Questions related to making an investment
1. How do I invest? Can I buy Gold Trust units directly from
Sprott Asset Management?
Units of the Gold Trust trade in US$ on the TSX and NYSE Arca
exchanges and are purchased through a brokerage. Sprott doesn't
sell the Units directly.
Ticker Symbol:PHY.U (TSX)/PHYS (NYSE Arca)
CUSIP number: 85207H104
2. Is there a Cdn$ version of the Gold Trust, or is it
denominated in US$ on both the TSX and NYSE ARCA?
Units of the Gold Trust are denominated in US$ on both the TSX
(PHY.U) and NYSE Arca (PHYS). Gold bullion is tradable
internationally and its price is generally quoted in U.S.
3. What are the fees and expenses for this product? What is
the Management Expense Ratio (MER)?
Unitholders may be subject to brokerage commissions or other
fees associated with trading (buying and selling) the units. There
are no other fees payable directly by the unitholder except those
related to the redemption of units for physical gold bullion.
The Gold Trust is responsible for all other fees and expenses
including the management fee. The Gold Trust pays the Manager a
monthly management fee equal to 1⁄12 of 0.35% of the value of net
assets of the Gold Trust (determined in accordance with the trust
agreement), plus any applicable Canadian taxes. The management fee
is calculated and accrued daily and payable monthly in arrears on
the last day of each month.
The Management Expense Ratio (MER) is reported in the Gold
Trust's quarterly financial statements and management report of
fund performance, which can be found in the Financial
Reports section of the website:
4. What is the difference between the Sprott Physical Gold
Trust and the Sprott Gold Bullion Fund?
The Gold Trust is a closed-end mutual fund trust. Units of the
Gold Trust trade in US$ on the TSX and NYSE Arca exchanges. The
Sprott Gold Bullion Fund is an open-ended mutual fund available to
Canadian investors and purchased in Cdn$.
For a comparison of all precious metals solutions available to
Canadian investors, please see the brochure.
5. Do units of the Gold Trust track exactly the spot price of
gold? How are the units priced (explain premium/discount
The units of the Gold Trust will generally trade at a premium or
discount to the net asset value per unit (NAVPU), depending on
relative supply and demand for the units in the secondary market
(the stock exchanges).
The Gold Trust is a closed-end mutual fund trust and not an
open-ended exchange traded fund (ETF). Unlike the Gold Trust, gold
ETFs issue or redeem units daily, reflecting purchases or
redemptions of units by investors. Such purchases and redemptions
are effected by a financial intermediary, engaged by the ETF
administrator to create a market for the ETF units. As such, the
trading price of ETFs on the stock exchange generally do not
deviate significantly from net asset value.
By contrast, the Gold Trust does not employ any financial
intermediary, and does not intend to issue new units, or redeem
existing units, on a day-to-day basis. As such, the units of the
Gold Trust will generally trade at a premium or discount to the net
asset value per unit (NAVPU), depending on relative supply and
demand for the units in the secondary market. The NAVPU and the
premium-discount calculation (the % difference between the price of
the Gold Trust units on the stock exchange and the NAVPU) are
recorded each trading day on the Net Asset Value section of the website.
Historical data charts showing the premium/discount frequency
distribution are found on the same webpage.
Physical Bullion-related Questions
6. Is the Gold Trust backed by physical gold bullion?
Except with respect to cash held by the Gold Trust to pay
expenses and anticipated redemptions, the Gold Trust expects to own
only London Good Delivery physical gold bullion. The Manager
intends to invest and hold 97% of the total net assets of the Gold
Trust in physical gold bullion in London Good Delivery bar form.
The Gold Trust does not invest in gold certificates or other
financial instruments that represent gold or that may be exchanged
7. How much gold does the Trust hold?
The total ounces of gold held within the Gold Trust and the
number of units outstanding can be found on the Net Asset
Value section of the website.
8. Who stores the gold bullion?
The Gold Trust's physical gold bullion is unencumbered and
stored fully allocated in a secure storage location in Canada. The
physical gold bullion is subject to periodic inspection and audits.
Please see ''Custody of the Trust's Assets'' in the Prospectus.
9. What is the process to take physical delivery of
Unitholders will have the ability, on a monthly basis to redeem
their units for physical gold bullion for a redemption price equal
to 100% of the NAV of the redeemed units, less redemption and
delivery expenses, including:
- the handling of the notice of redemption
- the delivery of the physical bullion for units that are being
redeemed (estimated at $5 per troy ounce at the time of the
prospectus, Feb. 2010 for delivery anywhere within continental US
- and the applicable gold storage in-and-out fees (minimum $50
plus $5 per each additional bar, at the time of the
Redemption requests must be for amounts that are at least
equivalent to the value of one London Good Delivery bar or an
integral multiple thereof, plus applicable expenses. A ''London
Good Delivery bar'' weighs between 350 and 430 troy ounces
(generally, most bars weigh between 390 and 410 troy ounces). Any
fractional amount of redemption proceeds in excess of a London Good
Delivery bar or an integral multiple thereof will be paid in cash
at a rate equal to 100% of the NAV of such excess amount. For full
details including the procedure to redeem units for physical gold
bullion, please see page 48 of the prospectus.
Please refer to the Prospectus for
more information on material tax considerations. The tax
information in the Prospectus is a summary of a general nature only
and is not intended to constitute legal or tax advice to any
prospective purchaser of units. Prospective purchasers of units
should consult with their own tax advisors about tax consequences
of an investment in units based on their particular
10. Are the Gold Trust units eligible for registered plans in
Canada (e.g. RRSPs, TFSAs, etc.)?
Provided that the Gold Trust qualifies and continues at all
times to qualify as a ''mutual fund trust'' within the meaning of
the Tax Act, the units will be qualified investments under the Tax
Act and the regulations thereunder for trusts governed by
registered retirement savings plans (RRSPs), registered retirement
income funds (RRIFs), registered education savings plans (RESPs),
deferred profit sharing plans, registered disability savings plans
(RDSPs) and tax-free savings accounts (TFSAs), in the opinion of
Heenan Blaikie LLP, counsel for the Gold Trust and Davies Ward
Phillips & Vineberg LLP, counsel to the underwriters of the
Gold Trust's initial public offering.
For further details, please see 'Eligibility Under The Tax Act
For Investment By Canadian Exempt Plans' on page 100 of the Prospectus.
11. Can I buy these units in my IRA/Roth IRA?
The Gold Trust believes a purchase of its units will qualify as
an eligible investment for individual retirement accounts although
there can be no assurance in that regard.
Section 406 of The U.S. Employee Retirement Income Security Act
(ERISA) of 1974 as amended and Section 4975 of the U.S. Internal
Revenue Code (Code) of 1986 as amended, prohibit certain
transactions, unless a statutory or administrative exemption is
- the assets of an ERISA Plan
- as well as those plans and accounts that are not subject to
ERISA but which are subject to Section 4975 of the Code, such
- individual retirement accounts (IRAs); and
- entities that are deemed to hold the assets of such plans and
accounts ("Plans") and certain persons (to whom we will refer as
parties in interest or disqualified persons) having certain
relationships to such Plans. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to
excise taxes and other penalties and liabilities under ERISA and
The Gold Trust anticipates that it qualifies for the exemption
under the Plan Asset Regulations for ''publicly offered
securities,'' although there can be no assurance in that
In order to be considered a ''publicly offered security,'' the
units must be:
- freely transferable;
- part of a class of securities that is owned by 100 or more
investors independent of the Gold Trust and of one another;
- part of a class of securities registered under Section 12(b) or
12(g) of the Exchange Act; or
- sold to the Plan as part of an offering of securities to the
public pursuant to an effective registration statement under the
Unites States Securities Act of 1933, as amended and the class of
securities of which the securities are a part is registered under
the Exchange Act within 120 days (or such later time as may be
allowed by the Securities and Exchange Commission) after the end of
the Gold Trust's fiscal year during which the offering of such
securities to the public occurred.
For further details, please see 'U.S. ERISA considerations' on
page 94 of the Prospectus.
12. What are the tax implications of investing in the Gold
For U.S. taxable holders of Gold Trust units, any gains realized
on the sale of units by an investor that is an individual, trust or
estate, including such investors that own units through
partnerships and other pass-through entities for U.S. federal
income tax purposes, may be taxable as long-term capital gains (at
a maximum rate of 20% under current law, compared to a long-term
capital gains tax rate of 28% applicable to the disposition of
physical gold bullion and other ''collectibles'' held for more than
one year), provided that such U.S. investor has held the units for
more than one year at the time of the sale and such U.S. investor
has made a timely and valid Qualified Electing Fund election with
respect to the units on the IRS Form 8621. Within 45 days from the
end of each taxable year of the Trust, the Trust will provide a
Passive Foreign Investment Company (PFIC) Annual Information
Statement on its website providing all information necessary to
enable unitholders or beneficial owners of units, as applicable, to
elect to treat the Trust as a QEF. Please visit the Tax Information
For detail on U.S. and Canadian federal income tax
considerations, please see page 84 of the Prospectus.
13. How do I get physical certificates evidencing ownership of
In the United States, there are two methods: One, you can direct
your broker to request a physical certificate from the Depository
Trust Company (DTC). This may be a more expensive option as DTC
generally charges ~$500 per certificate.
Two, you can direct your broker to initiate a DWAC certificate
request (only a broker can initiate this) with the Trust's
co-Transfer Agent, R&T Co (www.rtco.com). See their
DWAC transfer form here:
Check with your brokerage if they offer this service and at what
In Canada, you can direct your broker to withdraw units from CDS
Clearing and Depository Services Inc. When the broker puts in the
withdrawal, the transfer agent in Canada, Equity Financial Trust,
will issue physical certificates to the broker.