London EC2M 2RH

17

Good Delivery Rules

Annex C – Referees

Annex C – Referees List of Approved Good Delivery Referees The following companies have been appointed as Referees to the LBMA Good Delivery system. Inclusion in this list does not constitute or imply any representation or warranty by the LBMA as to creditworthiness or as to the services or goods supplied or quality or compliance with any specification relating thereto. No liability for direct or consequential loss, howsoever caused, whether by negligence or otherwise, whether by use of this list or reliance thereon, is accepted by the LBMA.

Company

Argor-Heraeus SA Metalor Technologies SA PAMP SA Rand Refinery Limited Tanaka Kikinzoku Kogyo K.K.

18

Annex D – Supervisors

Good Delivery Rules

Annex D – Supervisors

List of Approved Good Delivery Supervising Companies The following companies have been appointed as Supervisors to the LBMA Good Delivery system. Inclusion in this list does not constitute or imply any representation or warranty by the LBMA as to creditworthiness or as to the services or goods supplied or quality or compliance with any specification relating thereto. No liability for direct or consequential loss, howsoever caused, whether by negligence or otherwise, whether by use of this list or reliance thereon, is accepted by the LBMA.

Company

Address

Contact Details

Stewart Inspection and Analysis Limited

Caddick Road Knowsley Business Park Prescot L34 9HP United Kingdom

T: +44 (0) 151 548 7777 F: +44 (0) 151 548 0714 E-mail: [email protected] [email protected]

Inspectorate International Limited

2 Perry Road Witham Essex CM8 3TU United Kingdom

T: +44 (0) 1376 515 081 F: +44 (0) 1376 520 819 E-mail: [email protected] For the attention of Paul Alston

19

Annex E – Security Transport Companies

Good Delivery Rules

Annex E – List of Security Transport Companies List of Security Transport Companies that are Members of the LBMA Inclusion in this list does not constitute or imply any representation or warranty by the LBMA as to creditworthiness or as to the services or goods supplied or quality or compliance with any specification relating thereto. No liability for direct or consequential loss, howsoever caused, whether by negligence or otherwise, whether by use of this list or reliance thereon, is accepted by the LBMA.

Company

Address

Contact Details

Brink's Limited

Unit 1 Radius Park Faggs Road Feltham Middlesex TW14 0NG United Kingdom

Tel: +44 (0) 20 8818 0659 Fax: +44 (0) 20 8818 0692 Contact name: Mr Simon Churchill Sales Executive, Precious Metals Email: [email protected]

G4S International

4th Floor 1-3 College Hill London EC4R 2RA United Kingdom

Tel: +44 (0) 20 7776 1300 Fax: +44 (0) 20 7776 1301 Contact name: Mr Andrew Wylie, Managing Director Email: [email protected]

VIA MAT International Limited

Unit 13, Shepperton Business Park, PO Box 92 Govett Avenue Shepperton Middlesex TW17 8UQ United Kingdom

Tel: +44 (0) 1932 230130 Fax: +44 (0) 1932 230231 Contact name: Mr Graham Tuck or Ms Andrea Leszczynski Email: [email protected] [email protected]

20

Annex F – Approved Weighers

Good Delivery Rules

Annex F – Approved Weighers List of Approved Weighers of Gold and Silver Bars

The following is a list of weighers of gold and silver bars whose weighing facilities, procedures and capability meet the standards required by the LBMA. Inclusion in this list does not constitute or imply any representation or warranty by the LBMA as to creditworthiness or as to the services or goods supplied or quality or compliance with any specification relating thereto. No liability for direct or consequential loss, howsoever caused, whether by negligence or otherwise, whether by use of this list or reliance thereon, is accepted by the LBMA.

Company

Address

Bank of England (Gold only)

Threadneedle Street London EC2R 8AH

Brink’s Limited

Arnold House 36/41 Holywell Lane London EC2P 2EQ

Britannia Refined Metals Limited (Silver only)

Botany Road Northfleet Gravesend Kent DA11 9BG

Deutsche Bank AG

Winchester House 1 Great Winchester Street London EC2N 2DB

HSBC Bank USA London Branch

Level 4 8 Canada Square London E14 5HQ

JBR Recovery Limited (Silver only)

Argentor House Oldbury Road West Bromwich B70 9BS

Johnson Matthey PLC

Precious Metals Division 2 Orchard Road Royston Herts SG8 5HE

JP Morgan Chase

125 London Wall London EC2Y 5AJ

21

Annex F – Approved Weighers

Good Delivery Rules List of Approved Weighers of Gold and Silver Bars (continued)

Company

Address

Thessco Limited (Silver only)

Royds Mills Windsor Street Sheffield S4 7WB

Via Mat International

Unit 13 Shepperton Business Park P O Box 92, Govett Avenue Shepperton Middlesex TW17 8UQ

22

Good Delivery Rules

Annex G – Weighing, Packing and Delivery

Annex G – Weighing, Packing and Delivery Procedures 1.

Weighing procedures

(a)

Gold

Bars are weighed on a beam balance using brass or stainless steel weights of various sizes that are regularly inspected by the Inspector of Trading Standards. It is also acceptable to use an equal-arm magnetically damped precision balance or a modification unit to add magnetic damping to an existing beam balance. If brass weights are used it is expected as a minimum requirement that a 400 troy ounce stainless steel weight is regularly used to cross-verify the accuracy of the 400 troy ounce brass weight. It is increasingly being recognised in the market that brass weights are susceptible to wear and tear and are not as accurate on an ongoing basis as stainless steel weights. The LBMA therefore recommends that, for the weighing of gold, all weights up to 50 ounces and the 400 ounce weight should be of stainless steel in preference to brass. It is the practice of the LBMA and the London market to weigh gold bars in multiples of 0.025 of a troy ounce and therefore this is the smallest weight used. For a gold bar to „turn the scale‟ it is necessary for the bar to cause the indicator needle on the beam balance to move a minimum of two divisions in favour of the bar when the correct weight is placed on the scales. A division on a gold beam balance corresponds to 0.001 of a troy ounce. A gold bar must therefore weigh at least 0.002 of a troy ounce over the stated multiple of 0.025 for a bar to be said to „turn the scale‟. If a bar does not „turn the scale‟ then the weight is reduced by 0.025 of a troy ounce. While it is recognised that other procedures for weighing exist, the above procedure will be used in determining the weight of gold bars delivered into the London market. (b)

Silver

Bars are weighed on either a beam balance or an electronic balance. Beam Balance Brass or stainless steel weights of various sizes should be used and these should be regularly inspected by the Inspector of Trading Standards. It is the practice of the LBMA to weigh silver bars in multiples of 0.10 of a troy ounce and therefore this is the smallest weight used. For a silver bar to „turn the scale‟ it is necessary for the bar to cause the indicator needle on the beam balance to move a minimum of two divisions in favour of the bar when the correct weight is placed on the scales. A division on a silver beam balance corresponds to 0.002 of a troy ounce. A silver bar must therefore weigh at least 0.004 troy ounce over the stated multiple of 0.10 for a bar to be said to „turn the scale‟. If a bar does not „turn the scale‟ then the weight is reduced by 0.10 of a troy ounce. While it is recognised that other procedures for weighing exist, the above procedure for a beam balance will be used in determining the weight of silver bars delivered into the London Market. Electronic balance Where an electronic balance is used for weighing silver bars it should comply with the following criteria. (1)

capable of weighing silver from 500 ounces to 1,250 troy ounces;

(2)

European Union Verification interval no greater than 0.1 troy ounce; 23

Good Delivery Rules

Annex G – Weighing, Packing and Delivery

(3)

readability less than 0.1 troy ounce;

(4)

internal calibration weight which can be activated automatically or via keyboard – calibration should be undertaken on a daily basis;

(5)

maximum eccentricity error not greater than 0.02 troy ounce;

(6)

maximum linearity deviation not greater than 0.02 troy ounce;

(7)

repeatability not greater than 0.02 troy ounce;

(8)

uncertainty of calibration measurement less than 0.05 troy ounce;

(9)

capable of Weights and Measures Verification for weighing silver (i.e. a Class I or II balance/scale having a National or EU Type approval certificate);

(10) calibrated with an inbuilt factor of not less than 0.004 troy ounce in favour of the bar. It is recommended that the calibration is periodically checked using external stainless steel Class F1 weights complying with Organisation Internationale de Métrologie Légale (OIML) standard RIII. An electronic balance should remain powered continuously. If for any reason the balance has been disconnected from the mains or switched off, it should not be used until it has been powered for at least one hour. Where silver is weighed on an electronic balance the inbuilt factor of 0.004 troy ounce in the calibration will always necessitate rounding down to the next 0.10 troy ounce including in those special cases where the reading on the scale is .00 troy ounce (e.g. a bar showing a weight of 1009.00 would be declared as 1008.90 troy ounces). 2.

Delivery and Packing

The LBMA recommends the following good market practice for delivery and packing. (a)

Gold and Silver

A buyer or other party taking delivery of metal may not, in the absence of express contrary agreement with the party making the delivery, stipulate any particular brand when taking delivery. If a tendered brand meets the specifications for Good Delivery but does not suit the requirements of the party looking to take delivery, then, in the absence of express contrary agreement with the party making delivery, the party looking to take delivery will be responsible for meeting the cost of melting and/or refining. Bars not conforming to the specifications set out in Sections 7, 8 and 9 of these rules may be sold or delivered on the market, but the party delivering such bars will be responsible for meeting the cost of making them Good Delivery. All physical metal delivered into, or within, the London market should be packed in a safe manner on a suitable pallet, normally constructed of sturdy wood that is in a good, safe condition. Such pallets should have the following dimensions, length 700mm, width 600mm height 150mm and the wood should be at least 25mm thick and a gap of at least 100 mm is also required to allow standard fork lifting equipment to move the loaded pallet. Each pallet should be capable of carrying one ton (the recommended maximum per pallet) and the pallets should be capable of being stacked six pallets high. All pallets should be heat treated, fumigated and carry a mark to prove this without which the pallets could be rejected by customs. Plastic pallets and pallets constructed from dry, brittle or poor quality timber are not considered suitable. Bars should be adequately strapped so that if being moved and brought to a sudden halt or subjected to a sudden change of direction the bars will not topple with the forward or sideways generated momentum. It is preferable that the bars are protected with bubble wrap, corrugated cardboard or similar material, to prevent bars rubbing together when in transit. It is not necessary to wrap bars individually. Gold bars should, if packed individually or two bars to a box, be packed in wooden, plastic or fibre boxes and strapped to a pallet whilst in transit. Each box should have a unique reference number. 24

Good Delivery Rules

Annex G – Weighing, Packing and Delivery

Alternatively gold bars may be packed, maximum 40 bars (approximately 500 kilos) on a pallet having been placed in a plastic box (sometimes referred to as a “tote”). The box should be nailed to the base of the pallet with the lid having holes to accommodate metal pull-tight seals at each corner to seal the box. Suitable metal or nylon banding should be used to band the box itself. With silver no more than 20 tons should be loaded in any single container. Bars should ideally be packed in the order in which they appear on the relevant weight list. Weight list must be legible and should be printed, rather than handwritten, with bar details being indelible. Weight list should be dated and indicate whether the metal has been weighed by an approved LBMA weigher. A copy of the weight list produced by an LBMA approved weigher (see sample in Annex H) should be attached to the bars. The inclusion of such a list should be taken as confirmation that the bars have been weighed in London in accordance with the London Weighing Procedures. If the bars have not been weighed by an LBMA approved weigher, the party taking delivery may charge the party delivering the bars for weighing at a rate to be mutually agreed. A London vault-holder shall have the absolute right to decide who is permitted access to its premises to collect or deliver bullion bars. A party arranging to deliver or collect bars from a London vault should advise the vault-holder of the vehicle registration and driver‟s identity. The party giving up control of the bars shall be entitled to a receipt in respect thereof in the absence of express written agreement to the contrary. If the above criteria are not met the London vault-holder shall be entitled to reject or refuse delivery, any costs associated therewith being for the other party‟s account. 3.

LBMA Approved Weighers

The LBMA has drawn up and maintains a list of Approved Weighers, (attached as Annex F). If a weighing dispute should arise, it will be referred by the Physical Committee to an LBMA approved weigher not associated with the dispute who will express a non-binding view as to who is responsible for any weight difference. 4.

Further information

Any questions or requests for further information about the weighing, packing and delivery procedures for gold and silver bars should be addressed to the Chief Executive of the LBMA.

25

Annex H – Sample Weight Lists

Good Delivery Rules

Annex H – Sample Weight Lists

The following information should appear on a weight list accompanying gold and silver bars:

GOLD Serial Number

Brand Code

Gross weight (troy ounces)

Assay

Fine Weight (troy ounces *)

123456

ABC

401.125

995.8

399.440

*Notes: In cases where the refinery weighs in kilograms, the method of conversion to a troy ounce basis conforming with the method of weighing used in London is shown overleaf. The fine weight for gold should be shown, as above, to three places of decimals. The method of calculation and rounding is shown in detail on the following page. Only if the fourth decimal is a 9 should the third decimal be increased by 1.

SILVER Serial Number

Brand Code

Gross Weight (troy ounces *)

Assay

234567

XYZ

1,164.900

9990

* Notes Applying to both Gold and Silver: If the weight is measured in troy ounces, it is not necessary to show the kilogram equivalent. However, if the company weighs in kilograms, the weight list should show both the kilogram weight and the equivalent figure in troy ounces (rounded to three places of decimals) using the method of conversion and rounding shown on the following pages using the standard LBMA conversion factor of: 1 troy ounce = 0.0311034768 kilograms For Good Delivery Applications only, the weight list should show both the four and five figure assay values of the individual bars

26

Annex H – Sample Weight Lists

Good Delivery Rules Annex H – Sample Weight Lists (Continued)

The following tables show how to calculate gross weight in troy ounces based on an initial kilogram weighing and in the case of gold, how to calculate the rounded fine weight. Only the columns with bold headings need to be shown on the weight list accompanying the bars. The other columns are to show the method of converting and rounding that should be used. Gold (1)

(2)

(3)

(4)

(5)

(6)

(7)

(9)

(10)

(11)

(12)

Unrounded Fine Weight troy ounces

Truncated Fine Weight troy ounces

Rounded Fine Weight troy ounces

Roundingup factor (must be >= 900)

(8)

Gross Weight (Column (6) Column (4) Less 0.002 Original Truncated Initial Rounded to for scale Gross down to turning Serial Maker's Weight Conversion to nearest 0.001 nearest 0.025 troy ounces troy ounces troy ounces troy ounces) Assay Number Brand kg 123

XYZ

12.5117

402.260496

402.260

402.258

402.250

0.9958

400.560550

400.560

400.560

550

124

XYZ

12.5114

402.250851

402.251

402.249

402.225

0.9958

400.535655

400.535

400.535

655

125

XYZ

12.4749

401.077348

401.077

401.075

401.075

0.9958

399.390485

399.390

399.390

485

126

XYZ

12.4280

399.569478

399.569

399.567

399.550

0.9958

397.871890

397.871

397.871

890

127

XYZ

12.4270

399.537328

399.537

399.535

399.525

0.9958

397.846995

397.846

397.847

995

(13)

Notes on Rounding Col (5) is not rounded up as 4th decimal of column (4) =5 Col (6) is not further truncated as it is an exact multiple of 0.025 Col (9) is not rounded up as the 4th decimal is < 9 Col (9) is rounded up as the 4th decimal is > 9

The table above shows how to convert a dead weight in kilograms to troy ounces as would be performed on a beam balance in the London Bullion Market Notes: 1. If the weight is initially measured in troy ounces, it is not necessary to show the kilogram equivalent. 2. Columns (4)-(6), (9), (10) and (12) do not need to be shown on the Weight List. They are included here in order to illustrate the method used in arriving at the figures in columns (7) and (11). 3 When the original weight is measured in kilograms, the figure in column (4) is calculated by dividing the kilogram weight in column (3) by the conversion factor 1 troy ounce = 0.0311034768 . 4. The figure in column (5) is derived from column (4) by rounding to the nearest 0.001 troy ounce using the normal rule of rounding up if the fourth decimal before any rounding is 5 or greater. 5. The figure in column (6) is derived by subtracting 0.002 troy ounce from the figure in column (5). See Section 1 of Annex G on weighing procedures. The adjustment in column (6) is not required if the initial kilogramme weighting (column (3)) already reflects the metric equivalent of 0.002 troy ounces. 6. The figure in column (7) is derived by truncating the figure in column (6) down to the nearest 0.025 troy ounces. 7. The unrounded fine weight for gold in column (9) is calculated as the product of columns (7) and (8).

27

Annex H – Sample Weight Lists

Good Delivery Rules

8. If the rounding factor shown in column 12 is 900 or more, the truncated fine weight – shown in column (10) - is increased by 0.001 to give the rounded fine weight in column (11). The factor in column (12) is derived from the 4th, 5th and 6th decimal digits of the figure in column (9).

Silver (1)

(2)

(3)

(4) Initial Conversion to troy ounces 1,064.70412

(5) Rounding of Column (4) to nearest 0.001 troy ounces 1,064.704

(6)

(7)

(8)

(9)

Less 0.004 for scale turning troy ounces 1,064.700

Gross Weight (Column (6) Truncated down to nearest 0.1 troy ounce) 1,064.7

Assay 0.9991

Notes on Rounding Col (7) is not further truncated as the figure in col (6) is an exact multiple of 0.1 The figure in col (4) is rounded up to the figure in col (5) because the 4th decimal is >=5 Following the deduction of 0.004, decimal part of the figure in col (6) (.697) must be truncated to .600 to give the figure in col (7)

Serial Number 345

Maker's Brand XYZ

Original Gross Weight kg 33.1160

346

XYZ

33.1018

1,064.24758

1,064.248

1,064.244

1,064.2

0.9991

347

XYZ

33.1159

1,064.70091

1,064.701

1,064.697

1,064.6

0.9991

The table above shows how to convert a dead weight in kilograms to troy ounces as would be performed on a beam balance in the London Bullion Market Notes: 1. If the weight is measured in troy ounces, it is not necessary to show the kilogram equivalent. 2. Columns (4) -(6) do not need to be shown on the Weight List. They are included here in order to illustrate the method used in arriving at the figures in column (7). 3. When the original weight is measured in kilograms, the figure in column (4) is calculated by dividing the kilogram weight by the conversion factor 1 troy ounce = 0.0311034768 kilograms. 4. The figure in column (5) is derived from column (4) by rounding to the nearest 0.001 troy ounce using the normal rule of rounding up if the fourth decimal before any rounding is 5 or greater. 5. The figure in column (6) is derived by subtracting 0.004 troy ounce from the figure in column (5). See Section 1 of Annex G on weighing procedures. . The adjustment in column (6) is not required if the initial kilogramme weighing (column (3)) already reflects the metric equivalent of 0.004 troy ounces. 6. The figure in column (7) is derived by truncating the figure in column (6) down to the nearest 0.1 troy ounces.

28

Good Delivery Rules

Annex I – Proactive Monitoring

Annex I – Proactive Monitoring – Procedures and Criteria 1.

Introduction

In November, 2001, the LBMA Management Committee decided in principle to introduce a system of proactive monitoring of refiners on the Good Delivery List in order to ensure the integrity and further enhance the reputation of the List and the refiners on it. In the following two years, extensive consultation with Good Delivery refiners took place to ensure that the system of monitoring could achieve these goals without proving onerous for the refiners being monitored. During these discussions, a method of monitoring was developed that involved the refiner submitting a dip sample from a normal production melt for testing by the LBMA‟s Good Delivery referees. It is believed that this method combines the desirable features mentioned above. An important aspect of the new system is that it necessitates a greater involvement on the part of the LBMA‟s panel of referees and it was decided at the outset to expand the panel. These referees must be able to demonstrate the very highest standards of precision and accuracy in the assaying of gold and silver. They must also have manufactured sets of reference samples which are free from detectable inhomogeneity and whose assay values are established to very high levels of accuracy. A number of refiners on the gold and silver List were invited to apply for referee status and much of the work in the period 2002-2003 was undertaken so that these companies could demonstrate firstly, that they met the high standards of assaying required and secondly, that they had produced the reference samples as specified by the LBMA. This work of cross-checking these samples was carried out on a double-blind basis, which meant that the candidate referees were involved in check-assaying each others‟ samples but without knowing the identity of the refiner whose samples they were testing. At its meeting in December, 2003, the Management Committee approved a recommendation from the Physical Committee to appoint five new Good Delivery referees. The names of the referees that constitute the expanded panel were announced at a press conference in London on 13 January, 2004. Proactive Monitoring commenced in late January, 2004. The first refiners to be monitored were selected by the LBMA based on a number of criteria, such as whether there had been recent changes in ownership or production technology and the length of time since the company was first tested for admission to the Good Delivery List. Normally, all refiners on the List will be monitored once every three years. 2.

Notice to Refiners about Monitoring

The LBMA Chief Executive will send a letter to the refiner concerned (with a copy via email or fax) informing it that proactive monitoring of its gold and/or silver production is to take place within a period of one month. The monitoring operation will normally begin with the taking of a dip sample from a normal production melt (this operation being witnessed by a representative of an LBMA-approved supervising company). Refiners that are on both the gold and silver List will be required to undergo monitoring for both metals at the same time (for instance, with the procedures described below being carried out on the same or successive days). There are special arrangements for the monitoring of gold refiners whose production technology involves only “four-nines” gold. As described in Section 5 below, the monitoring of these refiners may involve them testing a set of six reference samples provided by the LBMA. 3.

Dip Sampling

3.1

Appointment of supervisor

A refiner being monitored by the dip sampling method should, in the first place, appoint a supervising company (“supervisor”) from the LBMA-approved list (see Annex D) to witness the sampling operation on behalf of the LBMA. The LBMA-approved list of supervising companies includes the

29

Good Delivery Rules

Annex I – Proactive Monitoring

internationally recognized assaying and inspection companies which are within the LBMA Membership. These companies have local representatives or laboratories around the world. The costs and expenses of the supervisor must be paid by the refiner. The supervising company will charge a fixed fee (currently US$1,250) for each dip sampling operation monitored, unless specifically agreed otherwise, plus travelling and subsistence expenses incurred by its representative. Thus, the expenses chargeable by the supervising companies will depend on the locations of their representative offices relative to that of the refiner. 3.2

Witnessing of Dip Sample

The melt from which the dip sample is taken should have a fineness in the range of 999 or above for silver and between 995.0 and a maximum of 999.0 for gold. The sample should be taken from a normal production melt and the operations leading up to the actual casting of the sample must be witnessed by the supervisor. If the sample is requested during holiday periods or other enforced shutdowns, the LBMA is willing to be flexible on the time allowed for arranging the dip sample. The refiner should be confident about what the melt contains and that it is homogeneous before taking the dip sample. The dip sample should be taken at the final stage of production, that is, just before casting. The purpose of taking the dip sample is to provide sufficient homogeneous material to provide the samples to be assayed by the refiner and the LBMA‟s referees, together with enough spare samples in case of various eventualities. The actual method of taking and casting the dip sample can be either of the following. (1)

The refiner may use a standard LBMA mould (which will be brought to the refinery by the supervisor). This consists of a two-part cast iron mould which produces a casting with dimensions of for silver: 60 mm in width, 6 mm in thickness and 100 mm in height; for gold: 60 mm in width, 6 mm in thickness and 50 mm in height. The refinery should have a guillotine or shear available which can be used to crop 5 mm from each edge. In the case of silver, the cropped casting should then be cut into 8 pieces of approximately 25 x 22.5 mm each (giving a sample weight of around 35 grams). In the case of gold, the guillotine should be used to cut off eight samples of approximately 10 grams each.

(2)

The refiner can use its normal method of dip sampling (provided that this will produce the necessary samples described above). The supervisor will report to the LBMA using a standardised format including information on: the use to which the refined metal will be put, the raw materials used, the processes leading up to the sample being taken, the method of dip sampling employed and, in the case of bars which are to be numbered, the numbers of the bars produced.

4.

Treatment of the Dip Sample

Two of the eight samples will be sealed and sent by the supervisor to the LBMA. One will be left with the refiner for assaying and five will be sealed by the supervisor and left with the refiner as reserves in case they are needed subsequently, for instance if any samples are lost in the post. 4.1

Refiner Assay

The sample left with the refiner by the supervisor should be assayed by corrected fire assay in the case of gold and by the normal method used in the refinery in the case of silver. The number of individual 30

Good Delivery Rules

Annex I – Proactive Monitoring

trials to be carried out is not specified by the LBMA but is instead left to the refiner, according to its normal practice. The report should include the individual trial results expressed to five significant figures of fineness and the mean of the trial results, also to five figures. The assay results should be sent by fax and e-mail to the LBMA Executive within four working days after the dip sampling. The method of assaying must be stated in the report (including the type of spectrographic testing, if used for silver). In the case of the assaying of silver by spectrographic methods, oxygen and nitrogen should be ignored when deducting the sum of the impurities from 1000 (in other words, the oxygen and nitrogen should be treated as silver). When determining the assay of dip samples using spectrographic methods, the applicant is responsible for identifying all impurity elements contained therein which will determine the final assay. The LBMA does not prescribe detailed procedures or criteria for assaying by means of spectrographic methods but Annex M lists the elements that LBMA Referees will typically determine. The LBMA Chief Executive will treat the information provided by the refiner in strictest confidence. In particular, none of this information will be transmitted to any of the referees. The mean assay value and the detailed trial results will be assessed by the Chief Executive and the LBMA‟s independent technical consultant as described below. The mean assay and (in borderline cases) the standard deviation of the trial results may be viewed by members of the LBMA Physical Committee (each of whom is bound by confidentiality in relation to the data provided by refiners being monitored). 4.2

Referee Assay

On receipt of the two samples by the LBMA, one sample will be sent according to a rota to one of the LBMA‟s referees who will be asked to assay the sample to five significant figures. It should be noted that the referee will not be aware of the identity of the refiner that provided the sample. The referee will carry out at least 15 trial assays in the case of gold and in the report submitted to the LBMA will also provide details of the individual trial results and the methods of assaying used. The second sample will be retained by the LBMA in case it is necessary to have this assayed by a second referee. This will be necessary if the first assays of the refiner and referee fail to agree within the tolerances described in Section 6 below. In such cases, the refiner will also be asked to unseal one of the spare samples, carry out an assay on it and submit a new assay report to the LBMA within five working days. 5.

“Four-Nines” Gold refiners

The LBMA considers that all refiners on the Good Delivery Gold List must be able to assay across the full range of Good Delivery alloys (namely a fineness range from 995.0 to 999.9) most of which can only be accurately assayed using the method of corrected fire assay. At the top end of this range, on the other hand, spectrographic methods can provide assays of the necessary precision and accuracy. In that these high-gold alloys can be thus assayed without requiring the use of fire assaying, they cannot be used to demonstrate that the refiner is able to assay over the full range of Good Delivery alloys. For refiners where the production technology (as well as the products marketed) only involve gold of fineness 999.9 and above, it is recognised that it would be disruptive and onerous for them to have to produce a special low gold content alloy for the purposes of LBMA monitoring. A refiner which, for the reasons described above, is unable to provide a gold dip sample with a fineness of less than 999.0, may instead opt to have an alternative form of monitoring, whereby the LBMA will send it a set of six approximately 10-gram reference samples for the refiner to assay using the corrected fire assay method. On receipt of the samples, the refiner must submit to the LBMA within six working days a report showing the mean assay of each sample to five significant figures. 6.

Assessment Criteria and Further Testing

The LBMA Executive, taking advice where necessary from its technical consultant, will compare the mean five-figure assay results provided by the refiner and the referee. In borderline cases, the LBMA will also take account of the individual trial results.

31

Good Delivery Rules

Annex I – Proactive Monitoring

The criteria are shown below. The tolerances on assaying shown here are expressed in terms of fineness (parts per thousand). Thus, for instance, ±0.10 for an assay of, say, 998.55 means a range of fineness from 998.45 to 998.65. 6.1

Consideration of Assays from First Dip Samples

The criteria used for assessing the assays on the dip samples provided are based on those contained in the Good Delivery Rules for new applicants. The refiner's and referee's assay results on the first dip sample provided by the refiner will be assessed as follows: Full pass – In the case of gold, where the dip sample must have a fineness of less than or equal to 999.0, agreement between the referee‟s and refiner‟s assays within ±0.15 will be regarded as a full pass with no further testing being required. In the case of silver, where the fineness of the dip sample can be in the range from 999.0 to 999.9+, different criteria apply depending on whether the sample‟s fineness (as assayed by the referee) is above or below 999.5. Above 999.5 agreement within ±0.05 will be regarded as a full pass while below 999.5 agreement within ±0.15 will be regarded as a full pass. Borderline failure – i.e., agreement in the range ±0.16-0.25 (or for silver samples of fineness of 999.5 and above, agreement in the range ±0.06-0.15). This will require that the second sample (which will already be in the hands of the LBMA) be tested by a second referee and that the refiner will be asked to assay one of the spare samples which have been sealed and left at the refinery by the supervisor. On receiving the assay results from the refiner and the second referee, the LBMA Executive will compare all the results and, if necessary taking technical advice, decide on whether the results are acceptable. If they are not, the refiner will be asked to arrange for a new dip sample to be witnessed within one month and provide a further two samples for testing by the LBMA‟s referees. Fail – i.e., a divergence of >0.25 (or for silver samples of fineness of 999.5 and over, a divergence of >0.15). In this case, the refiner would be required to provide a further two samples from a new witnessed dip sample within one month. 6.2

Cases where a Second Dip Sampling Operation is Required

Each of the second pair of samples will be sent to a different referee for assaying. In general, two different referees will assay the second pair of samples compared to those that assayed the first samples. The LBMA will assess the results based on the criteria described above but taking into account all the assay results provided by the refiner and the referees. If necessary after taking advice from its technical consultant, the LBMA will then decide on one of the following courses of action. The refiner will be informed that it has passed the monitoring test. The refiner will be asked to assay a set of LBMA reference samples as described in Section 8.2 below (under similar conditions as for a new applicant for Good Delivery accreditation). In the latter case, the LBMA will assess the assay report subsequently provided by the refiner and decide whether: The refiner has satisfied the criteria and will therefore be informed that it has succeeded in passing the monitoring test, or The refiner will be required to undergo a full re-application for Good Delivery accreditation. In the latter case, except in cases of gross failure, the refiner will normally continue to be listed until the results of the re-application are available. 6.3 Criteria for Assays provided by “Four-Nines” Gold refiners In the case of the “Four-Nines” gold refiners which opt to be monitored by means of assaying a set of six LBMA reference samples, the criteria for passing the test are similar to those applicable in the case of new applicants for listing.

32

Good Delivery Rules

Annex I – Proactive Monitoring

assays of 999.5 and above should agree to ±0.05; for example, the assay determined on a sample assaying 999.84 according to the LBMA would have to fall within the range 999.79 to 999.89 assays below 999.5 should agree within ±0.15 provided that no significant bias is apparent; for example, the assay determined on a sample assaying 996.73 according to the LBMA would have to fall within the range 996.58 to 996.88. However, it will be deemed acceptable if there is not more than one divergence provided that this is not greater than ±0.25. 7.

Result of Monitoring

The LBMA Chief Executive will inform the refinery of the outcome of the assay comparisons as soon as they have been reviewed by the LBMA‟s Physical Committee. 8.

Charging System and LBMA Membership

Good Delivery List refiners which are within the membership, either as Members or as Associates, will be provided with the basic monitoring service as part of their annual subscription. This does not include the charges levied by supervising companies nor those for the provision of LBMA reference samples. 8.1

Good Delivery Maintenance Fee

Refiners which are not part of the membership can remain on the Good Delivery List on payment of an annual maintenance fee of £1,000 per metal + VAT (as applicable). 8.2

Charges for Reference Samples and Re-Testing

In cases where the comparison of the refiner‟s and referees‟ dip sample assay results suggests the need for the refiner‟s assaying ability to be more thoroughly checked by means of it assaying a small set of reference samples, as described above, there will be an additional charge as follows: (a) Set of six 10-gram gold samples at £525 per sample, being a total of £3,150 including the value of the metal content, plus VAT (as applicable) The cost of shipment of these samples to the refinery will be payable in addition. The same charge as in (a) above will be made for “Four-Nines” gold refiners which opt for the testing of a set of LBMA gold samples. The additional charge for a complete reapplication and re-test of the refiner‟s assaying ability and bars would be the same as for new Good Delivery applicants (see Section 6 of the Good Delivery Rules: currently a total of £26,000 in the case of gold and £19,000 for silver – both subject to VAT as applicable). 9.

Treatment of Refiners who are Unwilling to be Monitored

Those refiners who decide not to submit to regular monitoring will be transferred to the Former List. This List shows the names, marks, etc of companies that were formerly accredited as Good Delivery, together with the date of transfer to the Former List. It is felt that rather than giving a note of explanation about the reason for the transfer, most refiners in this position would prefer that no such explanation should be given in the List.

33

Good Delivery Rules

Annex J – Specimen Technical Line Drawing

Annex J – Specimen Technical Line Drawings (1) 400 Ounce Gold Bar

34

Good Delivery Rules

Annex J – Specimen Technical Line Drawing

(2) 1,000 Ounce Silver Bar

35

Good Delivery Rules

Annex K – End Stamping of Silver Bars

Annex K – End Stamping of Silver Bars

36

Annex L – Facilitators

Good Delivery Rules

Annex L – Facilitators List of Facilitators The following companies have been listed as Facilitators who may be able to provide assistance to applicants in putting together their Good Delivery applications. An applicant should contact a Facilitator directly to agree the terms and conditions on which the Facilitator may be willing to provide services. Inclusion in this list does not constitute or imply any representation or warranty by the LBMA as to creditworthiness or as to the services or goods supplied or quality or compliance with any specification relating thereto. No liability for direct or consequential loss, howsoever caused, whether by negligence or otherwise, whether by use of this list or reliance thereon, is accepted by the LBMA.

Company

Address

Contact Details

Argentum Consultants Limited

"Glendown", Southfields Rd Woldingham Surrey CR3 7BG United Kingdom

T:+ 44 (0) 1883 652588 F: +44 (0) 1883 650358 E-mail: [email protected] (Mr. Douglas Beadle)

Chinastar (Hong Kong) Limited

12/F., 3 Lockhart Road Wanchai Hong Kong

T: +852 97642484 F: +852 25276015 E-mail: [email protected] (Mr Liu Huiyong or [email protected] (Mr. Henry Lau)

Inspectorate International Limited

2 Perry Road Witham Essex CM8 3TU United Kingdom

T: +44 (0) 1376 536852 F: +44 (0) 1376 520819 E-mail: [email protected] (Mr. Ian Gathercole –Sales and Marketing Manager - Precious Metals)

Inspectorate (Singapore) Pte Ltd

Blk 28 Ayer Rajah Crescent 01-03 Singapore 139959

T: +65 6778 9033 F: + 65 6778 9466 E-mail: [email protected] (Mr. Patrick Le Mare – Precious Metals Marketing Manager Asia)

Inspectorate (Shanghai) Ltd

5F Building 2 No. 658 Jin Zhong Road Shanghai 200335 People‟s Republic of China

T: +86 3360 0122 F: +86 3360 0119 E-mail: [email protected] (Mr. Davis Liang – Business Development Director)

Metal Registration Ltd

180 Piccadilly London W1J 9HF United Kingdom

T: +44 (0) 20 7917 2740 F: +44 (0) 20 7917 1740 E-mail: [email protected] (Ms. Melanie Wells – Director)

SG2 Consult Sàrl

Poudrières 63 CH-2000 Neuchâtel

T: +413 273 03258 F: +413 273 03258 E-mail: [email protected] (Mr. Serge Gambs)

37

Annex M – Determination of Residual Elements

Good Delivery Rules Annex M – Residual Elements

Determination of Residual Elements by Spectrographic Analysis Good Delivery applicants and refiners undergoing Proactive Monitoring which use spectrographic analysis for determining the assays of their materials are responsible for identifying all residual elements present in their bars or dip samples which will affect the assays determined. The lists set out below are not intended to be prescriptive as far as refiners are concerned but merely to provide guidance as to the elements that LBMA Referees may typically look for. The “core” elements which the majority of LBMA Referees will normally look for when analysing gold and silver samples are shown in Table 1. Table 2 shows elements which may in addition be determined by LBMA Referees. Table 1 – Core Elements Gold Silver – Ag x Copper – Cu x Platinum - Pt x Palladium - Pd x Rhodium – Rh x Nickel – Ni x Iron – Fe x Lead – Pb x Zinc – Zn x Arsenic – As x Selenium – Se x Antimony – Sb x Bismuth – Bi x Chromium – Cr x Manganese – Mn x Cobalt – Co x Aluminium Al x Titanium – Ti x Silicon – Si x Calcium – Ca x Cadmium – Cd x Magnesium – Mg x Tin – Sn x Tellurium – Te x Iridium – Ir x Ruthenium – Ru x Gold – Au Indium – In

Silver x x x x x x x x x x x x x x x

Table 2 – Additional elements: Gold Boron – B x Indium – In x Molybdenum – Mo x Potassium – K x Sodium – Na x Osmium – Os x Thallium – Tl x Zirconium – Zr x Beryllium – Be x Lithium – Li x Tungsten – W x Phosphorus – P x Mercury – Hg x Germanium – Ge x Gallium – Ga x Vanadium – V x Rhodium – Rh x Titanium – Ti x

Silver x x x x x

x

x

x x x x x x

x x

October, 2008

38