Gold Bullion Limited ACN

Transcription

1 A joint initiative with* Gold Bullion Limited ACN Issue of Gold Bullion Securities Financial Advisor Investor Resources Limited ACN

2 From the Chief Executive 20 March 2003 TO WHOM IT MAY CONCERN This letter is written for inclusion in a Prospectus to be issued by Gold Bullion Limited dated on or about 21 March The World Gold Council was established in 1987 and has recently undergone a significant restructuring, with the objective of increasing its focus as the commercially driven international marketing organisation for the gold industry. The key objective of the WGC is to stimulate the demand for and retention of gold in all its forms. The World Gold Council and Gold Bullion Limited have jointly worked on developing this initiative and refining the investment product to its final state, in readiness for the proposed listing on the Australian Stock Exchange of Gold Bullion Securities ( GOLD ). Going forward, the World Gold Council will work jointly with Gold Bullion Limited on this marketing initiative and the provision of information on the gold market. The World Gold Council will not be liable for any of the activities of Gold Bullion Limited.* The merits of holding gold as a strategic asset allocation tool, owing to gold s low or negative correlation with mainstream investment assets, have been clearly demonstrated in recent times. The current environment, which is characterised by political, economic and financial uncertainty and where returns from mainstream assets continue to disappoint, highlights the advantages of gold as an investment. In the past, many investors have found investing in gold to be a cumbersome and costly process. Retail and institutional investors have encountered barriers to entry in the form of difficulties with purchase, storage and insurance. The securitisation of gold, as proposed by Gold Bullion Limited, should help to address these issues. We believe this joint initiative is the beginning of a new journey in the repositioning and acceptance of gold as a unique asset class. Yours faithfully James E Burton Chief Executive Officer *Potential investors should be aware that while the World Gold Council has consented to the inclusion of this letter and the use of the gold logo in this prospectus it has not otherwise caused or authorised the issue of this prospectus and takes no responsibility as to the contents of the remainder of this prospectus.

3 IMPORTANT INFORMATION Information and Representations This is a replacement Prospectus dated 21 March 2003 ("Prospectus"). It replaces the prospectus dated 14 February 2003 ("Initial Prospectus") relating to Gold Bullion Securities of Gold Bullion Limited. This Prospectus has been prepared by Gold Bullion Limited (the Company ), the Issuer of the Gold Bullion Securities. Potential investors should note that no person is authorised by the Company to give any information to investors or to make any representation on behalf of the Company not contained in this Prospectus. No offer or invitation in relation to securities of the same class as those offered in this Prospectus has been made or issued in the last 12 months. The expiry date of this Prospectus is 13 months after the date of the Initial Prospectus. No securities will be allotted or issued on the basis of this Prospectus later than 13 months after the date of the Initial Prospectus. Pursuant to section 911A(2)(b) of the Corporations Act 2001, the Company has entered into an arrangement with Investor Resources Limited. Under this arrangement Investor Resources Limited (or its authorised representatives) is making offers to arrange for the issue of Gold Bullion Securities by Gold Bullion Limited. The existence of this arrangement means that Gold Bullion Limited is exempted from the requirement to hold an Australian financial services license under the Corporations Act. Applications can be made only on the application forms attached to this Prospectus or on an application form which was accompanied by an electronic version of this Prospectus at Details of where to lodge the application form (electronic and paper) and the method of payment are set out in the application form. The Company reserves the right to vary the dates and terms of this offer without notifying the recipient of this Prospectus or any Applicant for Gold Bullion Securities. Prospectus Lodged with ASIC This Prospectus has been lodged with the Australian Securities and Investments Commission ( ASIC ) on 21 March The Initial Prospectus was lodged with the ASIC on 14 February ASIC takes no responsibility as to the contents of this Prospectus. Application for Listing on ASX An application has been made for the listing of the Gold Bullion Securities offered by Gold Bullion Limited pursuant to this Prospectus on the Australian Stock Exchange ( ASX ) The fact that the ASX may list the Gold Bullion Securities of Gold Bullion Limited is not to be taken in any way as an indication of the merits of Gold Bullion Limited or the listed Gold Bullion Securities. The ASX 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 howsoever arising from or in reliance upon any part of the contents of this document. Investment Decisions It is impossible in a document of this type to take into account the investment objectives, financial situation and particular needs of each potential investor. Accordingly, nothing in this Prospectus is a recommendation by the Company, the Trustee, Investor Resources Limited, the World Gold Council, HSBC Bank USA or any other person concerning investments in shares or any other security. Potential investors should not rely on this Prospectus as the sole basis for any investment decision in relation to shares or any other security and should seek independent professional investment and taxation advice before making a decision whether to invest in the Gold Bullion Securities. Prospective investors should read the entire Prospectus before making any decisions to invest in the Gold Bullion Securities. If prospective investors have any doubt as to their course of action they should consult their stockbroker, solicitor, accountant or other professional adviser. Potential investors should also be aware that while the World Gold Council has consented to the inclusion of its letter at the commencement of this prospectus and the use of the gold logo in this prospectus it has not otherwise caused or authorised the issue of this prospectus. Jurisdiction The offers made in this Prospectus are, subject to the terms described in this Prospectus, available to persons receiving an electronic Prospectus within Australia. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this Prospectus comes should seek advice on and observe any such restrictions. Failure to comply with relevant restrictions may violate those laws. This Prospectus is not an offer or invitation in relation to shares in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the offers under this Prospectus or otherwise permit a public offer of the Gold Bullion Securities in any jurisdiction outside Australia. The Gold Bullion Securities have not been and will not be

4 registered under the US Securities Act of 1933 and may not be offered or sold in the United States or to, or for the account or benefit of, a US person (as defined in Regulation S under the Securities Act) except in a transaction exempt from the registration requirements of the Securities Act and applicable US state securities laws. Further Information Investors who are seeking advice on the offer or who have questions in relation to this Prospectus are to contact their broker, accountant or other professional advisor. Investors who have questions on how to complete the Application Form or on the processing of their Application Form should call the ASX Perpetual Registrars Information line on (02) Defined Terms Certain terms used in this Prospectus are defined in section 6.1. This Prospectus should be read in conjunction with these defined terms.

5 TABLE OF CONTENTS 1 DETAILS OF THE OFFER 2 2 DESCRIPTION OF A GOLD BULLION SECURITY What is a Gold Bullion Security What is a Gold Bullion Share? Trust Structure Rights of Gold Bullion Security Holders Creations and Redemptions Per Share Entitlement to Gold Capital of the Company Trading Gold Bullion Securities on the ASX 8 3 THE GOLD BULLION Where is the Gold Bullion? Storage and Insurance of Gold Bullion The London Bullion Market 9 4 THE BUSINESS OF GOLD BULLION LIMITED Background and Corporate Structure Creation and Security Structure Description of the Company s Business Management Expenses Monthly Gold Sales Charge Creation and Redemption Fees Directors Profiles 15 5 RISK FACTORS Gold Price and Exchange Rate Volatility Management Expenses Tracking Error and Liquidity Risk Bullion Dealing Risks Security and Insurance Other Compulsory Redemption Events No Operating History General Market Risk Performance by the Company, the Trustee and Parties to Material Contracts 18 6 SUMMARY OF TRANSACTION DOCUMENTS Definitions used in the Transaction Documents Summary of the Constitution Summary of the Bare Trust Deed Summary of the Allocated Bullion Accounts Agreement Summary of the Administration Agreement 37 7 SUMMARY OF TAX CONSIDERATIONS Introduction A Gold Bullion Security Cost Base/Cost of Acquiring Trading Stock Sale of Gold Monthly Gold Sales Transfer Taxes 40 8 DISCLOSURES 41 PRIVACY 43 EXECUTION 43 APPLICATION FORM ERROR! BOOKMARK NOT DEFINED. CORPORATE DIRECTORY G OLD B ULLION L IMITED Page 1

6 1 DETAILS OF THE OFFER Overview of the Offer The Company is currently offering one class of security (a Gold Bullion Security ) for subscription. The Company has been created specifically for this purpose. Gold Bullion Securities are designed to enable investors to purchase an interest in physical gold bullion and to buy and sell that interest through the trading of Gold Bullion Securities on the ASX. The holder of a Gold Bullion Security will actually hold both a redeemable preference share of nominal value issued by the Company (a Gold Bullion Share ) and a beneficial interest in approximately 1/10 th of one fine troy ounce of physical gold held by HSBC Bank USA, the Custodian Bank, in vaults in London. The gold bullion will be held in custody by the Custodian Bank for the Trustee, Gold Bullion Nominees Pty Ltd, with each investor owning a beneficial interest in the gold pursuant to the Bare Trust Deed. The Offer (being the invitation made to the public under this Prospectus) is a continuous offer made during the term of this Prospectus. There is no aggregate subscription amount required by the Company. Applicants may apply for new issues of Gold Bullion Securities at any time by lodging a completed Application Form with ASX Perpetual Registrars Limited. Valid Application Forms received by 2pm EST will generally enable investors to receive new Gold Bullion Securities within 3 business days. Applications for new Gold Bullion Securities must be for a minimum A$500,000 or equivalent value. Investors wishing to buy smaller amounts should purchase the Gold Bullion Securities on the ASX. How to Apply Applications may only be made on: (a) (b) the Application Form attached to this Prospectus (as a paper copy); or a printed Application Form which was accompanied by an electronic version of this Prospectus available at Details of where to lodge the Application Form and the method of payment are set out in the Application Form. Payment may be made in any currency or in gold. Payments in Australian dollars or other non-us dollar currency will be converted to US dollars at the time the gold is purchased at the exchange rate to buy US dollars prevailing at the time. Account details of the Company for direct credits are set out in the Application Form. Cheques should only be crossed not negotiable and be made payable to Gold Bullion Limited Applications Account. Payments in gold must be credited to the Trustee s bullion account at the Custodian Bank in London. For Applicants who elect not to pay in gold, the precise number of Gold Bullion Securities to be issued will not be determined until after the gold relating to your application is actually purchased. The gold will generally be purchased the same business day that a valid Application Form, together with cleared funds, is received and approved by the Company see section Creations for further details. Upon receipt of a valid Application Form and the correct payment amounts, the Company will issue new Gold Bullion Securities (unless the Board determines otherwise see section 2.5.1). Use of funds Applicants paying in gold will pay the gold directly to the account of the Trustee at the Custodian Bank. Such Applicants will also be required to pay the Creation Fee (which will include the nominal amount for the Gold Bullion Shares) to the Company. Monies received by the Company from Applicants paying in Australian dollars or any other currency will be applied by the Company to pay for the gold bullion and the Creation Fee. A Monthly Gold Sales Charge will apply to all gold held by the Trustee at the end of each month see section 4.5 Monthly Gold Sales Charge and the proceeds together with any Creation Fees and Redemption Fees held by the Company will be paid by the Company to Investor Resources Limited as consideration for marketing and administering the Gold Bullion Securities, arranging for storage and insurance of the gold G OLD B ULLION L IMITED Page 2

7 bullion and producing this Prospectus. See section 8 Disclosures Expenses of the Issue and section 4.4 Management Expenses for more details concerning the application of proceeds from the Creation Fee. ASX Quotation An application for admission of the Gold Bullion Securities to quotation on the ASX has been made by the Company to the ASX. The ASX has not indicated that it will list the Gold Bullion Securities nor has it indicated that official quotation (if permission to list were granted) will take place on a specific date. If the ASX does not approve the listing of the Gold Bullion Securities or if the ASX does not admit Gold Bullion Securities to quotation within 3 months from the date of this Prospectus, the Company will return any application monies and/or gold which have been originally provided by an Applicant as soon as possible thereafter. The ASX takes no responsibility for the contents of this Prospectus. CHESS The Company will apply to participate in the Clearing House Electronic Subregister System ( CHESS ). The Company will not issue certificates for Gold Bullion Securities to applicants who are issued Gold Bullion Securities. The Registry, on behalf of the Company, will provide each holder with an uncertificated securities holding statement which will set out the Gold Bullion Securities issued to the holder. If applicable, the holding statement will inform each holder of their Holder Identification Number and the Sponsoring Issuer Number. Gold Bullion Securities Register ASX Perpetual Registrars Limited will maintain a register of the Gold Bullion Securities in Sydney. Gold Bullion Documents The Gold Bullion Documents, being the primary documents which set out the terms and conditions relating to the Gold Bullion Securities and the holding of the gold bullion, comprise: (a) The Constitution of the Company; (b) The Trust Deed; (c) The Allocated Bullion Accounts Agreement; and (d) The Administration Agreement. Please see section 6 for a summary of the Gold Bullion Documents. The Gold Bullion Securities are not secured by any charge or other encumbrance over any asset of the Company. G OLD B ULLION L IMITED Page 3

8 2 DESCRIPTION OF A GOLD BULLION SECURITY 2.1 What is a Gold Bullion Security A Gold Bullion Security is comprised of a Gold Bullion Share and a Beneficial Interest in gold held on trust for the Holder. The following diagram illustrates the two components of a Gold Bullion Security: Components Gold Bullion Limited Redeemable preference share of nominal value issued by the Company Value of a Gold Bullion Security Custodian Bank Gold held in London vaults for the Trustee with each investor owning a beneficial interest in the gold pursuant to the Bare Trust Deed 2.2 What is a Gold Bullion Share? A Gold Bullion Share is a redeemable preference share of nominal value which carries with it an entitlement to approximately 1/10 th of one fine troy ounce of gold bullion. Each redeemable preference share will be issued by the Company at a nominal value of 1/1000 th of 1 cent. The gold, to which the holder will be entitled, will be held by the Custodian Bank or its sub custodians, in vaults in London, in the name of the Trustee pursuant to the terms of the Allocated Gold Bullion Accounts Agreement Trust Structure Pursuant to the Bare Trust Deed, a Separate Trust will be established for each holder of a Gold Bullion Share and the gold will be held by the Trustee on trust for each holder. Each holder will therefore hold: (a) (b) a Gold Bullion Share issued by the Company; and a beneficial interest in a Separate Trust that owns the physical gold bullion. The Separate Trust is a bare trust so the holder is absolutely entitled to the gold bullion. Each time the holder transfers a Gold Bullion Share to a new holder, the beneficial interest in the gold bullion automatically transfers to the new holder. A summary of the Bare Trust Deed is set out in section 6. The Trustee is Gold Bullion Nominees Pty Ltd, a special purpose company established to facilitate the Offer of Gold Bullion Securities. The ownership and directors of the Trustee are the same as for the Company. Rights of Gold Bullion Security Holders Holders of Gold Bullion Securities have the right to: (a) (b) (c) at any time (in accordance with the terms for Redemption) either (i) require the Trustee to call for physical delivery of the gold bullion (subject to certain conditions see section 2.5.2), which delivery will occur in London, or (ii) instruct the Trustee to sell the gold bullion in the spot market and remit the proceeds to the holder; vote on any proposal that affects rights attached to a Gold Bullion Security (except the issue of new Gold Bullion Securities or the redemption of Gold Bullion Securities on issue); and vote on any proposal to wind up the Company and vote during the winding up of the Company. G OLD B ULLION L IMITED Page 4

9 Holders of Gold Bullion Securities have no other rights and in particular are not entitled to: (a) (b) (c) any right to the payment of any dividends; any rights of participation in any surplus assets and profits of the Company; priority of payment of capital in relation to other classes of shares, except on the winding up of the Company Holders of Gold Bullion Securities do not have any direct rights against the Custodian Bank and must rely on the Trustee to enforce the obligations of the Custodian Bank under the Allocated Bullion Accounts Agreement Creations and Redemptions Creations The Company may at any time, whilst this Prospectus is open, issue new Gold Bullion Securities. Applications for new Gold Bullion Securities must be for a minimum A$500,000 or equivalent value. Applicants for Gold Bullion Securities may either purchase the gold themselves or request the Trustee to purchase the gold on their behalf (which will be done using one or more of the Approved Dealers selected by the Trustee). Valid Application Forms received by ASX Perpetual Registrars Limited by 2pm EST will generally enable investors to receive new Gold Bullion Securities within 3 business days, that is, on a T+3 basis. Gold Bullion Securities will only be issued by the Company after: (a) (b) (c) receipt by ASX Perpetual Registrars Limited of a valid Application Form; receipt into the Trustee's allocated account held with the Custodian Bank of the required amount of gold for each share being issued; and payment by the Applicant of the Creation Fee (which will include the nominal amount for the Gold Bullion Shares). Upon the occurrence of (a) to (c), the Company will issue new Gold Bullion Securities subject to the Company reserving the right not to accept an Application for new Gold Bullion Securities. If the Company elects not to accept an Application it must notify the Applicant forthwith and ensure any gold and monies are returned to the Applicant as soon as possible. The Company will charge a Creation Fee, which is described in further detail in section 4.6 Creation and Redemption Fees. The number of Gold Bullion Securities to be issued will be equal to: (a) the number of fine troy ounces of gold (expressed to 3 places of decimals) in respect of that particular Applicant that is credited to the account of the Trustee at the Custodian Bank; divided by (b) the Per Share Entitlement to gold on the date of issue. Applicants who purchase their own gold: (a) (b) (c) (d) must credit the gold to the Trustee s account established under the Allocated Bullion Accounts Agreement (the "Account"); will be refunded any overpayment of gold, whether arising from overpayment by the Applicant or from rounding; must pay to the Company the Creation Fee; and will be issued their Gold Bullion Securities on a T+3 basis, subject to the Company having received confirmation of the deposit of the gold to the Trustee s Account and the Creation Fee. For all other Applicants, who would like the Trustee to purchase the gold on their behalf: (a) (b) funds must be paid to one of the Applications Accounts of the Company; the Trustee will purchase the gold in the spot market during Australian trading hours (most likely in the afternoon when there is generally more liquidity in the spot gold market); G OLD B ULLION L IMITED Page 5

10 (c) (d) (e) (f) (g) the Trustee will purchase the US dollars, required to settle the gold purchase, generally at about the same time and in conjunction with the spot purchase of the gold (not required if the Applicant pays in US dollars); the Trustee will only purchase the gold and currency through an Approved Dealer; the Company will transfer from the Applications Account to its own account the Creation Fee; the Company will refund to the Applicant any excess Application Amount, whether arising from overpayment by the Applicant or from rounding; and the Company will issue the Gold Bullion Securities on a T+3 basis, subject to the Company having received confirmation of the deposit of the gold to the Trustee s Account Redemptions Holders of Gold Bullion Securities may at any time lodge a Redemption Notice with ASX Perpetual Registrars Limited: (a) (b) for any amount of Gold Bullion Securities which they hold, requiring the Company to redeem part or all of their holding of Gold Bullion Securities; and requiring the Trustee to call on the Custodian Bank to deliver gold to an allocated gold account of the Holder in London or requiring the Trustee to sell the gold on their behalf and pay to the Holder the proceeds from the sale of the gold. Upon receipt of a Redemption Notice by ASX Perpetual Registrars Limited, a holding lock will be placed on the Gold Bullion Securities to be redeemed and the Holder will not be able to trade those securities on the ASX. Redemptions (whether for gold or currency) will be paid two business days following the date upon which a valid Redemption Notice is lodged with ASX Perpetual Registrars Limited, that is, on a T+2 basis. Redemption Forms lodged after 2pm EST will be treated as having been received on the next business day. Holders electing to take delivery of gold may only do so by receiving London Good Delivery gold bars (approximately 400 fine troy ounces each see section 3.3.2). Such Holders will receive the gold in London, delivered to an allocated gold account in the name of the Holder held with a member of the London Bullion Market Association - see section 3 for further details on the London Bullion Market. If the amount of gold requested for delivery cannot be satisfied by delivery of a whole number of London Good Delivery gold bars, the Trustee will sell the residual amount of gold specified in the Redemption Notice and will pay the proceeds from the sale to the Holder. The Company will charge a Redemption Fee, which is described in further detail in section 4.6 Creation and Redemption Fees. The number of Gold Bullion Securities to be redeemed will be equal to: (a) the number of fine troy ounces of gold (expressed to 3 places of decimals) that are debited in respect of that particular Holder from the account of the Trustee at the Custodian Bank; divided by (b) the Per Share Entitlement to gold on the date of redemption. Holders who elect to redeem for gold: (a) (b) (c) will have the gold credited to their own account in allocated form (provided they have opened an appropriate account) on a T+2 basis; must pay to the Company the Redemption Fee; and will have their Gold Bullion Shares redeemed for nominal value, subject to the Company having received confirmation of the debit of the gold from the Trustee s Account. For Holders who request the Trustee to sell the gold on their behalf: (a) (b) unless otherwise agreed by the Trustee and the Holder, the Trustee will sell the gold in the spot market at the London AM fixing price. Any premium or discount to the fixing price obtained or incurred as part of the sale will be passed on to the Holder; the Trustee will sell the US dollars received from the gold sale for the currency of redemption requested by the Holder, generally at about the same time and in conjunction with the spot sale of the gold (not required if the applicant wishes to be paid in US dollars); G OLD B ULLION L IMITED Page 6

11 (c) (d) (e) (f) the Trustee will only sell the gold and currency through an Approved Dealer; the Trustee will pay to the Company the Redemption Fee; the Trustee will pay the sale proceeds to the Holder on a T+2 basis; and the Company will redeem the Holder s Gold Bullion Shares for nominal value, subject to the Company having received confirmation of the debit of the gold from the Trustee s account. Holders should be aware that the Company may compulsorily redeem Gold Bullion Securities by notice to Holders setting out an early redemption date which will not be less than 30 days from the date of the notice. To ensure Gold Bullion Shares are able to be redeemed in accordance with the requirements of the Corporations Act, IRL will from time to time subscribe for and the Company will from time to time issue to IRL additional ordinary shares in Gold Bullion Limited Approved Dealers The Company will determine from time to time those dealers ( Approved Dealers ) who will be allowed to quote on spot purchases and sales of gold and currency required for any creations or redemptions. The Approved Dealers will generally be the main market makers in the spot gold and spot foreign exchange markets whose pricing, credit and documentation is acceptable to the Company. HSBC or any other company within the HSBC Group may be an Approved Dealer. The Company will seek to (but is not required to) conduct all spot transactions pursuant to standard market terms and with firms which have a parent company credit rating of A-1 or better (short-term foreign currency credit rating by Standard & Poor s or similar ratings by other agencies). The list of Approved Dealers from time to time will be published by the Company on its website at Transaction Costs for Purchases and Sales The bid/offer quotes sought by the Trustee from Approved Dealers for all purchases and sales of gold and currency will generally be on the basis of the transaction costs and dealer fees being absorbed by the dealer. However, Applicants and Holders will still be required to pay for any transfer or other taxes associated with purchases or sales of gold and currency and these amounts will generally be debited by the Company in processing the Application or Redemption request. Per Share Entitlement to Gold All Gold Bullion Securities issued up until 30 June 2003 will be entitled to exactly 1/10 th of a fine troy ounce of gold. Thereafter, gold will be sold by the Trustee at the end of each month, to cover expenses, in the amount of 0.02% of 1/10 th of one fine troy ounce of gold bullion from each Gold Bullion Trust (approximately 0.24% per annum) and the entitlement to gold for all Gold Bullion Securities, including new issues, will be reduced accordingly at the end of each month. The sales proceeds will be paid to the Company as fees and no additional amount will be payable by Holders on account of goods and services tax. See section 4.5 for details of the Monthly Gold Sales Charge. Capital of the Company The subscription monies for Gold Bullion Securities comprises: (a) (b) (c) a nominal amount (1/1000 th of 1 cent) to pay for the redeemable preference share; funds to pay for the Creation Fee; and the balance of funds to pay for the purchase of the gold bullion. The nominal amount for the preference share will become part of the capital of the Company. The Creation Fee will initially also form part of the Company s capital. The balance of funds will be held on trust and will be used to purchase the gold bullion to be held in the name of the Trustee. At the date of this Prospectus, the capital of the Company is $250,000 comprised of 250,000 ordinary voting shares (which are not Gold Bullion Securities). These ordinary voting shares are held by Investor Resources Limited. Subscription monies applied to Creation Fees will initially increase shareholders funds in the Company. However, pursuant to the Administration Agreement all the operating costs relating to the Company and the Trustee (which will include insurance and storage charges for the gold bullion, marketing and administration costs) will be paid for by Investor Resources Limited, which will be paid a fee for this equal to the Monthly Gold Sales Charge plus any Creation Fees and Redemption Fees held by the Company G OLD B ULLION L IMITED Page 7

12 from time to time, as described in section 4. It is not proposed to reduce the capital of the Company below $250,000 other than pursuant to a resolution by the shareholders to wind up the Company. 2.8 Trading Gold Bullion Securities on the ASX It is intended to apply to list the Gold Bullion Securities for trading on the ASX. The market value of the Gold Bullion Securities may be affected by: (a) (b) (c) (d) (e) (f) (g) the price of the underlying gold bullion expressed in Australian dollar terms; the per share entitlement to gold of the Gold Bullion Securities each month; the bid/offer spread in the price of gold quoted in US dollar terms and in the A$/US$ exchange rate in the foreign exchange market; the size of the Monthly Gold Sales Charge; the Creation Fee that the Company charges for new issues of Gold Bullion Securities; the Redemption Fee charged by the Company for redemptions; and the volatility and liquidity of the Gold Bullion Securities in trading. G OLD B ULLION L IMITED Page 8

13 3 THE GOLD BULLION Where is the Gold Bullion? All gold for the Gold Bullion Securities will be held in London in custody by the Custodian Bank, HSBC Bank USA, in its own vault or in another vault of a sub-custodian bank. HSBC Bank USA is part of the HSBC Group. HSBC Bank USA has a credit rating (long-term foreign currency) of AA- from Standard & Poor s, Aa3 from Moody s Investors Service and AA- from Fitch Ratings. Pursuant to the terms of the Bare Trust Deed, HSBC Bank USA may be replaced as the Custodian Bank by another LBMA clearing bank at any time but only if the other bank is able to offer storage and insurance on more attractive terms than is being provided by HSBC Bank USA. All gold for the Gold Bullion Securities will be held in allocated form (see Allocated Accounts below in this section for an explanation of allocated ) pursuant to the terms of an Allocated Bullion Accounts Agreement (the Custodian Bank Agreement ). The gold will be held on trust for investors, registered in the name of a special purpose nominee, Gold Bullion Nominees Pty Ltd, subject to the terms of the Trust Deed. The Company has applied $249,900 of its ordinary share capital to buying 420 fine troy ounces of gold and has transferred that gold to the account of the Trustee. As London Good Delivery gold bars held by the Trustee are approximately 400 ounces each, a residual amount of gold of less than 400 ounces will invariably be required to be held by the Trustee (on behalf of the Company and not investors) in allocated or unallocated form (see Allocated Accounts and Unallocated Accounts below in this section for an explanation of these terms). This gold held for the Company will be used to ensure that holders of Gold Bullion Securities always receive allocated gold, as there will always be enough surplus gold held by the Company to ensure that no fractional gold bars would be required for the total Allocated Accounts. Storage and Insurance of Gold Bullion All gold held by the Custodian Bank for the Trustee is presently insured as part of a global insurance policy of the HSBC Group on such terms and conditions as HSBC considers appropriate. In the event of an insurance claim, the HSBC Group has agreed to pay over to the Trustee all insurance proceeds received with respect to any gold held for the Trustee plus an amount equal to any shortfall arising from the deductible under the insurance policy. The Custodian Bank pays the actual costs of storage and insurance. The Custodian Bank has agreed to charge a total fee for storage and insurance of not more than 0.10% per annum of the market value of the gold held in allocated form, calculated daily and payable monthly in arrears with no minimum fee. This fee arrangement applies until November 2004 and thereafter may be reviewed and varied by the Custodian Bank. Further details of the terms of storage and the extent of the liability of the Custodian Bank for the gold can be found in section 6.4 summary of the Allocated Bullion Accounts Agreement. The London Bullion Market The LBMA The London Bullion Market Association ("LBMA") is the trade association that acts as the co-ordinator for activities conducted in the London bullion market. The roles of the LBMA include: setting refining standards for and ensuring gold bars meet the LBMA Good Delivery Standard; co-ordinating market clearing and vaulting; promoting good trading practices; and developing standard documentation. London Good Delivery According to the Good Delivery Rules of the London Bullion Market Association a gold bar must have a minimum finess of 99.5% and a weight of approximately 400 ounces or 12.5 kilograms (although bars are permitted to be between 350 and 430 ounces). The actual quantity of pure gold in a bar is expressed to 3 places of decimals and is calculated by multiplying the gross weight (in ounces, to 3 decimals) by the finess (in percent, to 2 decimals). For example, a bar with a gross weight of fine troy ounces and a finess of 99.58% would be recorded as having a fine gold content of fine troy ounces (note no rounding up G OLD B ULLION L IMITED Page 9

14 unless the fourth decimal is a nine). The standards required for gold bars to be included in the "Good Delivery Lists" are set out in The Good Delivery Rules for Gold and Silver Bars published by the LBMA. The standards and the lists are available on the LBMA website at Even though a variety of smaller and exact weight bars are available in the market, the Company will only ever be dealing in LBMA Good Delivery gold bars Loco London Gold traded in the London market is generally on a loco London basis, meaning the gold is physically held in vaults in London or is transferred into accounts established in London. The basis for settlement and delivery of a loco London spot trade is payment (generally in US dollars) 2 business days after the trade date against delivery. Delivery of the gold can either be by physical delivery to an allocated account or through the London Bullion Clearing system to an unallocated account. Holders of Gold Bullion Securities who wish to pay or redeem in gold (rather than cash) will be required to deal loco London and through an allocated account, although holders may, at their own expense, arrange a location swap to take delivery of the gold in another location. Allocated Accounts Allocated accounts are held in clients names and have uniquely identifiable bars of gold allocated to a specific customer and physically segregated from other metal held in the vault. The client has full title to this gold with the dealer holding it as custodian. Provided correct segregation is maintained, metal in an allocated account does not form part of a bullion dealer s assets. Unallocated Accounts Most gold traded in the London market is traded and settled in unallocated form. Gold held in this form does not entitle the holder to specific bars of gold and the holder only ranks as an unsecured creditor of the dealer. The only gold which will be held by the Trustee in this form (which will generally be less than 400 fine troy ounces) will be held for the account of the Company and not for the account of any holders of Gold Bullion Securities. Subject to the terms of a clients' account agreement, a client may make exchanges between allocated and unallocated gold accounts (provided the client has a sufficient balance). The Trustee, by using only the gold of the Company will switch between allocated and unallocated accounts as necessary to ensure Gold Bullion Shareholders are always entitled solely to allocated gold. Trading Unit The trading unit for gold is one fine troy ounce ( fine meaning pure gold irrespective of the purity of a particular bar). The conversion factors between troy ounces and metric used by the LBMA are: 1 troy ounce = grams 1 kilogram = troy ounces Even though the London bullion market is a wholesale market, where minimum traded amounts are generally 1,000 fine troy ounces of gold, being an over-the-counter market, dealers may deal in whatever quantities they wish. The Company may be required to deal in quantities of less than 1,000 fine troy ounces because the minimum application amount for new issues is only A$500,000 (approximately 790 fine troy ounces at a gold price of A$630 per ounce) and because some redemptions may require the sale of gold in smaller parcels or in a number of fine troy ounces expressed to 3 places of decimals. For such transactions, the Company may not be able to achieve the same price if dealing in 1,000 ounce lots. London AM Fix The London market provides a unique gold fixing service, whereby twice a day, all purchases and sales, whether for larger or smaller amounts, are conducted solely on the basis of a single published fixing price. The fixing commences at 10.30am (the London AM fix) and at 3.00pm (the London PM fix) London time. These are fully transparent benchmarks and are widely accepted as the basis for pricing spot transactions as well as a variety of other transactions. There are 5 dealer members of the Gold Fixing, one of whom is the Custodian Bank, and clients place orders for the fixing through the dealing room of the fixing members. G OLD B ULLION L IMITED Page 10

15 Vaulting and Clearing Certain members of the London bullion market offer clearing services. They may use their own vaults for storage of physical bullion and/or have the use of storage facilities with another party. The Custodian Bank is one of the LBMA members which offers clearing services. The Company believes that presently HSBC Bank USA clears more gold in the London market than any other firm clearing approximately half the gold in that market. The clearing members of the LBMA use a daily clearing system whereby those members utilise the unallocated gold they maintain between each other for the settlement of all mutual trades and third party transfers. This system is designed to avoid the security risks and costs involved in the physical movement of bullion. Documentation The LBMA has developed and introduced a number of standard agreements which cover the terms and conditions for operating customer facing allocated and unallocated accounts and for dealing in spot gold transactions. In all dealings in gold the Company and the Trustee will use the standard LBMA documentation. G OLD B ULLION L IMITED Page 11

16 4 THE BUSINESS OF GOLD BULLION LIMITED Background and Corporate Structure Arising from discussions with the World Gold Council and the Australian Gold Council, the Managing Director of Investor Resources Limited ( IRL ), Graham Tuckwell, was encouraged to pursue the idea of establishing a company or product which would enable investors to buy gold bullion through an ASX listed entity. As a result, Gold Bullion Limited was established by IRL in September 2002 and since then the details on how best to structure and offer Gold Bullion Securities have been developed. Gold Bullion Limited (the Company ) and Gold Bullion Nominees Pty Ltd (the Trustee ) are single purpose entities created for the purpose of offering Gold Bullion Securities and related securities to the public. The Company and the Trustee were incorporated in Victoria on 17 September 2002 and 20 September 2002 respectively the Company as a public company and the Trustee as a proprietary company. All of the ordinary shares of the Company and the Trustee are owned by IRL. Neither the Company nor the Trustee has any other classes of shares currently on issue. The only other shares currently proposed to be issued by either company are the Gold Bullion Securities to be issued by the Company pursuant to this Prospectus. The Company has a paid up capital of $250,000 with no other liabilities. Its assets comprise $100 plus 420 ounces of gold (costing $249,900) which gold has been loaned to the Trustee and is held in an unallocated gold account with the Custodian Bank. This unallocated gold will be used by the Trustee to ensure that holders of Gold Bullion Securities always receive allocated gold as discussed in section 3.1. The directors of the Trustee are the same as the directors of the Company. Creation and Security Structure The Company has entered into the Gold Bullion Documents on terms which it considers should give investors sufficient confidence in the creation and redemption procedures such that each holder of a Gold Bullion Security will be entitled to their appropriate amount of gold. The following diagram illustrates the creation process for Gold Bullion Securities and the intended ringfencing of the gold held by the Custodian Bank and the Gold Bullion Securities to be issued by the Company and facilitated by ASX Perpetual Registrars Limited using the CHESS clearing system. The example shows an investor buying new Gold Bullion Securities from an Approved Dealer who is also the Applicant. Investor New GBS $ All gold is ring fenced within this structure Approved Dealer (Applicant) Gold New issue of GBS ASX Perpetual (Share Registrar) Confirmation that gold received Custodian Bank (HSBC) Trustee Fee GBL Details of the Creation and Redemption process are set out in section 2.5. Details of the security structure are set out in section 6. G OLD B ULLION L IMITED Page 12

17 4.3 Description of the Company s Business The Company has not traded since its incorporation, apart from purchasing 420 fine troy ounces of gold and lending such to the Trustee. As such, there has been no profit and loss recorded and no tax expense incurred to date. All the expenses of the Company are paid by IRL. Pursuant to the Administration Agreement between IRL and the Company and the Trustee (the Companies ), IRL will continue to be responsible for supplying all administration services and covering all administrative costs of the Companies. These costs will include: management and administration services required for the Companies; directors fees and insurance; shareholder information costs of the Company; ASX and ASIC reporting and compliance costs of the Companies; ASX listing fees and share registry costs of the Company; storage and insurance costs for allocated gold bullion; and any promotion costs and other fees and expenses relating to activities which the Company and IRL decide to undertake from time to time. In return for covering the above expenses (and for also covering the initial costs of establishing the Companies, the various agreements set out herein and promoting the Offer), the Company will pay to IRL a fee equal to the Monthly Gold Sales plus any Creation Fees and Redemption Fees. All such fees are payable on a GST inclusive basis. 4.4 Management Expenses As all of the management and corporate expenses of the Company and the Trustee will be paid for by IRL, in accordance with the terms of the Administration Agreement, the share capital of the Company of $250,000 is not anticipated to be required to pay for any management or corporate expenses. Creation Fees, which when received will form part of the share capital of the Company, will be moved out of the Company on a regular basis through fee payments to IRL as discussed in section 2.7 Capital of the Company. This section shows the forecast expenses of the Company and the Trustee and expresses these as a percentage of total assets for various amounts of Gold Bullion Securities outstanding - this percentage being referred to as the Implied Management Expense Ratio. The following table sets out the forecast operating expenses relating to activities of the Company and the Trustee in the first 12 months of operation. The footnotes set out some of the assumptions in these forecasts. Table 1 Forecast Operating Expenses first 12 months Note A$ 000 Administration Expenses: Company & Product Promotion Administration & Compliance Notes: Storage & Insurance of Gold: %pa 1. These are the base remuneration costs for executives involved in promotional activities. Most of these costs are for a full-time marketing and investor relations executive. The Chairman will not draw a base salary from IRL relating to any activities of the Company or the Trustee. However, he and other executives may be paid additional remuneration, as determined from time to time by the board of directors of the Company, based on the amount of Creation Fees generated by them in excess of those required to pay all operating expenses. 2. Includes: (a) The allocation of total salary costs for the Company Secretary plus an office assistant/secretary (both engaged less than full-time on work for the Company and the Trustee) with office space provided by IRL; G OLD B ULLION L IMITED Page 13

18 (b) (c) The base remuneration for two non-executive directors with no directors fees being drawn by the Chairman. The non-executive directors may be paid additional remuneration, as determined from time to time by the board of directors of the Company, based on the amount of Creation Fees generated by them; and Listing and registry fees based on quotes from the ASX and ASX Perpetual respectively. 3. As per the terms of the agreement with HSBC Bank USA whereby IRL will pay a total fee for storage and insurance of not more than 0.10% per annum of the market value of the gold held in allocated form, calculated daily and payable monthly in arrears with no minimum fee. The following table calculates, based on the operating expenses set out above, the Implied Management Expense Ratio for a range of amounts of Gold Bullion Securities outstanding. Table 2 Implied Management Expense Ratio Amounts are A$ 000 unless stated Amount Outstanding Expenses A$100m A$200m A$500m Administration Expenses Storage & Insurance of Gold (0.10%pa) Total Annual Expenses Management Expense Ratio 0.45%pa 0.28%pa 0.17%pa 4.5 Monthly Gold Sales Charge Up until 30 June 2003, all Gold Bullion Securities will be entitled to exactly 1/10 th of a fine troy ounce of gold. Thereafter, gold will be sold by the Trustee at the end of each month from Trust assets (the Monthly Gold Sales Charge ) and the proceeds will be paid to IRL pursuant to the Administration Agreement. The Monthly Gold Sales Charge will initially be set at 0.02% per month or approximately 0.24% per annum. No additional amount will be charged to Holders on account of goods and services tax which is payable in connection with the Monthly Gold Sales Charge. As a result, it is likely that the per share entitlement to gold, expressed as a percentage of 1/10 th of one fine troy ounce, will be: At 30 June % At 30 June % At 30 June % At 30 June % At 30 June % At 31 August % However, the Monthly Gold Sales Charge may be varied by the Company at any time, but only after giving 1 month s written notice to all holders of Gold Bullion Securities. The above table assumes there will not be any change to the charge but that may not be the case. The Monthly Gold Sales Charge and the precise entitlement to gold for existing Gold Bullion Securities and all new issues for each month will be published by the Company on its website at It is the Company s current intention to implement a capital restructuring from time to time whenever the per share entitlement reduces to 99.00% of 1/10 th of a fine troy ounce of gold (which will be every 50 months if the charge remains at 0.02% per month) to return the per share entitlement to gold to exactly 1/10 th of a fine troy ounce of gold. If implemented, the per share entitlement to gold will always be between 100% and 99.00% of 1/10 th of a fine troy ounce of gold. The Company currently proposes to implement the share/capital restructure by: consolidating each holding of 100 Gold Bullion Securities into 99 Gold Bullion Securities; and compulsorily redeeming holdings of fewer than 100 Gold Bullion Securities (with holders of fewer than 100 Gold Bullion Securities being able to purchase additional securities on market before the restructure to avoid compulsory redemption if they wish). However, no decision has yet been taken by the Board to implement any capital restructuring and Holders of Gold Bullion Securities will be given notice, of any such decision and the form of any proposed restructure, not less than 1 month before it is effected. G OLD B ULLION L IMITED Page 14

19 Creation and Redemption Fees The Company will charge a Creation Fee, based on the Application Amount, for all creations of new Gold Bullion Securities. The Creation Fee will be equal to 0.10% of value of the gold credited to the account of the Trustee to create the Gold Bullion Securities. The Company will also charge a Redemption Fee of $100 per redemption (regardless of the number of Gold Bullion Securities being redeemed). No additional amounts will be payable by an Applicant or a Holder for GST in connection with Creation Fees or Redemption Fees. The Company may very the Creation Fee and Redemption Fee at any time after giving 1 month s written notice to all Holders of Gold Bullion Securities. Directors Profiles The Directors of the Company at the date of this Prospectus are as follows: Graham Tuckwell - Chairman Mr Tuckwell is the founder and Managing Director of IRL, a boutique corporate advisory firm established almost 6 years ago which specialises in providing financial, technical and strategic advice to the resources industry. He has more than twenty years corporate and investment banking experience. He specialises in devising innovative transaction and financing structures. Prior to establishing IRL, Mr Tuckwell was Head of Mining Asia/Pacific at Salomon Brothers, Group Executive Director at Normandy Mining responsible for Strategy and Acquisitions and Head of Mergers and Acquisitions at Credit Suisse First Boston in Australia. He holds a Bachelor of Economics (Honours) and a Bachelor of Laws degree from the Australian National University. Dr Vince FitzGerald Director Dr FitzGerald is Chairman of The Allen Consulting Group Pty Ltd, a leading Australian consulting company in economics, public policy and economic and financial regulation. He has been a Director of that firm since 1989, soon after its foundation. Prior to that he was a senior government official in Canberra, his career involving steps in the Treasury, Prime Minister and Cabinet, Finance (Deputy Secretary), Trade (Secretary), and Employment, Education and Training (Secretary). He is a well known expert on the superannuation industry in Australia, and is a superannuation fund Trustee. Dr FitzGerald is also a Director of ING Australia Holdings Ltd. He holds a Bachelor of Economics (1st class Honours in Econometrics) from the University of Queensland, and a Ph D in Economics from Harvard University. Simon Village - Director Mr Village graduated with a Bachelor of Engineering (Honours) degree from Camborne School of Mines, and worked for the Anglo American group as a mining engineer, prior to joining HSBC in 1994 as a gold mining analyst. He established himself as a top-rated gold analyst, and also built up HSBC s Global Mining product, based out of London in Simon returned to South Africa in 2000, and was the Managing Director in charge of HSBC s South African securities business, prior to taking up the position with the World Gold Council last year as Managing Director responsible for developing gold investment products and services for both the retail and institutional markets. Simon has worked closely with IRL and GBL in developing the Gold Bullion Securities. Greg Burgess Company Secretary Mr Burgess is a qualified accountant and is the Company Secretary and Chief Financial Officer of IRL. His previous experience prior to joining IRL includes being the Chief Financial Officer of Wizard Information Services, senior positions within the Australian Department of Finance and internal auditor at Normandy Mining Limited. He holds a Bachelor of Arts (Accountancy) from the University of Canberra and is a Fellow of CPA Australia. G OLD B ULLION L IMITED Page 15

20 5 RISK FACTORS An investment in Gold Bullion Securities involves a degree of risk. In addition to the other information contained in this Prospectus, the following risk factors should be carefully considered by prospective investors before deciding whether to invest in Gold Bullion Securities. 5.1 Gold Price and Exchange Rate Volatility As gold is typically traded in US dollars (US$) and the Gold Bullion Securities will be traded on the ASX in Australian dollars (A$), the price of Gold Bullion Securities will be affected by movements in both the US$ price of gold and the A$/US$ exchange rate. Both the gold price and the exchange rate fluctuate widely and are affected by numerous factors well beyond the Company s control. The graphs below show, for the period since the floating of the A$ in December 1983, the US$ gold price, the A$/US$ exchange rate and the resultant A$ gold price on a monthly basis to December 2002 as published by the Reserve Bank of Australia in the Bulletin Statistical Tables F11 and F12. Gold Price Gold Price ($/oz) A$ Price US$ Price 250 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 A$/US$ Exchange Rate Exchange Rate Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 G OLD B ULLION L IMITED Page 16

21 Management Expenses The continuing quotation of issued Gold Bullion Securities will be dependent on monthly gold sales and Creation Fees being sufficient to cover management and corporate expenses. Although IRL is obligated under the Administration Agreement to pay for all management and corporate expenses, it is permitted at any time by 30 days notice to terminate that Agreement. In these circumstances, the Company may by 30 days notice to Holders compulsorily redeem all or part of the issued Gold Bullion Securities. This means an investment in Gold Bullion Securities may be redeemed earlier than desired by a Holder if the Company considers that the Monthly Gold Sales and the Creation Fees are not sufficient to cover management and corporate expenses. If the Company compulsorily redeems any newly issued Gold Bullion Securities (being Gold Bullion Securities issued within 5 months of the date of redemption), IRL will repay to each Holder an amount equal to the Creation Fees paid for those Gold Bullion Securities, reduced by 1/5 th of the total amount for each month or part thereof that the Gold Bullion Securities are on issue. Tracking Error and Liquidity Risk At any time, the price at which the Gold Bullion Securities trade on the ASX may not reflect accurately the underlying price of gold expressed in A$ terms. The procedures set out in this Prospectus for new issues and redemptions of Gold Bullion Securities may help limit any such tracking error. However, this risk cannot be fully eliminated since the traded price on the ASX will be a function of supply and demand amongst investors wishing to buy and sell Gold Bullion Securities through the ASX (as compared to investors wishing to use the new issue and redemption facilities offered by the Company). The Gold Bullion Security is a new security and it has no trading record. Although the Company will apply to list the Gold Bullion Securities on the ASX, there may be relatively few buyers or sellers and this will affect their liquidity and the price to investors. There can be no assurance that active trading will develop in the Gold Bullion Securities. Bullion Dealing Risks The Company, when buying and selling gold (and possibly foreign exchange, on occasion) will be relying on the credit of the counter-party bank. If any bank fails to settle, there is a risk of loss to the Applicant or Holder of the Gold Bullion Securities to which the non-settled transaction relates. Security and Insurance All gold will be held by the Custodian Bank in its vaults in London or in the vaults of a sub-custodian appointed by the Custodian Bank. There is a risk that the gold held for the Trustee could be lost, stolen or damaged. In that event, the Trustee may not be able to request either the sale or delivery of gold on behalf of any Holder of Gold Bullion Securities. In addition, holders of such Gold Bullion Securities may need to rely on the terms of the insurance coverage to protect their investment. The Custodian Bank is entitled to insure the gold on such terms and conditions, and against such risks, as it considers appropriate. In the event of a successful claim, it is obliged to pay to the Trustee only such proceeds as it actually receives (although it will make up any sum unpaid due to it being a deductible under the terms of the policy). Any claim on insurance could take considerable time and the outcome of any such claim cannot be assured. The Trustee may receive no payout whatsoever or a payout substantially less than the spot price of the gold on either the date of the claim or on the date of any payout. Although the Custodian Bank has offered the Company attractive rates for storage and insurance, the terms of the insurance may be varied by the insurer or the existing insurer could decide not to renew the insurance policy and an alternative insurer offering acceptable terms might not be found. Also, the Custodian Bank could elect not to continue to provide storage and insurance facilities to the Company. In these circumstances, the Company may compulsorily redeem all or part of the issued Gold Bullion Securities on 30 days notice to Holders and thus an investment in Gold Bullion Securities may be redeemed earlier than desired by a Holder. G OLD B ULLION L IMITED Page 17

22 Custodial services offered by the Custodian Bank and any sub custodian are presently not regulated investment activity subject to the supervision and rules of the Financial Services Authority, the United Kingdom's Financial Services regulator (or the Bank of England). Further details regarding the Security and Insurance are set out in section 6.4 "Summary of Allocated Bullion Accounts Agreement" Other Compulsory Redemption Events In the event of the de-listing, suspension or withdrawal of the Gold Bullion Securities from trading on the ASX at any time and in circumstances where the Company considers in its absolute discretion that the Gold Bullion Securities will not be re-listed or re-admitted to trading by ASX within a reasonable time, the Company may on 30 days notice to a Holder compulsorily redeem all or part of the issued Gold Bullion Securities and thus an investment in Gold Bullion Securities may be redeemed earlier than desired by a Holder. No Operating History The Company was incorporated in September 2002 as a single purpose entity created to offer Gold Bullion Securities to the public. Activities to date have been limited to establishing the enterprise and hence there is no operating history upon which one can evaluate the Company. General Market Risk General movements in local and international markets and factors that affect the investment climate and investor sentiment could all affect the level of trading and therefore the market price of Gold Bullion Securities. These risks are generally applicable to any investment in listed securities and investors should be aware that Gold Bullion Securities can go down in price as well as up. Performance by the Company, the Trustee and Parties to Material Contracts The value of a Gold Bullion Security depends on the ability of the Company and the Trustee to perform their respective obligations under the Trust Deed and the Constitution as well as the ability of various persons to perform their obligations under the material contracts summarised in Section 6 of this Prospectus ("Material Contracts"). These obligations are unsecured contractual obligations of the Company, the Trustee or other 3 rd Parties which will rank equally with other unsecured contractual obligations of these parties other than liabilities mandatorily preferred by law. The obligations of the Company, the Trustee or a third party or other person with obligations under a Material Contract and concerning the Gold Bullion Securities are not guaranteed by any party. Investors must make their own assessment of the ability of the Company, the Trustee and any person involved in performing an obligation under a Material Contract in meeting their obligations concerning the Gold Bullion Securities. G OLD B ULLION L IMITED Page 18

23 6 SUMMARY OF TRANSACTION DOCUMENTS 6.1 Definitions used in the Transaction Documents Accountant means any member of the Australian Society of Certified Practicing Accountants or member of The Institute of Chartered Accountants in Australia; Applicant means a person or persons making an Application; Application means an offer by a person to the Issuer to subscribe for Gold Bullion Securities, being an offer on terms referred to in an Application Form and the Prospectus; Application Form means the form attached to, or accompanying this Prospectus, upon which an Application must be made; Associate has the meaning ascribed by section 11 of the Corporations Act; ASX means the Australian Stock Exchange Limited ACN ; ASX Listing Rules means the listing rules of the ASX as amended or varied from time to time; Beneficial Interest means after payment for the Gold, the beneficial interest which an investor acquires in the Gold upon registration as Holder of a Gold Bullion Share or any substituted asset as adjusted in accordance with this Trust Deed; Business Day means a business day as recognised by the ASX Listing Rules and the rules of the LBMA; CHESS means the Clearing House Electronic Subregister System established and operated in accordance with the SCH Business Rules; CHESS Approved Securities means securities approved by SCH to participate in CHESS in accordance with the SCH Business Rules; Commencement Date means in relation to a Separate Trust, the date on which the first Holder s name is added to the Register; Company and Issuer means Gold Bullion Limited; Completion means the act of lodging a valid Redemption Notice in accordance with 10.3 of the Trust Deed; Compulsory Redemption Date means the date notified by the Company to the Holders as the date on which all or part of the Gold Bullion Securities will be compulsorily redeemed by the Company; Constitution means the constitution of Gold Bullion Limited, as amended from time to time; Corporations Act and Corporations Regulations have the same meanings respectively given to them in the Corporations Act 2001 (Commonwealth) as amended or varied for time to time; Creation Fee means the creation fee described in section 4.6 of this Prospectus; Custodian and Custodian Bank means the entity that provides custody and transfer facilities for the Gold from time to time, as at the date of this Prospectus being, HSBC Bank USA; Delivery Date means the date which is: (a) (b) 2 Business Days after the Redemption Date or the Compulsory Redemption Date; or the date specified in the Redemption Notice by the Holder, whichever is the later. Delivery Method means either the Gold Delivery Method or the Gold Sale Method as specified by the Holder in a Redemption Notice; G OLD B ULLION L IMITED Page 19

24 Delivery Obligations means the obligation of the Company, on behalf of the Trust, to deliver the Gold to the Holder in accordance with the terms of the Constitution; Directors means the directors of the Company from time to time; Gold means at any time in respect of each Gold Bullion Share either: (a) (b) in the case of gold which has been allocated by the Custodian as a London Good Delivery Bar, one tenth (1/10 th ) of one fine troy ounce of such gold as may be reduced or increased from time to time in accordance with the Transaction Documents or a Prospectus; or in the case of gold which remains unallocated by the Custodian, the balance of the unallocated gold account held by the Trustee with the Custodian, as determined in each case in accordance with the rules of the London Gold Bullion Market Association; Gold Bullion Security means a Gold Bullion Share and entitlement to the corresponding Beneficial Interest; Gold Bullion Shares are redeemable preference shares which have the rights set out in the Constitution, issued by the Company in accordance with the Constitution or a Special Resolution of the Company; Gold Bullion Trust or Trust or Gold Trust means each Separate Trust over the Gold of each Holder; Gold Delivery Method means the method used by the Company to discharge its Delivery Obligations as set out in the Constitution; Gold Sale Method means the method used by the Company to discharge its Delivery Obligations as set out in the Constitution; Holder means the person whose name is for the time being entered in the Share Register and the Register as the holder of a Gold Bullion Share and the holder of a Beneficial Interest, respectively; Insolvency Date means the date on which the first Insolvency Event, in relation to the Issuer occurs; Insolvency Event means, for the Issuer, the happening of one or more of the following events: (a) (b) (c) (d) (e) (f) (g) (h) (i) except for the purpose of a solvent reconstruction or amalgamation: (i) (ii) process is filed in a court seeking an order that it be wound up or that a Controller be appointed to it or any of its assets, unless the application is frivolous, bona fide contested, withdrawn, struck out or dismissed within 21 days of it being filed; or an order is made that it be wound up or that a Controller be appointed to it or any of its assets; or (iii) a resolution that it be wound up is passed or proposed; a liquidator, provisional liquidator, Controller or any similar official is appointed to, or takes possession or control of, all or any of its assets or undertaking; an administrator is appointed to it or a resolution that an administrator be appointed to it is passed; it enters into, or resolves to enter into, an arrangement, compromise or composition with any of, or any class of, its creditors or members, or an assignment for the benefit of any of, or any class of, its creditors, or process is filed in a court seeking approval of any such arrangement, compromise or composition; a reorganisation, moratorium, deed of company arrangement or other administration involving one or more of its creditors is effected; any action is taken by the Australian Securities and Investments Commission with a view to its deregistration or its dissolution, or an application is made to the Australian Securities and Investments Commission that any such action be taken unless such action is frivolous or bona fide contested; it is insolvent as disclosed in its Accounts or otherwise, states that it is unable to pay its debts or it is presumed to be insolvent under any applicable law; as a result of the operation of section 459F(1) of the Corporations Act, it is taken to have failed to comply with a statutory demand; any event or circumstance set out in section 461 of the Corporations Act occurs in relation to it; or G OLD B ULLION L IMITED Page 20

25 (j) anything having a substantially similar effect to any of the events specified in paragraphs (a) to (i) inclusive happens to it under the law of any jurisdiction; Insolvency Event Redemption Notice means a compulsory Redemption Notice forwarded to Holders if an Insolvency Event occurs and cannot be remedied; IRL means Investor Resources Limited ACN ; LBMA means the London Bullion Market Association; Law means the Corporations Act 2001; Prospectus means any offer document issued by the Company from time to time in relation to the issue of Gold Bullion Securities by the Company; Redemption Date means the date on which a valid Redemption Notice is lodged or deemed to be lodged with the Issuer under the Trust Deed and the Constitution; Redemption Fee means the redemption fee described in section 4.5 of this Prospectus; Redemption Instructions means the instructions provided by the Holder to the Company and the Trust which in the Company s reasonable opinion are sufficient to allow the Company to effect the delivery or sale of the Gold in accordance with the Constitution and the Prospectus relating to the relevant Gold Bullion Securities. The Redemption Instructions must include as a minimum, the name, HIN/SRN for the Gold Bullion Securities, contact telephone number and payment details of the recipient if the Gold is to be sold, and delivery and custodial arrangements loco London only if the Gold is to be delivered; Redemption Notice means a written notice in the form approved by the Trustee and Issuer from time to time to be lodged by the Holder with the Issuer which instructs the Trustee how to deal with the Gold and confirms redemption of the Gold Bullion Share; Register means the register of Holders of Beneficial Interests kept and maintained by the Registrar; Registered Address means in relation to a Holder, whether or not there is one or more than one Holder registered in respect of that Gold Bullion Share, the last single address recorded in the Share Register in respect of that Gold Bullion Share; Registrar means any person the Issuer may appoint from time to time to maintain the Register and the Share Register; Regular Preference Shares are preference Shares which are not Gold Bullion Shares; Related Body Corporate has the same meaning given to the term related body corporate in the Law; Released Parties means the Company, its Related Bodies Corporate, their respective employees, officers, agents and all contractors and sub-contractors; Relevant Portion means that part of the Subscription Amount which the Company holds on trust for the Trust and which corresponds to the purchase price of the Gold for a particular Applicant; Sale Costs means all of the costs of arranging the sale of a Holder s Gold determined by the Company. The costs of the sale include any costs and expenses incurred by the Company (or its agents) whatsoever which in the Company s opinion relates to the arranging and completion of the sale; Sale Proceeds means the actual amount for which the Gold is sold on behalf of the Holder less the Sale Costs, storage costs, insurance costs and any applicable Transfer Taxes; SCH has the meaning ascribed in the ASX Listing Rules; SCH Business Rules has the meaning ascribed in section 9 of the Corporations Act; Separate Trust means each of the trusts constituted under the Trust Deed; G OLD B ULLION L IMITED Page 21

26 Share Register means the register maintained by the Issuer in respect of the Gold Bullion Shares; Subscription Amount means the amount that a person pays to the Company on subscription for the issue to it of a Gold Bullion Share; Termination Event means if a contract that either: (a) the Issuer or the Trustee has with a Service Provider (such as provision of insurance); or (b) a Service Provider has entered into or arranged in accordance with its obligations to either the Issuer or the Trustee, is terminated for whatever reason and a replacement contract on similar commercial terms cannot be negotiated or executed; Transaction Documents means the Trust Deed, Prospectus, the Constitution of the Issuer and any other document identified as a transaction document for the purposes of the Trust Deed or a Prospectus; Transfer Tax means any tax, income tax, capital gains tax, goods and services tax, withholding tax, stamp, financial institutions, registration and other duties, bank accounts debits tax, import/export tax or tariff and other related taxes, levies, imposts, deductions, interest, penalties and charges imposed or levied by a Government or Government agency; Trust Deed means the Bare Trust Deed of the Gold Bullion Trust dated on or about 14 February 2003 as amended from time to time; and Trustee means the trustee for the time being of the Gold Bullion Trust, appointed as such by this Trust Deed and includes any subsequent Trustee or any nominee, custodian, delegate or agent of the Trustee as the context requires Summary of the Constitution The Gold Bullion Share and entitlements to the corresponding Beneficial Interest are constituted by the Constitution of Gold Bullion Limited, the Trust Deed and by terms, provisions and statements of a number of other documents including this Prospectus. The Constitution is an important document and should be read by investors when making an assessment of whether to apply for Gold Bullion Securities. Accordingly, certain key provisions of the Constitution are summarised below. This summary is not intended to set out in detail all the provisions of the Constitution, only those specifically relating to the Gold Bullion Shares. The Constitution is available for inspection by Holders and potential investors at the offices of the Company during the usual business hours. Certain capitalised terms used in this summary have defined meanings in the Constitution that are not always repeated or paraphrased in this summary or this Prospectus. A number of defined terms are repeated or paraphrased in section Definitions. Nature of Gold Bullion Shares Gold Bullion Shares are preference shares which are liable to be redeemed by the Company. The terms upon which and the manner in which any redemption is effected will be in accordance with the Constitution or as otherwise specified in the conditions of issue of the Gold Bullion Share as set out in a Prospectus and the Trust Deed. Rights attaching to Gold Bullion Shares Holders of Gold Bullion Shares only have the right to vote: on a Resolution to approve the terms of a buy-back agreement for those Shares; on a proposal that affects rights attached to the Gold Bullion Share that is not the issue of additional Gold Bullion Shares, a capital reduction or the redemption of the Gold Bullion Shares; on a proposal to wind up the Company; and during the winding up of the Company. G OLD B ULLION L IMITED Page 22

27 Holders of Gold Bullion Shares are not entitled to: any right to the payment of any dividends; any rights of participation in any surplus assets and profits of the Company; or priority of payment of capital or dividends in relation to other Shares, except on the winding up of the Company Obligations of Gold Bullion Shareholders The Holder of a Gold Bullion Share: is bound by the terms and conditions of the Constitution, the Prospectus and the Trust Deed; and must ensure that any change to its Registered Address details are immediately notified to the Company for recording in the Register. Redemption of Gold Bullion Shares Gold Bullion Shares will be redeemed by the Company on the Delivery Date if the Gold Delivery Method applies or on the Redemption Date if the Gold Sale Method applies after a valid Redemption Notice has been received by the Company. The Gold Bullion Shares may be redeemed earlier than indicated in this Prospectus in accordance with the Trust Deed, or otherwise in accordance with this Constitution. Subject to any right of set-off, each Gold Bullion Share will be redeemed by the Company paying to the Holder cent for each Gold Bullion Share held by the Holder. The Redemption Notice A Holder may lodge a Redemption Notice with the Company, electing which Delivery Method is to apply in accordance with the Trust Deed. Upon receipt of a valid Redemption Notice, the Company will ensure that all things necessary to deal with the Gold in accordance with Redemption Instructions occur. If an invalid Redemption Notice is received by the Company, the Company may notify the Holder of the invalid Redemption Notice and the reasons for its invalidity so that the Holder may immediately correct the invalidity. When the Company has fulfilled all its Delivery Obligations, the Company will have discharged all of its obligations to the Holder and the Holder will cease to have any rights or interest in the Company (other than those rights which survive termination if any). Provided that the Company acts in good faith and without default or negligence, the Company is not liable or responsible to the Holder for any loss suffered in respect of the Gold including any loss suffered by the Holder upon the Company arranging for the Gold to be delivered in accordance with the Redemption Instructions. The Consequences of Redemption On the Redemption Date if the Gold Sale Method applies or on the Delivery Date if the Gold Delivery Method applies, the Company will redeem each Gold Bullion Share and the following will occur: the Company will instruct the Trustee to transfer the unencumbered Gold to the Holder; subject to any right of set-off, the Company will pay the Holder a redemption amount of cent per Gold Bullion Share redeemed on the Redemption Date; the Holder s rights and interests in the Gold Bullion Share redeemed cease to have effect; and the Company will cancel the Gold Bullion Share. Risks and Expenses When the legal interest in the Gold is transferred to the Holder on the Delivery Date or the Redemption Date, all title to the Gold and all risks in and relating to the Gold pass to the Holder. Please refer to section 6.3 Summary of the Bare Trust Deed, for more information about these risks. G OLD B ULLION L IMITED Page 23

28 Gold Delivery Method If the Holder so elects by returning the completed valid Redemption Notice, the Gold Delivery Method will apply. If the Gold Delivery Method applies: the Company will arrange for delivery of the Gold to the Holder in an allocated account and otherwise in accordance with the Delivery Instructions and the Prospectus; and all title to the Gold and all risks in and relating to the Gold pass to the Holder from the Delivery Date and the Company is not responsible or liable for any loss or damage that occurs to the Gold after the Delivery Date. Gold Sale Method The Gold Sale Method will apply if: the Holder elects the Gold Sale Method on the Redemption Notice; the Company does not receive from the Holder a valid Redemption Notice by 5:00pm on the Compulsory Redemption Date; or the Holder elects the Gold Delivery Method but through no fault of the Trustee or the Company the Gold is not successfully delivered and is not claimed by the Holder within one calendar month of attempted delivery being made. If the Gold Sale Method applies because the Holder has not sent a valid Redemption Notice within the required time period, or because the Gold is not successfully delivered, the Company may elect to store the Gold for up to 12 months from the Redemption Date before selling the Gold. During such time as the Gold is stored, the Holder may claim the Gold and, after payment of all of the Company s costs and expenses, request physical delivery of the Gold. If the Holder has elected the Gold Sale Method, the Company will arrange for the sale of the Gold on the spot market at a price based on the London AM fixing price. If the Gold Sale Method applies: the Company is irrevocably authorised to accept physical delivery of the Gold for and on behalf of the Holder from the Trust; the Holder irrevocably authorises the Company to sell the Gold, and for it or any of its nominees to take all necessary or desirable action to effect the sale; and the Company will pay the Sale Proceeds to the Holder as instructed by the Holder in the Redemption Notice. The Holder acknowledges and agrees that: the Company will sell the Gold on behalf of the Holder on a best efforts basis; the Holder will accept the price negotiated by the Company and sell the Gold at this price; the Company makes no representation or warranties as to the price at which it will be able to sell the Gold or the amount of Sale Proceeds; as permitted by law, the Company is not responsible or liable for any loss, costs or expense incurred by the Holder as a result of the sale of the Gold except to the extent that such loss, cost or expense arises as a result of the Company s negligence, default, fraud or dishonesty; and upon payment by the Company to the Holder of the Sale Proceeds the Company will have discharged all its obligations to the Holder and the Holder will cease to have any rights or interest in the Gold Bullion Share, the Company or the Trust Set Off Rights All monetary obligations imposed on the Holder under the Constitution are absolute, free of any right to counterclaim or set-off and may only be satisfied once the payment has cleared. The Company may set off amounts payable to the Company, the Trust or their agents by a Holder against any amount payable by the Company, Trust or their agents. The Company may withhold any amounts payable by the Company, Trust (or their agents) in satisfaction of any amount payable to the Company, the Trust or agents. G OLD B ULLION L IMITED Page 24

29 The Gold Delivery and Custody Undertaking The Company will: arrange for the custody of the Gold with the Custodian Bank on behalf of the Holder from the time that the Gold is delivered to the Company (or the Trust) up to the Delivery Date. The custody arrangements will be in accordance with standards required by the relevant gold market from time to time; if the Company purchases Gold for a Holder, the Company will arrange the delivery of the Gold to Trust; and unless otherwise agreed in writing by the Company, if an Applicant wishes to apply for Gold Bullion Shares by transferring Gold to the Trust, the Applicant must arrange for delivery of the Gold to the Company at the Custodian Bank loco London The Gold Delivery Representations The Company represents and warrants to the Holder that: the Gold delivered to the Holder or sold on behalf of the Holder will be of the quality as represented in the Prospectus; and the Gold will be stored in accordance with the standards set out in the Prospectus Insurance Pursuant to the Allocated Bullion Account Agreement, the Custodian is obligated to insure the Gold on such terms and conditions as the Custodian considers appropriate. Under the terms of the Constitution the Company will retain a Custodian that, as part of the services provided, will organise insurance of the Gold Appointment of Agents and Contractors The Company may discharge any of its obligations or undertakings by engaging agents or contractors to perform the obligations or undertakings of the Company or carry out any relevant function of the Company on its behalf Application of Subscription Amounts When a person subscribes for a Gold Bullion Share, the Company will hold the Relevant Portion of the Subscription Amount on trust for the benefit of the Holder under the Trust. This amount will be used by the Trust to purchase the Gold from the vendor and the Company is authorised to pay the amount to the Trust or the vendor of the Gold when called for. The remainder of the Subscription Amount will become part of the capital of the Company (which may then be subject to a capital reduction) Reduction of Capital Subject to the Law and the Listing Rules, the Company may reduce its capital in any manner and, in particular, the Company may reduce its capital to: make any payment or pay any person on account of storage, registry, insurance costs and other fees or expenses relating to the Gold or the Gold Bullion Securities; and pay any amount to any person or entity, to otherwise discharge the Company s Gold delivery and storage obligations Unclaimed Monies or Gold If the Holder fails to take delivery of the Gold or accept the Sales Proceeds within 12 months after the Delivery Date, the Gold or Sales Proceeds will become the property of the Company. Any such Gold may be sold and any Sales Proceeds may be used by the Company to pay for any costs accrued in relation to the Gold. Any remaining balance may be used by the Company to reduce the cost of any future issues of Gold Bullion Shares or otherwise as determined by the Company Dealing with Gold Bullion Shares A Holder may transfer its Gold Bullion Share. In this event: the rights and obligations attaching to the Gold Bullion Share, and the Beneficial Interest in the Trust, are transferred from the old holder to the new holder; G OLD B ULLION L IMITED Page 25

30 the old holder will be removed from the Register and the new holder will be added; and the old holder ceases to have any rights in relation to the Gold Bullion Shares, the Trust or the Company Indemnity, Exclusion and Limitation of Liability The Company and other Released Parties will not be liable for any claim, loss, damage, liability, obligation, suit, proceedings, action, costs or expenses arising out of, in connection with or in any way related to Gold Bullion Shares including matters that are standard exclusions from any insurance coverage. The Holder releases the Released Parties from, and indemnifies the Released Parties in respect of, all such Claims Summary of the Bare Trust Deed Each Gold Bullion Share and entitlements to the corresponding Beneficial Interest are constituted by the Bare Trust Deed, made between the Company and the Trustee (initially Gold Bullion Nominees Pty Limited) as well as by the by terms, provisions and statements of a number of other documents which are incorporated into the Trust Deed. These other documents include the Constitution and this Prospectus. The Trust Deed is governed by the laws of Victoria. The Trust Deed is an important document and should be read by investors when making an assessment of whether to apply for Gold Bullion Securities. Accordingly, certain key provisions of the Trust Deed are summarised below. This summary is not intended to set out in detail all the provisions of the Trust Deed. The Trust Deed is available for inspection by Holders and potential investors at the offices of the Company during normal business hours. Certain capitalised terms used in this summary have defined meanings in the Trust Deed that are not always repeated or paraphrased in this summary or this Prospectus. A number of defined terms are repeated or paraphrased in section 6.1 Definitions. Acquisition of Gold The Company, for and on behalf of the Trustee: may purchase Gold from time to time upon receipt of a valid Application; and will pay the outstanding purchase price of the Gold in accordance with the rules and conventions of the relevant gold market and the legal interest in the Gold will transfer to the Trustee who holds it as bare Trustee in accordance with the terms of the Trust Deed. The Trustee must act in accordance with the Company s instructions in relation to the purchase or sale of Gold at all times. The Company or its agent may accept the transfer of Gold by an Applicant for or on behalf of the Trustee as consideration for the issue of a Gold Bullion Security, and any such transfer will only be accepted in accordance with the terms of the Prospectus and the Transaction Documents. The Gold Bullion Securities An investor becomes a holder of Gold Bullion Securities on the date the investor is registered as a Holder by the Registrar. Upon receiving notice of registration, the Trustee will hold the Beneficial Interest in the Gold for the Holder and the Holder will be absolutely entitled to the Gold. The Gold Bullion Securities are transferable in accordance with the ASX Listing Rules and SCH Business Rules and are CHESS Approved Securities. Upon registration of a transfer in the Share Register, the Beneficial Interest in the Gold that corresponds to the relevant Gold Bullion Security will pass to the new Holder. Instructions The Holder authorises the Company to instruct the Trustee to act on all matters relating to the Gold (provided that the instructions are in accordance with the Transaction Documents), and authorises the Trustee to accept any instructions so given by the Company and to request that the Company, or a third party, as agent, carry out the Trustee s duties on its behalf. G OLD B ULLION L IMITED Page 26

31 Separate Trusts A Separate Trust shall be established in respect of the Gold, whose Beneficial Interest is held by a Holder. The Trustee is the trustee of each Separate Trust. Status of Gold Bullion Securities The Gold Bullion Securities are not interests in a managed investment scheme for the purposes of the Corporations Act. Aggregation The Trustee, the Company and the Registrar must keep separate, and not pool, the interests or the property of the Separate Trusts. However: all Gold held for a particular Holder from time to time may be aggregated; all Beneficial Interests held by a particular Holder from time to time may be aggregated by the Registrar; the legal interest in all Gold is held by the Trustee (or a permitted nominee); any money received by the Trustee in respect of the Separate Trusts is deposited in the same bank account; and accounting, taxation and other records or returns may be prepared on a consolidated basis in accordance with the Trust Deed. Holders Rights and Liabilities Each Holder is bound by and is entitled to the benefit of the terms of the Trust Deed. Subject to the Trust Deed, a Holder does not indemnify the Trustee or any creditor of the Trustee in respect of any liabilities of the Trustee arising from any of the Separate Trusts, the exercise of the Trustee s rights under the Deed, or the discharge of the Trustee s duties under the Trust Deed. Beneficial Interest A Holder will immediately acquire a Beneficial Interest in the Gold: at the time the Trustee takes delivery of the Gold if the Gold Bullion Share is acquired by the Holder as a consequence of the new issue of Gold Bullion Securities; or on becoming registered as a Holder of a Gold Bullion Share if the Holder acquires the Gold Bullion Share on the ASX. The Holder will have absolute entitlement to that Gold at all times. Upon the transfer of a Gold Bullion Share, from one person to another, the Beneficial Interest in the Gold will automatically transfer to the transferee Holder upon the transferee Holder becoming registered as the Holder of the Gold Bullion Share. The Company will ensure that an appropriate entry is recorded in the Share Register and the Register. Redemption of the Gold Bullion Securities Please refer to section 6.2 Summary of the Constitution" for additional information about Redemption of the Gold Bullion Securities. Redemption Notices Holders may at any time redeem all or part of their holding of Gold Bullion Securities by lodging a Redemption Notice in the form prescribed by the Company. Redemption Notices lodged with the Company or its nominee after 5.00pm on any day will be deemed to be lodged on the next Business Day. The Redemption Notice sent by the Holder must specify which Delivery Method is to apply (the two Delivery Methods are explained in the Summary of the Constitution). Upon receipt of a valid Redemption Notice, the Issuer will instruct the Trustee to do all things necessary to deal with the Gold in accordance with the Redemption Instructions and the redemption procedures in the Constitution. When the Trustee has fulfilled all its Delivery Obligations, the Trustee will have discharged all its obligations to the Holder and the Holder will cease to have any rights or interest in the Beneficial Interest or the Gold Bullion Trust whether or not the Holder actually receives the Gold or the Sale Proceeds. G OLD B ULLION L IMITED Page 27

32 If a valid Redemption Notice is lodged with the Company on the Delivery Date if the Gold Delivery Method applies or the Redemption Date if the Gold Sale Method applies: legal title to the Gold automatically passes to the Holder and the Holder s Beneficial Interest merges with the legal interest; the Gold Bullion Share shall be redeemed; and the Separate Trust is dissolved. The Holder must also pay to the Issuer the Redemption Fee specified in section 4.6 of this Prospectus. Validity of Redemption Notice A Redemption Notice is only valid if: the Holder has nominated one Delivery Method only for each Gold Bullion Share; the Redemption Notice is given by the person who, to the knowledge, or in the reasonable opinion of the Issuer, was registered as the Holder of that Gold Bullion Security at 5.00pm on the Redemption Date; the Holder has provided sufficient cleared funds for payment of all costs, expenses and taxes (if any) payable by the Trustee associated with Completion; the Holder has agreed that the Company may disclose information provided by the Holder in accordance with the privacy legislation; the Redemption Notice is not given during a period when the Gold Bullion Securities are suspended from trading; and the Holder lodges the Redemption Notice with the Company by 5.00pm on the Redemption Date. If a Redemption Notice is received by the Company which is invalid the Company will promptly notify the Holder. Compulsory Redemption The Company may decide to compulsorily redeem the Gold Bullion Securities and will be entitled to determine the Redemption Date for the purposes of the Trust Deed. The Redemption Date set by the Company for the purposes of compulsory redemption shall not be less than 30 days following notice of the early redemption by the Issuer to each Holder. If practicable, the Company will provide the Holder with a notice of an early redemption requesting the Holder to provide a valid Redemption Notice within such time as the Company may specify. However, the Company is under no obligation to do so. Failure to Provide a Redemption Notice Following Notice of Compulsory Redemption If, following notice by the Company of compulsory redemption, a Holder fails to lodge a valid Redemption Notice by 5.00pm on the Compulsory Redemption Date, or if the Company determines that it is not practicable to provide the Holder with notice of early redemption, then on the Delivery Date: legal title to the Gold automatically passes to the Holder and the Holder s Beneficial Interest merges with the legal interest; the Gold Bullion Share will be redeemed; the Separate Trust is dissolved; and the Holder is deemed to have elected the Gold Sale Method and instructed the Trustee as its agent to sell its Gold. All Sale Proceeds of the Gold will be sent to the Holder s Registered Address. Sale of Gold The Gold Sale Method will apply if the Holder so elects or if the Gold Delivery Method is elected but through no fault of the Trustee or the Company the Gold is not successfully delivered or claimed by the Holder within one calendar month of delivery being attempted. If the Gold Sale Method applies, the Holder is deemed to instruct the Trustee, as its agent, to arrange for the sale of the Gold in accordance with the Constitution and irrevocably authorises the Trustee to appoint the G OLD B ULLION L IMITED Page 28

33 Company as its agent and to act in accordance with the Company s Instructions. The Gold Sale Method is explained in more detail in section 6.2 Summary of the Constitution. No Liability The Trustee makes no representation or warranty as to the price at which the Gold will be sold and agrees to sell at the price negotiated by the Company. The Trustee is not liable for any cost, expense, loss or liability incurred by the Holder in relation to the sale. The Holder indemnifies the Trustee from any liability incurred by the Trustee in relation to the sale of the Gold Risk and Expenses When the legal interest in the Gold transfers to the Holder, on the Delivery Date if the Gold Delivery Method applies or the Redemption Date if the Gold Sale Method applies, all risks in and relating to the Gold transfer to the Holder: If the Holder elected the Gold Delivery Method, the Holder becomes immediately responsible for all matters relating to the delivery or on-going storage of the Gold, and for all costs, expenses and liabilities in relation to the Gold. If the Holder elected the Gold Sale Method, the Holder becomes responsible and liable for all the costs associated with sale of the Gold in accordance with the Gold Sale Method Set off Rights All monetary obligations imposed on the Holder under the Trust Deed are absolute, free of any right to counterclaim or set off and may only be satisfied once payment has cleared. The Trustee may, and on instruction from the Company must: set off any amount payable to the Trustee, the Company or any of their agents by a Holder against any amount payable by the Trustee or the Company to the Holder; and withhold any amount payable by the Trustee, the Company or any of their agents to a Holder in satisfaction of any amount payable to the Trustee, the Company or any of their agents by the Holder No Disposal The Trustee must not dispose of the Gold for the duration of a Separate Trust except if there is a change of Trustee in accordance with the Trust Deed Holder s Sole Responsibility for Investment Each Holder is solely responsible for making its own enquiries and decisions in respect of the Company, and of whether or not to deal or invest in Gold Bullion Securities Duration of Separate Trusts Each Separate Trust begins on the Commencement Date for that Trust. A Separate Trust terminates on the earlier of: the actual delivery of Gold by either the Gold Sale Method or the Gold Delivery Method; or by operation of law. If an Insolvency Event occurs in relation to the Company, all Gold Bullion Securities are suspended and cease to trade on ASX. The Holders may not transfer their Gold Bullion Securities off-market during the period of suspension. If the Holder receives a notice that the Company can remedy the Insolvency Event within a reasonable time frame, the Holder may recommence trading after receipt of the Notice. If the Insolvency Event cannot be remedied, then with effect from the Insolvency Date: the Holder s Beneficial Interest is deemed to have merged with the legal interest in the Gold and the legal title passed to the Holder; the Gold Bullion Share shall be redeemed; and the Separate Trust is dissolved. G OLD B ULLION L IMITED Page 29

34 In such a case, an Insolvency Event Redemption Notice will be immediately forwarded to each Holder, specifying the date on which it must be lodged with and received by the Company. Upon receipt of a valid Insolvency Event Redemption Notice the Trustee will act as if a valid Redemption Notice had been lodged. If the Holder does not lodge a valid notice, the Trustee will sell the Gold in accordance with the Gold Sale Method The Trustee Trustees Powers All of the Trustee s powers are expressly set out in the Trust Deed. The Trustee will exercise its powers in good faith and at the direction of the Company. The Trustee holds the Gold, without any interest in it, other than that existing by reason of the office and legal title as Trustee, and without any duties to perform, except as directed by the Holder. In exercising any power of sale or custody under the Trust Deed: where the Holder fails to lodge a Redemption Notice the Trustee may act as agent and arrange for the sale or custody of the relevant Gold for up to 12 months after the Redemption Date, and hold any Sale Proceeds on trust for the Holder. (The Trustee and Company are not liable for the price obtained on any such sale or the costs of storage); and subject to the specific limitations of liability for the Trustee which are contained in the Trust Deed, the Trustee may authorise any person (including the Company or its Associates) to act as its delegate to hold title to the Gold, perform any act or obligation or exercise any discretion within the Trustee s power. The Trustee remains liable for the acts or omissions of a delegate except in respect of transactions through a recognised settlement or clearing system or a delegate whose acts or omissions are not reasonably capable of supervision by the Trustee. Voting Rights The Trustee will not have power and is not required to exercise any voting rights in relation to the Gold Bullion Securities. Indemnity Gold Bullion Trust indemnifies the Trustee for any liability it may incur in performing or exercising any of its powers or duties in relation to any Separate Trust except liabilities arising from a breach of trust, negligence or fraud of the Trustee. Retirement and Removal The Trustee must retire as trustee when required to by law, or may do so upon giving 3 months notice to the Company and the Holder. The Trustee may only be removed by: written direction from the Company giving not less than 30 Business Days notice to Trustee; in accordance with any relevant legislation and regulations; or by order of the court. The Holder has no rights to request the removal of the Trustee in the absence of fraud, dishonesty or gross negligence. If the Trustee retires or is removed, the Company may appoint a replacement trustee by deed. Any new Trustee will execute a deed in which it agrees to be bound by the same terms as the Trust Deed. Upon retirement or removal, the Trustee is released from all obligations in relation to each Separate Trust except that the Trustee is still obliged: to vest the Gold of each Separate Trust in the new Trustee (subject to the satisfaction of all liabilities owed to the Trustee on its own account under the Trust Deed or for which the Trustee may be personally liable or for which there has been provision satisfactory to the Trustee); to deliver all books and records relating to each Separate Trust to the new Trustee; and the Trust Deed continues in effect in respect of anything done or omitted to be done by the retiring Trustee when it was Trustee. G OLD B ULLION L IMITED Page 30

35 No Guarantee The Company and its Associates do not guarantee that the Trustee will perform or otherwise comply with its obligations under the Trust Deed. Rights and Liabilities of Trustee The Trustee must not be a Holder at any time. The Trustee or its Associates may: deal with each other, the Company, any Separate Trust or a Holder; have interests in any contract or transaction with each other, the Company or any Holder and retain for its own benefits any profit or benefits derived from such contract or transaction; act in the same or a similar capacity in relation to any other scheme; or sell Gold to the Company. If the Trustee acts in good faith and without default or negligence in endeavouring to perform its obligations under the Trust Deed, it is not responsible to Holders for any loss suffered in respect of the relevant Separate Trust. Limitation on Liability The liability of the Trustee in relation to each Separate Trust is in any case limited to the Gold of the Separate Trust. The Trustee is not liable for the acts or omissions of: any brokers or other agents whose acts or omissions are not reasonably capable of supervision by the Trustee; the Company, Registrar or Custodian (including their agents) for the performance of their obligations under the Trust Deed or Transaction Documents; or any storage providers who store or transfer the Gold for all, or part, of the Trust s duration. Trustee s Reliance The Trustee may take and act upon the opinion or advice of various parties including without limitation solicitors, bankers, accountants, auditors, valuers, the Company, the Custodian or Registrar and it may rely on any document or information provided to the Trustee unless the Trustee has reasonable grounds to believe the information or document is not genuine or correct. The Trustee will not be liable for anything done, suffered or omitted by it in good faith in reliance on such opinion, advice, documents, statements, notices or information. Exercise of Discretion The Trustee need not act except where required to do so by the Trust Deed. The Trustee need not consult with the Holders before acting under the Trust Deed except if the Trust Deed expressly provides otherwise. Directions by the Court The Trustee may apply to a court for directions as to any matter arising in connection with performance of its obligations under the Trust Deed. The Trustee is not liable to any person for any delay arising as a result of that application. No Responsibility for Trust Deed The Trustee has no responsibility for the form or contents of the Trust Deed or any disclosure document issued in relation to the Gold Bullion Securities and will not be liable for any loss incurred as a result of the inadequacy, invalidity, unenforceability or any statement in, omission from or publication of any such documents. Further Obligations The Trustee is not required to: do or not do anything or to incur any liability unless the Trustee s liability is limited in a manner satisfactory to the Trustee; advance or use its own funds for the payment of any costs, expenses or liabilities; or G OLD B ULLION L IMITED Page 31

36 keep itself informed as to the circumstances or activities of the Registrar, the Custodian, the Company or any other person in relation to the Gold, the Trust Deed, the Gold Bullion Securities or the Register. A liability or obligation of the Trustee arising under the Trust Deed is strictly limited to the extent to which the liability or obligation can be lawfully satisfied out of the Gold of a Separate Trust. Liabilities of or referable to each Separate Trust are to be satisfied from the Gold of that Separate Trust. Appointments In addition to appointing any Officers, agents, sub-contractors or experts on such terms as the Trustee thinks fit, the Trustee may appoint a custodian (including any associate) to be the registered holder of the Gold held under the Trust Deed. Any such nominee is a bare trustee for the Trustee with no power to deal in the Gold except as directed by the Trustee or the Company. The registered holdings of Gold of a Custodian are deemed for the purposes of the Trust Deed to be a registered holding of the Trustee. Several Obligation The obligations of the Company, the Trustee and the Registrar under the Trust Deed are several only and not joint. Providing Information The Trustee must, on request and where it is lawful to do so, provide the Company with information concerning the Gold, whether or not the Trustee is aware of the Company s purpose for requesting that information. The Trustee is not obliged to disclose any information relating to the Company or its Associates to a Holder or any other person. Funding of Trustee The Trustee will have no right of recourse against the property of a Separate Trust except as is set out in specific provisions of the Trust Deed which authorise the Trustee to recoup from the trust fund of a Separate Trust. The Trustee may require the Holder to pay on behalf of the Trustee all disbursements, liabilities, expenses and outgoings reasonably and properly incurred by the Trustee or on its behalf in performing the Trustee s functions or obligations or discretions under the Trust Deed. Reimbursement of Outgoings All costs, fees, expenses and liabilities reasonably and properly incurred by the Trustee in connection with the Separate Trust or in performing its obligations under the Trust Deed are payable or reimbursable by the Holder. This includes among others expenses connected with: termination of the Separate Trusts and the retirement or removal of the Trustee and the appointment of a new trustee; and any court procedure, arbitration or other dispute concerning the Separate Trust including proceedings against the Trustee. Recourse to Separate Trusts The Trustee may only have recourse to the Separate Trusts for any remuneration or reimbursement or indemnity permitted under the Trust Deed if it is expressly authorised to deduct costs and fees from the proceeds of any payment received by the Trustee, the Company or any third party on the sale or disposal of the Gold. The Trustee has no right of recourse against the physical Gold, only against proceeds from any sale of the Gold. Taxes Holders must pay all Transfer Tax payable by the Trustee in connection with the ownership, transfer or Completion of a Gold Bullion Share. It is each Holder s own responsibility to ensure that the correct tax treatment is applied in relation to the Holder s Gold Bullion Securities and the Gold. G OLD B ULLION L IMITED Page 32

37 If the Holder does not pay any Transfer Taxes when required, the Company will pay the amount of the Transfer Taxes on behalf of the Trustee and the Holder. The Company may recover that amount and any related costs, expenses and reasonable interest from the registered Holder as a debt due. The Holder is responsible for paying all stamp duties assessed in respect of the Separate Trusts or the Gold to which Gold Bullion Securities of that Holder relate. Statements of Account and Audit To the extent required by law, the Trustee must prepare and lodge consolidated accounts and financial and taxation returns (with the assistance of accountants) and must ensure compliance with applicable audit requirements in respect of the Separate Trusts and the Trustee s performance of its functions under the Trust Deed. Subject to contrary provisions of the Trust Deed or as required by the ASX Listing Rules, the Trustee has no obligation to provide information including financial reports, accounts and statements to Holders about the Separate Trusts or the Gold or its own financial accounts, reports or statements. Register The Trustee will maintain a register of Beneficial Interests, in which the Trustee recognises the Holder as the absolute owner of the Beneficial Interest. The details of the Holder s Beneficial Interest on the Register maintained by the Trustee will be identical to the Share Register maintained by the Company General Provisions Notices A notice required or permitted to be given to a Holder under the Trust Deed must be in writing and is to be treated as being given if: left at the Registered Address of the Holder; sent by pre-paid mail to the Registered Address of the Holder; sent by facsimile transmission to the Holder s facsimile number; or in the event of time constraints, by such other method as approved by the ASX. Any notice which is permitted by a court of competent jurisdiction to be given to a Holder by advertisement will, unless otherwise required by law, be sufficiently advertised if advertised once in a daily newspaper circulating nationally throughout Australia. All notices required or permitted to be given by a Holder to the Company, Trustee or Registrar must be in writing and are treated as being duly given upon being actually received by the relevant recipient at its principal office or such other address as it may specify to the Holder. Payment to Holders Any money payable to a Holder will be paid in a manner as determined by the Trustee acting on the Company s instructions. The receipt of the Holder in respect of the Gold and any money payable in respect of it is a good discharge to the Trustee. Any payments made to Holders which remain unclaimed for more than twelve months after the date of payment may, at the discretion of the Trustee but subject to applicable laws, be paid to the Company to be used to reduce future costs of issue or for other purposes and the relevant Holder has no claim to any such amount paid to the Company against any person. Amendments to the Trust Deed The Trustee may by supplemental deed amend the Trust Deed if authorised by a Holders resolution or in certain other circumstances, including where (in the Trustee s reasonable opinion): the amendment is necessary or desirable and is not materially prejudicial to the rights of Holders; the amendment is necessary or desirable to comply with any statutory or other requirement of law or the ASX or to rectify any inconsistency, defect, error or ambiguity in the terms of the Trust Deed; or the amendment is necessary or desirable for Gold Bullion Securities and the amendment does not affect the rights of current Holders of Gold Bullion Securities. G OLD B ULLION L IMITED Page 33

38 The Trustee must notify all Holders in writing of a proposed amendment. Holders have 20 Business Days in which to return ballot papers to the Trustee. Each Holder is entitled to one vote for each Gold Bullion Share held. A resolution is duly passed if 75% or more of the votes cast are in favour of the amendment. Obligation of Holders to Provide Information A Holder must provide such information as the Trustee may reasonably request or as required by law Summary of the Allocated Bullion Accounts Agreement Terms relating to the custody and insurance of Gold by the Custodian Bank, HSBC Bank USA, are contained in the Allocated Bullion Accounts Agreement executed between HSBC Bank USA and IRL and dated 28 November The Allocated Bullion Accounts Agreement is an important document and should be read by investors when making an assessment of whether to apply for Gold Bullion Securities. Accordingly, certain key provisions of the Allocated Bullion Accounts Agreement are summarised below. This summary is not intended to set out in detail all the provisions of the Allocated Bullion Accounts Agreement. The Allocated Bullion Accounts Agreement is available for inspection by Holders and potential investors at the offices of the Company during the usual business hours. Certain capitalised terms used in this summary have defined meanings in the Allocated Bullion Accounts Agreement that are not always repeated or paraphrased in this summary or this Prospectus. A number of defined terms are repeated or paraphrased in section 6.1 Definitions. Allocated Accounts HSBC Bank USA will open and maintain an Allocated Account in respect of gold in the name of the GBN (the Allocated Account ). The Allocated Account shall evidence and record the gold held by HSBC Bank USA as well as the withdrawals and deposits. The Allocated Account will be denominated in fine troy ounces of gold. HSBC Bank USA will provide reports by fax by the close of each Business Day with respect to any changes to the Allocated Account that same day and will provide additional reports as may be agreed from time to time. HSBC Bank USA retains the right to reverse erroneous entries with effect back-valued to the date upon which the final or correct entry (or no entry) should have been made. Deposits A notice of deposit is required to be delivered to HSBC Bank USA by 11.00am (London time) on the date intended for a deposit unless otherwise agreed. HSBC Bank USA may refuse to accept the gold, amend the deposit procedure or impose additional procedures for deposits as it considers appropriate. Unless HSBC Bank USA arrange collection, the gold must be delivered to HSBC Bank USA at its London vault premises or as they direct at the owner s expense and risk, and in the manner and accompanied by such agreements as HSBC Bank USA may require. Deposits are required to be in the form which complies with the rules of the LBMA unless otherwise agreed. Withdrawals A notice of withdrawal is required to be given to HSBC Bank USA by 11.30am (London time) two Business Days prior to the date intended for a withdrawal unless otherwise agreed. HSBC Bank USA may amend the procedure for the withdrawal of gold or impose additional procedures as it considers appropriate. G OLD B ULLION L IMITED Page 34

39 Unless HSBC Bank USA agrees to undertake delivery, withdrawal of gold is at the owner s expense and risk. HSBC Bank USA will notify the location from which gold can be collected no later than one Business Day before the Withdrawal Date Instructions IRL may notify HSBC Bank USA of people authorised to give instructions on its behalf, and until is receives notice to the contrary is entitled to assume that any of those people have full and unrestricted power to give instructions. HSBC Bank USA is also entitled to rely on any instructions which are from, or which purport to emanate from, any person who appears to have such authority. Instructions continue in full force until they are cancelled, amended or superseded and amendments shall have effect only after receipt by HSBC Bank USA. If HSBC Bank USA considers that any instructions are unclear or ambiguous it will use reasonable endeavours to obtain clarification of the instructions but may act or refuse to take any action or execute such instructions until any ambiguity or conflict has been resolved to its satisfaction. Where practicable, HSBC Bank USA will refuse to execute instructions if in its opinion they are or may be contrary to the rules of the LBMA or any applicable law. Please note that - the Company, IRL and GBN have executed a Signing Protocols Deed, whereby IRL has irrevocably undertaken to ensure that the names of the people who are authorised to give instructions on IRL s behalf under the Allocated Accounts Bullion Agreement are: (a) with respect to any account in the name of GBL, the board of directors of GBL by written authority signed by all of the directors of GBL; and (b) with respect to any account in the name of GBN, the board of directors of GBN by written authority signed by all of the directors of GBN. A copy of the Signing Protocols Deed has also been provided by IRL to HSBC Bank USA. Confidentiality Neither party is permitted to disclose information acquired under the agreement without the consent of the other party. However, certain disclosures are permitted if required by (amongst other things) laws, by another company in the same group or any sub-custodian rules of the LBMA or if requested by a government agency, or if required by a party s auditors, legal advisers. However, the Custodian Bank has consented to the disclosure of the terms of the Allocated Bullion Accounts Agreement in accordance with this prospectus. Custody Services HSBC Bank USA is appointed as the custodian of the gold in accordance with the agreement, and any applicable rules of the LBMA, the Bank of England and any other relevant regulatory authority. HSBC Bank USA will segregate the gold from any Precious Metal which it owns and will request any Sub- Custodians to segregate the gold from any Precious Metals they own. HSBC Bank USA will identify the Trustee as the owner of the gold in its books. Unless otherwise agreed the Bullion will be held at HSBC Bank USA s London vault or at the vaults of any Sub-Custodian. Sub Custodians HSBC Bank USA may appoint Sub-Custodians to perform any of its duties under the agreement including the custody and safekeeping of gold. It is required to use reasonable care in the appointment of any Sub- Custodian but is not liable for any act or omission, or for the solvency, of any Sub-Custodian unless the appointment of that Sub-Custodian was made by it negligently or in bad faith. G OLD B ULLION L IMITED Page 35

40 6.4.8 Fees and Expenses IRL is required to pay such fees as HSBC Bank USA determines from time to time. However, during the first 24 months of the agreement HSBC (being until 28 November 2004) Bank USA will cap its fees at 0.10% per annum (calculated daily and payable monthly in arrears) of the market value of the gold held in the Allocated Account for GBN. IRL is required to pay on demand all costs, charges and expenses (including any relevant taxes, duties and legal fees but excluding fees for storage and insurance of the gold which will be recovered by way of the fees described above) incurred by HSBC Bank USA in connection with the gold Value Added Tax All sums payable under the agreement by IRL to HSBC Bank USA shall be deemed to be inclusive of VAT Scope of Responsibility HSBC Bank USA will use reasonable care in the performance of its duties under the agreement and will only be responsible for any loss or damage suffered as a direct result of any negligence, fraud or wilful default by it in the performance of its duties, and in which case its liability will not exceed the market value of the gold at the time of such negligence, fraud or wilful default. HSBC Bank USA is under no duty or obligation to make or take, or require any Sub-Custodian to make or take, any special arrangements or precautions beyond those required by any applicable rules of the LBMA, the Bank of England or any other applicable regulatory authority. Insurance: HSBC Bank USA will insure the gold on such terms and conditions as it considers appropriate and it will be responsible for all costs, fees and expenses (including any relevant taxes) in relation to the insurance policy. In the event of any loss or damage to the gold, HSBC Bank USA will pay to GBN any insurance proceeds it receives in relation to the gold plus the amount of the deductible in the relevant insurance policy. Force majeure: HSBC Bank USA shall not be liable for any delay in performance, or for the non-performance of any of its obligations under the Agreement by reason of any cause beyond its reasonable control. This includes any breakdown, malfunction or failure of transmission, communication or computer facilities, industrial action, acts and regulations of any governmental or supra national bodies or authorities or regulatory or self-regulatory organisation, for any reason, to perform its obligations. Indemnity: IRL has indemnified HSBC Bank USA against all costs and expenses, damages, liabilities and losses which it may suffer or incur, directly or indirectly in connection with this agreement except to the extent that such sums are due directly to HSBC Bank USA s negligence, wilful default or fraud. Set Off: HSBC Bank USA's rights under this agreement are in addition to any other rights it may have in relation to the gold bullion and any lien or other rights it may have to set-off, combine or consolidate any account Termination Either party may terminate this agreement by giving not less than 40 Business Days written notice to the other party specifying: the date on which termination will take effect (which date shall not be during the first 24 months of this agreement), the person to whom the gold is to be made available, and all other necessary arrangements for the redelivery of the gold. If arrangements have not been made which are acceptable to HSBC Bank USA for the redelivery of the gold within 6 months of the date specified in the termination notice as the date on which the termination will take effect, HSBC Bank USA will be entitled to sell the gold and account for the proceeds after deducting any amounts due to HSBC Bank USA under the agreement. Termination shall not affect rights and obligations then outstanding under the agreement which shall continue to be governed by the agreement until all obligations have been fully performed. G OLD B ULLION L IMITED Page 36

41 General The parties acknowledge and agree that IRL holds the benefit of the agreement for each of GBL and GBN and each holder of a share in GBL Governing Law, Jurisdiction and Arbitration The agreement is governed by, and will be construed in accordance with, English law and the parties have agreed that the English courts are to have jurisdiction to settle any disputes or claims which may arise out of or in connection with the Agreement. The parties have also agreed that any dispute arising out of or in connection with the agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the rules of the London Court of International Arbitrators Summary of the Administration Agreement The Administration Agreement between the Company, IRL and the Trustee sets out terms on which IRL undertakes to provide or procure services to the Company in connection with the Gold Bullion Securities. The Administration Agreement is an important document and should be read by investors when making an assessment of whether to apply for Gold Bullion Securities. Accordingly, certain key provisions of the Administration Agreement are summarised below. This summary is not intended to set out in detail all the provisions of the Administration Agreement, only those specifically relating to the Gold Bullion Securities. The Administration Agreement is available for inspection by Holders and potential investors at the offices of the Company during the usual business hours. Certain capitalised terms used in this summary have defined meanings in the Administration Agreement that are not always repeated or paraphrased in this summary or this Prospectus. A number of defined terms are repeated or paraphrased in section 6.1 Definitions. Administration Services In consideration of the fees payable to it in accordance with this Prospectus, IRL undertakes to arrange for the issue of Gold Bullion Securities and ensure that the Company and the Trustee meet and comply with all of their Obligations under the Transaction Documents by, including but not limited to: arranging the distribution and promotion of Gold Bullion Securities; arranging and performing the creation and redemption of Gold Bullion Securities; arranging and managing the issue and provision of a Holder s interest in a Trust including making arrangements for the purchase, custody and delivery of Gold Bullion to a Trust; arranging and performing the disposal of a Holder s interest in a Trust including making arrangements for the disposal of Gold Bullion or delivery of the Gold Bullion to a Holder in London; making arrangements for the insurance of Gold Bullion and the Company s Directors, compliance with SCH Business Rules and the auditing of compliance with ASX Listing Rules; arranging and managing the Company sponsored subregister or certificated subregister; arranging and managing the update of any securities registers including making arrangements for the issue of share certificates, transaction processing and Holder account processing; arranging for the receipt of applications for the issue of Gold Bullion Securities; handling inquiries received from Holders; undertaking any ancillary matters such as liasing with relevant third parties including ASIC, ASX or the Custodian Bank; entering into any necessary documents or contractual arrangements; acting on any request from the Company from time to time; and otherwise meeting and complying with any or all of the Obligations Performance IRL is required to act in good faith and without gross negligence, fraud or wilful default in carrying out its obligations under this agreement. G OLD B ULLION L IMITED Page 37

42 Termination This agreement may be terminated by any party on 30 days written notice or if an Insolvency Event occurs in relation to any of the parties. IRL Not Fiduciary IRL has no fiduciary duties to either a Holder or any other party to the agreement. Agents and Delegates GBL and the Trustee authorises IRL, and IRL agrees to act as GBL and the Trustee s agent for the purposes of performing the services under this Agreement including but not limited to executing any document or doing any other thing IRL considers reasonably necessary in connection with the performance of the services. IRL may authorise any person to act as its agent or delegate, or subcontract any of its services to perform any act or exercise any discretion within IRL s power, including the power to appoint in turn its own agent or delegate. Transfer Tax IRL is not liable for any Transfer Tax or other charge arising under this Agreement in relation to the Gold, a Gold Bullion Security or otherwise. Indemnities The Company indemnifies IRL and the Trustee against losses and claims incurred by IRL or its agents acting under this Agreement, except to the extent caused by the negligence, fraud or dishonesty of IRL or its officers. IRL indemnifies the Company and the Trustee against any losses or liabilities incurred by GBL in connection with any negligence, fraud or dishonestly of IRL or its officers. G OLD B ULLION L IMITED Page 38

43 7 SUMMARY OF TAX CONSIDERATIONS Introduction This summary of Australian tax considerations has been prepared for inclusion in a Prospectus dated on or about 14 February 2003 to be issued by Gold Bullion Limited ( GBL ) in relation to the proposed offer of Gold Bullion Securities ( GBS ). This statement is necessarily general in nature and does not take into account the specific taxation circumstances of each investor and potential investors should not rely on this statement and should obtain advice referable to their own circumstances prior to making any investment decision. This summary deals only with the Australian tax considerations of potential investors and does not deal with the tax consequences in relation to other jurisdictions. In this statement the 1997 Act means the Income Tax Assessment Act 1997 and the CGT means the capital gains tax provisions of the 1997 Act. This statement is based on the law in force and administrative practice, as of 10 February A Gold Bullion Security In purchasing a GBS, investors will acquire a share in the capital of GBL which will be listed. Correspondingly, investors will acquire a beneficial interest in gold. This means that particular gold bullion bars are held in the name of the Trustee solely for the benefit of investors and means that an investor is the effective owner of the gold to which the GBS relates. As an investor owns two assets, any dealings in the GBS will mean that the investor is dealing with both a share and gold bullion. Therefore, when a GBS is purchased or sold it is in effect a purchase or sale of the share and the gold bullion. Cost Base/Cost of Acquiring Trading Stock Although the share and gold bullion components of a GBS cannot be traded separately, the two are considered to be distinct assets for tax purposes. When an investor acquires a GBS (whether on the secondary market or by a creation) it is likely that 1/1000 th of 1 cent (the redemption sum) would be apportioned to the share and the remainder would be apportioned to the gold bullion. For an investor who creates a GBS, the Creation Fee will form part of the cost base of the share and the gold bullion. Sale of Gold This section deals with the situation where gold bullion is sold by an investor, either by way of a sale of GBS on the secondary market or by way of a sale by the Trustee of the gold bullion on the investor s behalf as part of a redemption of GBS for cash. We note that an investor who takes delivery of the gold bullion on redemption will not be taxed until the gold is actually sold. The Gold Bullion Component If the investor is a resident who is neither a dealer in securities nor in gold, the investor will be subject to CGT on any gain (and can claim any capital loss) arising on the disposal. If sold by way of redemption, the Redemption Fee would be a cost of disposing of the gold and can be used to decrease any capital gain or increase any capital loss. A discount capital gain may arise if the investor has held the relevant asset for 12 months or more. If all the requirements of the discount capital gain are satisfied, then the investor is subject to CGT on only half of the gain if the investor is an individual, or one-third of the gain if the investor is a superannuation fund. No discount is available if the investor is a company. If the investor is a resident who is a dealer either in securities or in gold, the investor will be subject to income tax on the gain from the sale as ordinary income. If there is a loss on the sale, it will be trapped in the separate trust established for each holder and cannot be distributed to the investor. However, the investor will still be entitled to a deduction for an amount equivalent to this loss, as the investor will have lost an equivalent amount on its trading stock (that is, its equitable interest in the gold bullion will have decreased in value). If sold by way of redemption, the Redemption Fee would be a cost of disposing of the gold bullion and will be deductible to the investor. G OLD B ULLION L IMITED Page 39

44 If the investor is not resident in Australia, there should be no CGT on the disposal of the gold bullion, as it is not necessarily connected with Australia. However, if the non-resident investor is a dealer in either securities or gold, it will be subject to ordinary income tax on the profit on any sale if this profit is sourced in Australia. In relation to dealers in securities or gold, if the investor is a resident of a country with which Australia has a double tax agreement, the investor would only be subject to income tax in Australia if the investor has a permanent establishment in Australia. In this regard, the investor will not have a permanent establishment in Australia merely because the Trustee is an Australian resident; it would need to have a further presence in Australia (for instance, a branch or agent) for it to have a permanent establishment The Share Component On sale or redemption, the share would be considered to have been sold or redeemed for 1/1000 th of 1 cent. Monthly Gold Sales The Monthly Gold Sales will reduce the per share entitlement to gold at the end of each month. The sale proceeds will be paid by the Trustee to IRL pursuant to the Administration Agreement. Every month, therefore, the investor is considered to have sold part of its gold assets. Broadly, the CGT or ordinary income tax provisions discussed above will apply in respect of the gain or loss on the disposal of the gold each month. The cost base/cost of acquiring the trading stock of the beneficial interest in the total amount of gold before this sale will be apportioned between the gold which is sold and the gold remaining after a sale. The payment to IRL is paid by the Trustee on the direction of the investor as a fee for services provided by IRL to GBL and on provided by GBL to the investor and will be a non-capital cost of ownership of the gold asset. If the investor is not a dealer in securities or gold, this fee will form part of the third element of cost base of the gold that remains after the monthly gold sale, in accordance with subsection (4) of the 1997 Act. However, this fee will not form part of the reduced cost base (as defined in the CGT) of the gold which remains. Therefore this fee can be used to reduce any subsequent capital gain, if any, on the disposal of the gold which remains but will not increase any capital loss on the disposal of the gold which remains. If the investor is a dealer in securities or gold, the fee paid will be tax deductible as an ordinary expense. We understand it is the Company s current intention to implement a share restructuring whenever the per share entitlement reduces to 99.0% of 1/10 th of one fine troy ounce of gold, so that each share will return to a per share entitlement of 100% of 1/10 th of one fine troy ounce of gold. Such a restructuring merely alters the number of shares and the way in which these shares are stapled to the beneficial interest in the gold. There should be no CGT or ordinary income tax on this restructuring. An investor s cost base/cost in acquiring the 1 share in every 100, which is removed, will be allocated to the 99 shares which remain. Transfer Taxes No GST should apply on the creation or redemption of a GBS or on the trading of a GBS other than GST which may be payable on brokerage on ASX trading. The supply of these things will be input taxed financial supplies by the Company and the Trust (as appropriate) to resident investors, and in some cases by resident investors to the Company and the Trust (as appropriate). They can be GST-free supplies, in certain circumstances, if non-resident investors are involved. The Monthly Gold Sales, being payments for the provision of administration services by the Company to investors will be a taxable supply to the investors, and accordingly subject to GST. Whether investors are entitled to claim back any GST in relation to such costs will depend on their own circumstances. Stamp duty will not be payable on the acquisition or trading in Gold Bullion Securities. To the extent that the subject of a dealing is a share, a general exemption from stamp duty applies in all jurisdictions of Australia for transfers of shares quoted on the ASX. No stamp duty will apply to dealings in the beneficial interest in the gold bullion. G OLD B ULLION L IMITED Page 40

45 8 DISCLOSURES Consents Baker & McKenzie Baker & McKenzie, Solicitors, is aware that Gold Bullion Limited wishes to offer Gold Bullion Securities for subscription. Baker & McKenzie has consented to Gold Bullion Limited using the name of Baker & McKenzie in the form and context in which it is included in the prospectus dated 14 February Baker & McKenzie has not withdrawn this consent before the document is lodged with ASIC. Baker & McKenzie has not caused or authorised the issue of the prospectus and take no responsibility as to the contents of the prospectus. Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu, Auditors, has given its consent to be named as the Auditor of the Company in the form and context in which its name appears in this prospectus. Deliotte Touche Tohmatsu has not withdrawn this consent before the document is lodged with ASIC. Deliotte Touche Tohmatsu has not caused or authorised the issue of the prospectus and take no responsibility as to the contents of the prospectus. World Gold Council The World Gold Council has given its consent to the disclosure of its letter at the commencement of this prospectus in the form and context in which it appears and the use of the gold logo in this prospectus in the form and context in which it appears. It has not withdrawn this consent before the document is lodged with ASIC. The World Gold Council has not caused or authorised the issue of any of the remainder of the prospectus and takes no responsibility as to the contents of the remainder of the prospectus. HSBC Bank USA and ASX Perpetual Registries Limited Neither HSBC Bank USA nor ASX Perpetual Registries Limited has caused or authorised the issue of this prospectus and has not made any statement that is included in this prospectus or any statement on which a statement made in this prospectus is based. HSBC Bank USA and ASX Perpetual Registries Limited take no responsibility for, and are not liable as to the contents of the prospectus. In particular Company notes that: HSBC Bank USA will at all times treat the Trustee as its sole client and accepts no duty, obligation or liability towards any Applicant, Holder or other third party; and none of ASX Perpetual Registries Limited, HSBC Bank USA nor any other member of the HSBC group of companies guarantees the performance of the Company, the Trustee or the Gold Bullion Securities. Responsibility Statement Gold Bullion Limited is the issuer of this Prospectus and is solely responsible for its contents. Litigation The Company is not and has not been involved in any legal or arbitration proceedings since its date of incorporation. Nor, so far as the Directors are aware, are any such proceedings pending or threatened against the company. G OLD B ULLION L IMITED Page 41

46 Expenses of the Issue The expenses of the issue are payable by Investor Resources Limited. These expenses include: Creation of the Prospectus documentation; Lodgement fees with ASIC and security code fees from ASX; ASX listing fees; Registry set up and maintenance; CHESS fees; and Marketing. Expert s and Advisers Interests Except as set out in this paragraph, no expert and no firm in which an expert is a partner, has any interest that exists when this Prospectus is lodged with the ASIC, nor has had such an interest that existed within 2 years before lodgement of this Prospectus for registration in connection with the formation or promotion of the company and no amounts, whether in cash or shares or otherwise has been paid or agreed to be paid to any expert or to any firm in which such expert is a partner for services rendered by the expert or the firm in connection with the promotion or formation of the company. Baker & McKenzie has acted as solicitors to the Company and estimates that its fees in connection with the preparation of this prospectus are $95,000. Director s Interests Except as set out below, no Director or proposed Director of the company and no firm in which a Director or proposed Director of the company is a partner, has any interest that existed when this Prospectus is lodged with the ASIC, nor has had such an interest that existed within 2 years before lodgement of this Prospectus for registration, in the promotion of or in any property proposed to be acquired by the company in connection with the formation or promotion of the company and no amount, whether in cash or shares or otherwise, has been paid or agreed to be paid to any Director or proposed Director or to any firm in which such Director or proposed Director is a partner to induce the Director or proposed Director to become, or to qualify the director or proposed Director as, a Director or otherwise for services rendered by the Director or proposed Director or by the firm in connection with the promotion or formation of the company: (a) (b) (c) (d) (e) The Board of Directors of the Company has approved payment to Dr Vince Fitzgerald for the period from his appointment as director on 10 February 2003 until 10 March 2004 of a salary of $30,000. None of Graham Tuckwell, Simon Village or Greg Burgess currently draw a salary from the Company. However, the salary of the directors of the Company may be varied from time to time as determined by the Board of Directors; Graham Tuckwell and Greg Burgess are both directors of IRL and may receive fees from their services to these companies from time to time. IRL is the Company s holding company and Graham Tuckwell is the controlling shareholder of IRL; the Directors may hold other property whether in their own right or non-beneficially, in which the Company may have an interest from time to time; the Constitution of the Company contains indemnities in favour of the Directors within the limits prescribed by the Corporations Act 2001; and Associates (including Directors) of the Company may hold the Gold Bullion Securities and from time to time buy and sell these. Material Contracts The company has entered into the following contracts which in the opinion of the Directors may be material to the issue of this prospectus: Bare Trust Deed; Administration Agreement The Company has entered into the Administration Agreement with Investor Resources Limited; and Allocated Bullion Accounts Agreement Investor Resources Limited has entered into an Allocated Bullion Account s Agreement with HSBC Bank USA. G OLD B ULLION L IMITED Page 42

47 Documents Available for Inspection Verified copies of the following documents are available for inspection free of charge between 9.00am and 5.00pm at the Company s business office, for a period of 12 months after the date of lodgement of this Prospectus with ASIC: Constitution of the Company; Bare Trust Deed relating to each Gold Trust; Allocated Bullion Accounts Terms; and Administration Agreement. PRIVACY Gold Bullion Limited respects the privacy of investors. We collect personal information for the purpose of processing your Application for Gold Bullion Securities and contacting you in relation to your holding of Gold Bullion Securities. We will use your personal information to process your Application and manage the Register. If you purchase Gold Bullion Securities your name may be placed on the Register and may be used and disclosed under the Corporations Act. Please note that personal information may be provided to service providers, but only under strict privacy controls. For more information on our privacy policy, or to see what information we have concerning you, please contact us. EXECUTION This Prospectus is signed by or on behalf of all of the Directors of the Company. Each director of Gold Bullion Limited has given his or her consent to the lodgement of this disclosure document in accordance with the Corporations Act Graham Tuckwell, Director G OLD B ULLION L IMITED Page 43