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The ETFS Asian Gold Trust, ETFS White Metals Basket Trust, ETFS Precious Metals Basket Trust, ETFS Gold Trust, ETFS Silver Trust, ETFS Palladium Trust and ETFS Platinum Trust are not investment companies registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. Shares of the Trusts are not subject to the same regulatory requirements as mutual funds. These investments are not suitable for all investors. Please read the prospectus carefully before investing.
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FAQs for ETPs
- Who is ETF Securities (ETFS)?
- What is the legal structure of the product?
- How do the Trust shares trade?
- Who are the Sponsors?
- Are the Trust shares fully backed by physical bullion?
- How are the shares priced and where is the information published?
- Do the shares track the underlying commodity price?
- Do the shares make interest payments?
- How can you ensure the shares track the relevant metal spot price?
- How is liquidity provided?
- Are there any other costs besides expense ratio?
- Who regulates the Trusts?
- How do I know the Trust actually holds any bullion?
- Can I tell what bullion bars are held by the Trust?
- Is the bullion held by the Trust insured?
- Who is the custodian and where is the bullion stored?
- What if the Custodian becomes insolvent?
- What happens if ETF Securities becomes insolvent?
- What if theTrustee becomes insolvent?
- What kind of bullion do you hold?
- What is Allocated bullion?
- What is Unallocated bullion?
- Can you take physical delivery of the Bullion?
- Is the bullion held in the Trust ever lent out?
FAQs for ETPs
1. Who is ETF Securities (ETFS)?
ETF Securities is a provider of Exchange Traded Products (ETFs, Commodity ETCs and Currency ETCs). The management of ETF Securities pioneered the development of ETCs, with the world's first listing of an ETC, Gold Bullion Securities in Australia and London in 2003 and then the world's first entire ETC platform which was listed on the London Stock Exchange in September 2006.
ETF Securities now offers more than 200 Exchange Traded Products (ETPs). The ETPs provide investors with a wide variety of investment strategies, with ETPs offering access to asset classes such as equities, currencies and commodities with physical, long, forward, leveraged and short exposure.
ETPs are simple to access as they are traded in five currencies (EUR, USD, GBP, JPY and AUD) and listed on nine major exchanges globally including the London Stock Exchange, the New York Stock Exchange, the Tokyo Stock Exchange, NYSE-Euronext Paris, NYSE-Euronext Amsterdam, Deutsche Börse, Borsa Italiana, the Australian Securities Exchange and the Irish Stock Exchange.
2. What is the legal structure of the product?
The structure is a Grantor Trust offered under the Investment Act of 1933. The Trust enables investors to gain direct exposure to precious metals without trading derivatives such as futures or taking physical delivery of the underlying commodity. The Trust only holds physical bullion and therefore has been structured as a 1933 Act Grantor Trust. There are 7 trusts; 2 Gold, Silver, Platinum, Palladium & 2 Precious Metals Baskets.
3. How do the Trust shares trade?
Like an ETF, the Trust is open ended and listed on NYSE Arca. Shares can be bought and sold intra-day using ordinary brokerage accounts. The Shares can be shorted and are eligible for margin accounts and can be executed as market orders, stop losses or limit orders. There are special risks associated with short selling and margin investing. Please ask your financial advisor for more information about these risks.
4. Who are the Sponsors?
ETF Securities USA LLC is the Sponsor of the precious metal Trusts. ETF Securities USA LLC is a wholly owned subsidiary of ETF Securities Limited. ETF Securities is one of Europe's leading providers of Exchange Traded Funds (ETFs).
5. Are the Trust shares fully backed by physical bullion?
Yes, the Trust's only asset is physical bullion. Each share in the Trust is fully backed by allocated (secure) physical bullion bars stored in the Custodian's vault. Each physical bar is properly segregated, individually identified and allocated towards the property of the Trust.
The bullion held by Trust is subject to a biannual independent audit carried out by Inspectorate International. In addition to this, ETF Securities publishes a metal bar list on the website which is updated daily. For more detailed information on the auditing process, please see question 14.
6. How are the shares priced and where is the information published?
The Trust shares are physically backed are priced using respective metal spot prices and therefore returns are highly correlated to the underlying spot price less applicable fees. NAV pricing information is published on the ETF Securities website; www.etfsecurities.com
7. Do the shares track the underlying commodity price?
The Trust shares are physically backed and returns are highly correlated to the underlying spot price less applicable fees.
8. Do the shares make interest payments?
No. Physically backed bullion shares pay no interest or dividends to investors as they only hold bullion.
9. How can you ensure the shares track the relevant metal spot price?
The Trust only holds one asset, physical bullion. Hence, the price of the Shares will closely track the pricing of the relevant London PM spot price less applicable fees. Physically backed bullion shares are priced off a set formula specified in the prospectus.
10. How is liquidity provided?
The Trust(s) are open-ended, therefore new shares can be created by Authorized Participants according to demand. Therefore, the liquidity of the shares is derived from the liquidity of the relevant underlying bullion market(s). There is also a Lead Market Maker appointed by the Exchange. The LMM is responsible for always providing a bid offer spread in size on the Exchange order book.
11. Are there any other costs besides expense ratio?
No, the Trust does not incur any costs besides the expense ratio. Your broker or financial advisor however, may charge you normal transaction costs (commissions) associated with the purchase or sale of shares.
12. Who regulates the Trust(s)?
The Trust(s) are incorporated in New York and listed on NYSE Arca. The Trusts are regulated by the Securities and Exchange Commission (SEC). ETF Securities USA is a wholly-owned subsidiary of ETF Securities, a leading European ETF issuer.
13. How do I know the Trust actually holds any bullion?
ETF Securities commissions a biannual independent audit of the bullion held in the Trust vaults. The audit is carried out by Inspectorate International. Inspectorate International is a global company providing inspection, testing, and analysis of commodities worldwide. There is one audit that takes place at year end, 31st December and one random audit that is carried out at the discretion of ETF Securities management. All audit reports are published on our website www.etfsecurities.com . The audit focuses on the amount of bars and that they are LBMA or LPPM good delivery standard.
In addition to the stringent audit procedures set in place by ETF Securities, the custodian also conducts their own audits as part of their custodial duties.
For more details on Inspectorate International, please refer to their website www.inspectorate.com
14. Can I tell what bullion bars are held by the Trust?
Yes. ETF Securities publishes a Metal Bar List on the website www.etfsecurities.com detailing all bullion bars held by the Trust. The metal bar list is updated daily.
15. Is the bullion held by the Trust insured?
The custodian is responsible for ensuring that appropriate insurance arrangements to insure the physical bullion are in place in connection with the custody and safekeeping of bullion. The Trust does not insure the bullion.
16. Who is the custodian and where is the bullion stored?
The custodian for the ETFS Silver Trust is HSBC USA. The bullion held by the trust is stored in HSBCs vaults in London, England under maximum security.
The custodian for the ETFS Gold Trust and ETFS Asian Gold Trust is JPMorgan Chase Bank, N.A. The bullion held by the trust is stored in secure vaults in Zurich, Switzerland and Singapore respectively under maximum security.
The custodian for ETFS Platinum Trust, ETFS Palladium Trust, ETFS Precious Metals Basket Trust & ETFS White Metals Basket Trust is JPMorgan Chase Bank, N.A. The bullion held by the trust is stored in secure vaults in Zurich, Switzerland and London, England under maximum security.
17. What if the Custodian becomes insolvent?
The Custodian is required to segregate the relevant Trust's bullion from any other bullion which the Custodian owns or holds for other parties. In the unlikely event that the Custodian becomes insolvent, the Trustee will have rights to reclaim all bullion held by Custodian on behalf of the Trust from the Custodian administrator or liquidator or by petitioning the Court.
18. What happens if ETF Securities becomes insolvent?
In the event that ETF Securities were to become insolvent, the Trustee and an Administrator would take control of the allocated metal in the Trust Accounts which should have no effect on the value of the Trust(s) since the issuer (Trust) is an independent entity from ETF Securities.
19. What if the Trustee becomes insolvent?
The assets of the Trust are safeguarded and held by Bank of New York as Trustee for the benefit of the respective shareholders and do not form part of the assets of Bank of New York. In the event of the liquidation of Bank of New York, the Sponsor has the right and obligation to appoint a replacement Trustee.
20. What kind of bullion do you hold?
The relevant Trust(s) holds London Bullion Market Association (LBMA) and London Platinum and Palladium Market (LPPM) good delivery bars (Gold, Silver, Platinum and Palladium). The LBMA and LPPM Good Delivery Lists are widely recognized as representing the de facto standard for the quality of gold and silver bars, in large part thanks to the stringent criteria for assaying standards and bar quality that an applicant must satisfy in order to be listed. The assaying capabilities of refiners on the Good Delivery List are periodically checked under the LBMA's proactive monitoring programme.
For more information on the LBMA and LPPM good delivery lists, please see the LBMA website www.lbma.org.uk and LPPM website http://www.lppm.org.uk
21. What is Allocated bullion?
Allocated bullion is bullion deposited under a safekeeping or custody arrangement. It is held as numbered bars, on labeled shelves, and it is the property of the individual owner. Even though it is held in a vault it is neither the property of the bank nor the liability of the bank. As such it is safe from bank insolvency.
Please note that allocated bullion is NOT to be confused with unallocated bullion. Please see question 22 for a definition of unallocated bullion
22. What is unallocated bullion?
Unallocated bullion is simply the provider's liability. It forms part of the working capital of the bank and it can be legally used by the bank for profit. The unallocated bullion investor is therefore exposed to the insolvency of the bank. Unallocated bullion is frequently held in accounts referred to as "pool", or "metal" or used in types of structured products and other financial instruments pertaining to provide exposure to precious metals.
23. Can you take physical delivery of the Bullion?
The Trust handles creation and redemption orders for the physically backed bullion shares with Authorized Participants (APs). APs transact with institutional investors only in large size, typically blocks of 50,000 or 100,000 shares. An individual investor wishing to take physical delivery of the underlying bullion would have to come to the appropriate arrangements with his or her broker.
24. Is the bullion held in the Trust ever lent out?
No. Bullion held by the Trust is in allocated form and is not traded, leased or loaned under any circumstances. The Trust does not employ any securities lending techniques or other inventory recycling methods.
ETFS Physical Asian Gold Shares are issued by the ETFS Asian Gold Trust. ETFS Physical White Metals Basket Shares are issued by ETFS White Metals Basket Trust. ETFS Physical Precious Metals Basket Shares are issued by the ETFS Precious Metals Basket Trust. ETFS Physical Silver Shares are issued by the ETFS Silver Trust. ETFS Physical Swiss Gold Shares are issued by the ETFS Gold Trust. ETFS Physical Platinum Shares are issued by the ETFS Platinum Trust. ETFS Physical Palladium Shares are issued by the ETFS Palladium Trust.
ETPs = Exchange Traded Products
Important Risks
The value of the Shares relates directly to the value of the precious metal held by the Trusts and fluctuations in the price could materially adversely affect an investment in the Shares. Several factors may affect the price of precious metals, including:
A change in economic conditions, such as a recession, can adversely affect the price of the precious metal held by the Trusts. Some metals are used in a wide range of industrial applications, and an economic downturn could have a negative impact on its demand and, consequently, its price and the price of the Shares;
Investors' expectations with respect to the rate of inflation;
Currency exchange rates;
Interest rates;
Investment and trading activities of hedge funds and commodity funds; and
Global or regional political, economic or financial events and situations. Should there be an increase in the level of hedge activity of the precious metal held by the Trusts or producing companies, it could cause a decline in world precious metal prices, adversely affecting the price of the Shares.
Also, should the speculative community take a negative view towards the precious metal held by the Trusts, it could cause a decline in prices, negatively impacting the price of the Shares.
There is a risk that part or all of the Trusts' physical precious metal could be lost, damaged or stolen. Failure by the Custodian or Sub-Custodian to exercise due care in the safekeeping of the precious metal held by the Trusts could result in a loss to the Trusts. Since there is no limit on the amount of platinum and palladium that the Trust may acquire, the Trust, as it grows, may have an impact on the supply and demand of platinum and palladium.
The Trusts have limited operating history.
Commodities generally are volatile and are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility.
This material must be accompanied or preceded by a prospectus. Please read the prospectus carefully before investing. Click here to review the prospectus.
Shares in the Trusts are not FDIC insured and may lose value and have no bank guarantee.
Investors buy and sell shares on a secondary market (i.e., not directly from Trusts). Only market makers or "authorized participants" may trade directly with the Trusts, typically in blocks of 50k to 100k shares.
Carefully consider each Trusts' investment objectives, risk factors, and fees and expenses before investing.
An investment in the trust does not constitute a direct investment in the underlying metal.
ALPS Distributors, Inc. is separate and unaffiliated to Dorsey Wright and Associates. ALPS Distributors, Inc. is the marketing agent for ETFS Silver Trust, ETFS Gold Trust, ETFS Platinum Trust, ETFS Palladium Trust, ETFS Precious Metals Basket Trust, ETFS White Metals Basket Trust and ETFS Asian Gold Trust.
For further discussion of the risks associated with an investment in the Trusts please read the prospectus.
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(09/14/11)
ETF Securities USA LLC (ETFS) today announced that the
total assets under management (AUM) of its U.S.-listed products is now $4.7 billion, which
represents 15% of the firm's new total of roughly $31 billion in AUM worldwide as at the end of
August 2011.
(08/11/11)
ETF Securities USA LLC (ETFS) announced today that on July 29, 2011, its physically-backed platinum ETP (PPLT) was the world's largest in terms of AUM, which stood at $802m. This represented roughly 450k ounces of platinum stored in secure vaults located in London, U.K. and Zurich, Switzerland.
(07/21/11)
ETF Securities has offered U.S. physically-backed precious metal exchange traded products (ETPs) since July 2009. In two years, the firm has grown its U.S. assets under management (AUM) to $4.2 billion as of July 19, 2011.
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