-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RLyDJxDzep++pFjQ2D8D8AHfXxmmVIy/llyFtxbntT2O7fDwRfk045ZdiiGCcWJa RLjKs2B0vzCUJh2D78iAqw== 0001193125-04-016457.txt : 20040206 0001193125-04-016457.hdr.sgml : 20040206 20040206165801 ACCESSION NUMBER: 0001193125-04-016457 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20040206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISHARES COMEX GOLD TRUST CENTRAL INDEX KEY: 0001278680 STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-112589 FILM NUMBER: 04575009 MAIL ADDRESS: STREET 1: BARCLAYS GLOBAL INVESTORS STREET 2: 45 FREMONT STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 S-1 1 ds1.txt FORM S-1 FOR ISHARES COMEX GOLD TRUST As filed with the Securities and Exchange Commission on February 6, 2004 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- iSHARES(R) COMEX GOLD TRUST SPONSORED BY BARCLAYS GLOBAL INVESTORS, N.A. (Exact name of Registrant as specified in its charter) ----------------- New York 6189 [.] (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification No.) incorporation or Classification Code organization) Number) c/o Barclays Global Investors, N.A. 45 Fremont Street San Francisco, CA 94105 (415) 597-2000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ----------------- Barclays Global Investors, N.A. 45 Fremont Street San Francisco, CA 94105 (415) 597-2000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: David Yeres, Esq. S. Paul Sacks, Esq. Sara Hanks Clifford Chance US LLP Barclays Global Clifford Chance US LLP 200 Park Avenue Investors, N.A. 2001 K Street, NW New York, NY 10166 45 Fremont Street Washington, DC 20006 San Francisco, CA 94105 ----------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] Calculation of Registration Fee ================================================================================
Proposed Proposed Title of each maximum maximum class of securities Amount to be offering price aggregate Amount of to be registered registered per iShare/(1)/ offering price/(1)/ registration fee - ------------------------------------------------------------------------------------- iShares...... 50,000,000 $39.87 $1,993,500,000.00 $252,576.45
================================================================================ (1)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(d) under the Securities Act of 1933. The initial Baskets (a Basket consists of 50,000 iShares) will be offered at a per iShare price equal to the value of one-tenth (1/10) of an ounce of gold as measured by the settlement price for spot month gold futures announced by the COMEX on the date of formation of the iShares COMEX Gold Trust. The price of gold used to calculate the proposed maximum offering price per share is based upon the settlement price for spot month gold futures announced by the COMEX on February 2, 2004. (Spot month is the COMEX-traded gold futures contract closest to maturity on a given day). ----------------- The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine. ================================================================================ The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. PRELIMINARY Subject to Completion ., 2004 [.] iShares(R) iShares COMEX Gold Trust The iShares COMEX Gold Trust will issue shares representing fractional undivided beneficial interests in its net assets. The assets of the trust will consist primarily of gold held by the custodian on behalf of the trust. The shares of the trust, called "iShares(R)", will reflect the price of gold less the trust's expenses and liabilities. The iShares will be listed and traded on the American Stock Exchange under the symbol "IAU". Market prices for the iShares may be different from the net asset value per iShare. Barclays Global Investors, N.A. is the sponsor of the trust, The Bank of New York is the trustee of the trust, and The Bank of Nova Scotia is the custodian of the trust. The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor. The trust intends to issue additional iShares on a continuous basis. The trust will issue and redeem iShares only in blocks of 50,000 or integral multiples thereof. A block of 50,000 iShares is called a "Basket". These transactions will be in exchange for gold. Only institutions and large investors that become authorized participants by entering into a contract with the sponsor and the trustee may purchase or redeem Baskets. Except when aggregated in Baskets, iShares are not redeemable securities. Investing in the iShares involves significant risks. See "Risk Factors" starting on page 6. Neither the Securities and Exchange Commission (SEC) nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The iShares are not interests in nor obligations of either the sponsor, the trustee, or the initial purchaser. The iShares are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. "iShares" [insert logo] is a service mark of Barclays Global Investors, N.A. ----------------- On , 2004, Barclays Capital, Inc., also called the Initial Purchaser, subject to conditions, agreed to purchase 150,000 iShares, which comprise the initial Baskets, as described in "Plan of Distribution." Delivery of the initial Baskets is expected to be made on or about [.], 2004. The trust received all proceeds from the offering of the initial Baskets in gold in an amount equal to the full initial price for the initial Baskets.
Per iShare/(1)/ Per Basket -------------- ---------- Initial public offering price for the initial Baskets/(2)/ $ [.] $ [.]
- -------- (1)The initial Baskets were created at a per Share price equal to the value of one-tenth (1/10) of an ounce of gold on the date of formation of the iShares COMEX Gold Trust. (2)The Initial Purchaser may receive commissions/fees from investors who purchase iShares from the initial Baskets through their commission/fee-based brokerage accounts. Barclays Capital ----------------- The date of this prospectus is [.], 2004. TABLE OF CONTENTS
Page ---- STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................. iii GLOSSARY....................................................... iii PROSPECTUS SUMMARY............................................. 1 Trust Structure, the Sponsor, the Trustee and the Custodian. 1 Trust Objective............................................. 2 Principal Offices........................................... 2 THE OFFERING................................................... 3 SUMMARY FINANCIAL CONDITION.................................... 5 RISK FACTORS................................................... 6 USE OF PROCEEDS................................................ 10 THE GOLD INDUSTRY.............................................. 11 Introduction................................................ 11 Market Participants......................................... 11 World Gold Supply and Demand (1993 - 2002).................. 12 Historical Chart of the Price of Gold....................... 13 OPERATION OF THE GOLD MARKET................................... 14 Futures Exchanges........................................... 14 COMEX....................................................... 14 TOCOM....................................................... 15 Other Exchanges............................................. 15 Exchange Regulation......................................... 15 Over-the-Counter Market..................................... 16 Not a Regulated Commodity Pool.............................. 16 BUSINESS OF THE TRUST.......................................... 17 Trust Objective............................................. 17 Secondary Market Trading.................................... 17 Valuation of Gold; Computation of Net Asset Value........... 18 Trust Expenses.............................................. 19 Impact of Trust Expenses on the Trust's Net Asset Value..... 19 DESCRIPTION OF THE iSHARES AND THE TRUST AGREEMENT............. 20 Deposit of Gold; Issuance of Baskets of iShares............. 20 Redemption of Baskets of iShares; Withdrawal of Gold........ 21 Certificates Evidencing the iShares......................... 21 Cash and Other Distributions................................ 21 Voting Rights............................................... 22 Fees and Expenses of the Trustee............................ 22 Trust Expenses and Gold Sales............................... 22 Payment of Taxes............................................ 22 Evaluation of Gold and the Trust Assets..................... 22 Amendment and Termination................................... 22 Limitations on Obligations and Liability.................... 23 Requirements for Trustee Actions............................ 24
i TABLE OF CONTENTS (continued)
Page ---- THE SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM; GLOBAL SECURITY........................ 25 THE SPONSOR............................................................................... 26 The Sponsor's Role..................................................................... 26 The Sponsor's Fee...................................................................... 26 THE TRUSTEE............................................................................... 27 The Trustee's Role..................................................................... 27 THE CUSTODIAN............................................................................. 27 The Custodian's Role................................................................... 27 CUSTODY OF THE TRUST'S GOLD............................................................... 28 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES............................................. 29 Taxation of the Trust.................................................................. 29 Taxation of U.S. Shareholders.......................................................... 30 Maximum 28% Long-Term Capital Gains Tax Rate for U.S. Shareholders Who Are Individuals. 31 Brokerage Fees and Trust Expenses...................................................... 31 Investment by Regulated Investment Companies........................................... 31 Investment by Certain Retirement Plans................................................. 31 Taxation of Non-U.S. Shareholders...................................................... 32 United States Information Reporting and Backup Withholding............................. 32 Taxation in Jurisdictions Other Than the United States................................. 32 ERISA AND RELATED CONSIDERATIONS.......................................................... 32 PLAN OF DISTRIBUTION...................................................................... 34 REPORT OF THE INDEPENDENT AUDITORS........................................................ 37 FORM OF STATEMENT OF FINANCIAL CONDITION.................................................. 37 LEGAL MATTERS............................................................................. 38 License Agreements..................................................................... 38 EXPERTS................................................................................... 38 WHERE YOU CAN FIND MORE INFORMATION....................................................... 38
ii STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes statements which relate to future events or future performance. In some cases, you can identify such forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this prospectus that address activities, events or developments that will or may occur in the future, including such matters as changes in commodity prices and market conditions (for gold and the iShares), the trust's operations, the sponsor's plans and references to the trust's future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by the sponsor on the basis of its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform to the sponsor's expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed in this prospectus, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. See "Risk Factors." Consequently, all the forward-looking statements made in this prospectus are qualified by these cautionary statements, and there can be no assurance that the actual results or developments the sponsor anticipates will be realized or, even if substantially realized, that they will result in the expected consequences to, or have the expected effects on, the trust's operations or the value of the iShares. Moreover, neither the sponsor, the initial purchaser, nor any other person assumes responsibility for the accuracy or completeness of the forward-looking statements. Neither the trust nor the sponsor is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in the sponsor's expectations or predictions. GLOSSARY In this prospectus, each of the following terms has the meaning set forth below: "AMEX" -- The American Stock Exchange LLC. "Authorized Participant" -- A person who, at the time of submitting to the trustee an order to create or redeem one or more Baskets (1) is a registered broker-dealer or other securities market participant, (2) is a DTC Participant or an Indirect Participant, and (3) has in effect a valid Authorized Participant Agreement. "Authorized Participant Agreement" -- An agreement entered into by each Authorized Participant, the sponsor and the trustee which provides the procedures for the creation and redemption of Baskets. "Basket" -- A block of 50,000 iShares or such number of iShares as the trustee, in consultation with the sponsor, may from time to time determine. "Basket Gold Amount" -- The amount of gold (measured in Fine Ounces), determined on each Business Day by the trustee, which Authorized Participants must transfer to the trust in exchange for a Basket, or will receive in exchange for each Basket surrendered for redemption. "Business Day" -- Any day other than (i) a Saturday or a Sunday, or (ii) a day on which the AMEX is closed for regular trading. "CFTC" -- Commodity Futures Trading Commission, an independent agency with the mandate to regulate commodity futures and option markets in the United States. "Code" -- The United States Internal Revenue Code of 1986, as amended. "COMEX" -- The exchange market on gold futures contracts operated by Commodity Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc. iii "Commodity Exchange Act" -- The United States Commodity Exchange Act of 1936, as amended. "Custodian" -- The Bank of Nova Scotia, a bank organized under the laws of Canada. "Custody Agreement" -- The agreement between the trustee and the custodian governing the custody of the trust's gold. "DTC" -- The Depository Trust Company, a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the United States Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. "DTC Participant" -- An entity which, pursuant to DTC's governing documents, is entitled to deposit securities with DTC in its capacity as a "participant". "ERISA" -- The Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" -- The United States Securities Exchange Act of 1934, as amended. "FSA" -- The Financial Services Authority, an independent non-governmental body which exercises statutory regulatory power under the FSM Act. "FSM Act" -- The United Kingdom Financial Services and Markets Act 2000. "Fine Ounce" -- An Ounce of 100% pure gold. The number of Fine Ounces in a gold bar may be calculated by multiplying the gross weight in Ounces by the fineness, expressed as a fraction of the fine metal content in parts per 1000. "Indirect Participant" -- An entity which, by clearing securities through, or maintaining a custodial relationship with, a DTC Participant, has access to the DTC clearing system. "Initial Purchaser" -- Barclays Capital, Inc. "IRA" -- Individual retirement account. "IRS" -- Internal Revenue Service. "iShares" -- Units of fractional undivided beneficial interest in the net assets of the trust which are issued by the trust. "LBMA" -- The London Bullion Market Association, a trade association that acts as the coordinator for activities conducted on behalf of its members and other participants in the London bullion market. "London Good Delivery Bar" -- A bar of gold meeting the London Good Delivery Standards. "London Good Delivery Standards" -- The specifications for weight, dimensions, fineness (or purity), identifying marks and appearance of gold bars as set forth in "The Good Delivery Rules for Gold and Silver Bars" published by the LBMA. "METI" -- Japan's Ministry of Economy, Trade and Industry. "NASD" -- National Association of Securities Dealers. iv "NAV" -- Net asset value per iShare. See "Business of the Trust -- Valuation of Gold; Computation of Net Asset Value" for a description of how the net asset value of the trust and the NAV are calculated. "Non-U.S. Shareholder" -- A shareholder that is not a U.S. Shareholder. "NYMEX" -- New York Mercantile Exchange, Inc. "OTC" -- The global Over-the-Counter market for the trading of gold which consists of transactions in spot, forwards, and options and other derivatives. "Ounce" -- A troy ounce, equal to 1.0971428 ounces avoirdupois. "Plans" -- Employee benefit plans and certain other plans and arrangements, including individual retirement accounts and annuities, Keogh plans, and certain collective investment funds or insurance company general or separate accounts in which such plans or arrangements are invested, that are subject to ERISA and/or section 4975 of the Code. "SEC" -- The Securities and Exchange Commission. "Securities Act" -- The United States Securities Act of 1933, as amended. "Shareholders" -- Owners of beneficial interests in the iShares. "Sponsor" -- Barclays Global Investors, N.A., an indirect subsidiary of Barclays Bank PLC. "TOCOM" -- The Tokyo Commodity Exchange. "Tonne" -- One metric tonne which is equivalent to 1,000 kilograms or 32,150.7465 troy ounces. "Trust" -- The iShares COMEX Gold Trust, a New York trust formed pursuant to the Trust Agreement. "Trust Agreement" -- The Depositary Trust Agreement among the sponsor, the trustee, the registered and beneficial owners from time to time of iShares and all persons that deposit gold for creation of iShares under which the trust is formed. "Trustee" -- The Bank of New York, a banking corporation organized under the laws of the State of New York with trust powers. "Unallocated" -- Gold is said to be held in unallocated form at a custodian when the person in whose name gold is so held is entitled to receive delivery of gold in the amount standing to the credit of that person's account, but that person has no ownership interest in any particular gold that the custodian maintaining the account owns or holds. In contrast, gold is held in "allocated" form when specific bars of gold held by the custodian are identified as the property of the person holding the "allocated" account. "U.S. Shareholder" -- A Shareholder that is (1) an individual who is treated as a citizen or resident of the United States for United States federal income tax purposes; (2) a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof; (3) an estate, the income of which is includible in gross income for United States federal income tax purposes regardless of its source; or (4) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under applicable Treasury Regulations to be treated as a domestic trust. v PROSPECTUS SUMMARY Although this summary contains material information about the trust and the iShares, it does not contain or summarize all of the information about the trust and the iShares contained in this prospectus which is material and/or which may be important to you. You should read the entire prospectus, including "Risk Factors" beginning on page 6, before making an investment decision about the iShares. Trust Structure, the Sponsor, the Trustee and the Custodian The trust was formed on [.], 2004 when the sponsor and the trustee signed the Depositary Trust Agreement ("Trust Agreement") and the Initial Purchaser made the initial deposit for issuance of three Baskets. The purpose of the trust is to own gold transferred to the trust in exchange for shares issued by the trust ("iShares"). Each iShare represents a fractional undivided beneficial interest in the net assets of the trust. The trust will issue iShares only in Baskets of 50,000 or integral multiples thereof. Baskets of iShares will be redeemed by the trust in exchange for the amount of gold corresponding to their redemption value. Individual iShares will not be redeemed by the trust, but will be listed and traded on the American Stock Exchange under the symbol "IAU". The objective of the trust is for the value of the iShares to reflect, at any given time, the price of gold owned by the trust at that time, less the trust's expenses and liabilities. The material terms of the trust are discussed in greater detail under the section "Description of the iShares and the Trust Agreement". The trust is not a registered investment company under the Investment Company Act of 1940 and is not required to register under such act. The trust's sponsor is Barclays Global Investors, N.A., a national banking association chartered in the United States and a wholly-owned subsidiary of Barclays Bank PLC. The sponsor operates as a limited purpose trust company. Its primary regulator is the Office of the Comptroller of the Currency, the agency of the U.S. Treasury Department that regulates United States national banks. The iShares are not deposits or other obligations of Barclays Global Investors, N.A. or any of its subsidiaries or affiliates or any other bank, are not guaranteed by Barclays Global Investors, N.A. or any of its subsidiaries or affiliates or any other bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. The sponsor will arrange for the creation of the trust, the registration of the iShares for their public offering in the United States and the listing of the iShares on the AMEX. The sponsor has agreed to assume the following administrative and marketing expenses incurred by the trust: the trustee's monthly fee, the custodian's fee, AMEX listing fees, SEC registration fees, printing and mailing costs, audit fees and up to $100,000 per annum in legal expenses. The sponsor will also pay the costs of the trust's organization and the initial sale of the iShares, including the applicable SEC registration fees. The sponsor will not exercise day-to-day oversight over the trustee or the custodian. The sponsor may remove the trustee and appoint a successor trustee if the trustee ceases to meet certain objective requirements (including the requirement that it have capital, surplus and undivided profits of at least $150 million) or if, having received written notice of a material breach of its obligations under the Trust Agreement, the trustee has not cured the breach within thirty days. The sponsor also has the right to replace the trustee during the ninety days following any merger, consolidation or conversion in which the trustee is not the surviving entity or, in its discretion, on the fifth anniversary of the creation of the trust or on any subsequent third anniversary thereafter. The sponsor also has the right to approve any new or additional custodian that the trustee may wish to appoint. The trustee is The Bank of New York and the custodian is The Bank of Nova Scotia. The trustee is responsible for the day-to-day administration of the trust. The responsibilities of the trustee include (1) processing orders for the creation and redemption of Baskets; (2) coordinating with the custodian the receipt and delivery of gold transferred to, or by, the trust in connection with each issuance and redemption of Baskets; (3) calculating the net asset value and the adjusted net asset value of the trust on each business day; and (4) selling the trust's gold as needed to cover the trust's expenses. For a more detailed description of the role and responsibilities of the trustee see "Description of the iShares and the Trust Agreement" and "The Trustee." The custodian is responsible for safekeeping the gold owned by the trust. The custodian is appointed by the trustee and is responsible to the trustee only. The general role and responsibilities of the custodian are further described in "The Custodian" and "Custody of the Trust's Gold." The custodian has no obligation to accept any additional delivery on behalf of the trust if, after giving effect to such delivery, the total value of the trust's gold held by the custodian exceeds $2 billion. If this limit is exceeded, it is anticipated that the trustee, in consultation with the sponsor, will retain an additional custodian. Trust Objective The objective of the trust is for the value of the iShares to reflect, at any given time, the price of gold owned by the trust at that time, less the trust's expenses and liabilities. The trust will not be actively managed. It will not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of gold. The trust will receive gold deposited with it in exchange for the creation of Baskets of iShares, will sell gold as necessary to cover the trust expenses and other liabilities and will deliver gold in exchange for Baskets of iShares surrendered to it for redemption. The iShares are intended to constitute a simple and cost-effective means of making an investment similar to an investment in gold. Although the iShares will not be the exact equivalent of an investment in gold, they provide investors with an alternative that allows a level of participation in the gold market through the securities market. An investment in iShares is: Asset-backed. The iShares will be backed by the assets of the trust. The trustee's arrangements with the custodian contemplate that at the end of each business day there can be in the trust account no more than 430 ounces of gold in an unallocated form. This means that the bulk of the trust's gold holdings will be represented by physical gold, identified on the custodian's books as the property of the trust and held by the custodian in New York, London and other locations that may be authorized in the future. As accessible and easy to handle as any other investment in shares. Retail investors may purchase and sell iShares through traditional brokerage accounts. Because the intrinsic value of each iShare will be a function of the price of only a fraction of an ounce of gold held by the trust, the cash outlay necessary for an investment in iShares should be less than the amount required for currently existing means of investing in physical gold. iShares will be eligible for margin accounts. Liquid. Although there can be no assurance that an actively traded market in the iShares will develop, the iShares will be listed and traded on the American Stock Exchange under the symbol "IAU". Relatively cost efficient. Because the expenses involved in an investment in physical gold will be dispersed among all holders of iShares, an investment in iShares may represent a cost-efficient alternative to investments in gold for investors not otherwise in a position to participate directly in the market for physical gold. Principal Offices The sponsor's office is located at 45 Fremont Street, San Francisco, CA 94105. The trustee has a trust office at 101 Barclay Street, Floor 6E, New York, New York 10286. The custodian is located at One Liberty Plaza, New York, New York, 10006. 2 THE OFFERING Offering...................... The iShares represent units of fractional undivided beneficial interest in the net assets of the trust. Use of proceeds............... Proceeds received by the trust from the issuance and sale of Baskets will consist of gold deposits. Such deposits will be held by the custodian on behalf of the trust until (i) distributed to Authorized Participants in connection with a redemption of Baskets or (ii) sold to pay the fee due to the sponsor and trust expenses not assumed by the sponsor. American Stock Exchange symbol IAU CUSIP......................... [.] Creation and redemption....... The trust will issue and redeem Baskets of iShares on a continuous basis (a Basket equals 50,000 iShares). Baskets of iShares will only be issued or redeemed in exchange for an amount of gold equal to the aggregate NAV of the number of iShares in the Baskets being created or redeemed. No iShares will be issued unless the custodian has allocated the corresponding amount of gold to the trust's account (except for an unallocated amount of gold not in excess of 430 ounces). Initially, a Basket will require delivery of 5,000 fine ounces of gold. The amount of gold necessary for the creation of a Basket, or to be received upon redemption of a Basket, will decrease over the life of the trust, due to the payment or accrual of fees and other expenses payable by the trust. Baskets may be created or redeemed only by Authorized Participants, who will pay a transaction fee for each order to create or redeem Baskets. See "Description of the iShares and the Trust Agreement" for more details. Net Asset Value............... The net asset value of the trust is obtained by subtracting the trust's expenses and liabilities on any day from the value of the gold owned by the trust on that day; the net asset value per iShare, or NAV, is obtained by dividing the net asset value of the trust on a given day by the number of iShares outstanding on that date. On each day on which the AMEX is open for regular trading, as promptly as practicable after the closing of trading of COMEX gold futures, the trustee will determine the NAV. The trustee will value the trust's gold on the basis of that day's announced COMEX settlement price for the spot month gold futures contract (the futures contract closest to maturity on that day). If there is no COMEX settlement price for spot month gold futures on that day, the trustee will use the most recently announced COMEX settlement price for spot month gold futures unless the trustee, in consultation with the sponsor, determines that such price is inappropriate as a basis for evaluation. See "Business of the Trust--Valuation of Gold; Computation of Net Asset Value." Trust expenses................ The trust's only ordinary recurring expense is expected to be the remuneration due to the sponsor (the "sponsor's fee"). In exchange for the sponsor's fee, the sponsor has agreed to assume the ordinary administrative and marketing expenses that the trust is expected to incur. The sponsor will also pay the costs of the trust's organization and the initial sale of the iShares, including the applicable SEC registration fees.
3 The sponsor's fee will be accrued daily and will be payable monthly in arrears. The trustee will from time to time sell gold in such quantity as may be necessary to permit payment of the sponsor's fee and of trust expenses not assumed by the sponsor. The trustee is authorized to sell gold at such times and in the smallest amounts required to permit such payments as they become due, it being the intention to avoid or minimize the trust's holdings of assets other than gold. Accordingly, the amount of gold to be sold will vary from time to time depending on the level of the trust's expenses and the market price of gold. See "Business of the Trust--Trust Expenses" and "Description of the iShares and the Trust Agreement--Trust Expenses and Gold Sales." Each sale of gold by the trust will be a taxable event to Shareholders. See "United States Federal Tax Consequences--Taxation of U.S. Shareholders." Termination events..... The trustee will terminate the Trust Agreement if: . the trustee is notified that the iShares are delisted from the AMEX and are not approved for listing on another national securities exchange within five business days of their delisting; . holders of at least 75% of the outstanding iShares notify the trustee that they elect to terminate the trust; . 60 days have elapsed since the trustee notified the sponsor of the trustee's election to resign and a successor trustee has not been appointed and accepted its appointment; . the SEC determines that the trust is an investment company under the Investment Company Act of 1940, as amended, and the trustee has actual knowledge of that determination; . the aggregate market capitalization of the trust, based on the closing price for the iShares, was less than $350 million for five consecutive trading days and the trustee receives, within six months from the last of those trading days, notice that the sponsor has decided to terminate the trust; . the CFTC determines that the trust is a commodity pool under the Commodity Exchange Act and the trustee has actual knowledge of that determination; or . the trust fails to qualify for treatment, or ceases to be treated, as a grantor trust for United States federal income tax purposes and the trustee receives notice that the sponsor has determined that the termination of the trust is advisable. If not terminated earlier by the trustee, the trust will terminate on [.], 2044. See "Description of the iShares and the Trust Agreement--Amendment and Termination." Authorized Participants Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must be a registered broker-dealer or other securities market participant, a participant in DTC, have entered into an
4 agreement with the trustee (the Authorized Participant Agreement) and be in a position to transfer gold to, and take delivery of gold from, the custodian through one or more gold accounts. The Authorized Participant Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of gold in connection with such creations or redemptions. A list of the current Authorized Participants can be obtained from the trustee or the sponsor. Clearance and settlement The iShares will be issued in book-entry form only. Transactions in iShares will clear through the facilities of DTC. Investors may hold their iShares through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC.
SUMMARY FINANCIAL CONDITION As of the opening of business on [.], 2004, the net asset value of the trust was $[.] and the NAV was $[.]. See "Form of Statement of Financial Condition" elsewhere in this prospectus. 5 RISK FACTORS Before making an investment decision, you should consider carefully the risks described below, as well as the other information included in this prospectus. Because the iShares are created to reflect the price of the gold held by the trust, the market price of the iShares will be as unpredictable as the price of gold has historically been. This creates the potential for losses, regardless of whether you hold iShares for a short-, mid- or long-term. iShares are created to reflect, at any given time, the price of gold owned by the trust at that time less the trust's expenses and liabilities. Because the value of iShares depends on the price of gold, it will be subject to fluctuations similar to those affecting gold prices. The price of gold has fluctuated widely over the past several years. If gold markets continue to be characterized by the wide fluctuations that they have shown in the past several years, the price of the iShares will change widely and in an unpredictable manner. This exposes your investment in iShares to potential losses if you need to sell your iShares at a time when the price of gold is lower than it was when you made your investment in iShares. Even if you are able to hold iShares for the mid- or long-term there can be no assurance of profit, because gold markets have known in the past extended periods of flat or declining prices. Following an investment in iShares, several factors may have the effect of causing a decline in the prices of gold and a corresponding decline in the price of iShares. Among them: . Large sales by the official sector. A significant portion of the aggregate world gold holdings is owned by governments, central banks and related institutions. If one or more of these institutions decides to sell in amounts large enough to cause a decline in world gold prices, the price of the iShares will be adversely affected. . A significant increase in gold hedging activity by gold producers. Should there be an increase in the level of hedge activity of gold producing companies, it could cause a decline in world gold prices, adversely affecting the price of the iShares. . A significant change in the attitude of speculators and investors towards gold. Should the speculative community take a negative view towards gold, it could cause a decline in world gold prices, negatively impacting the price of the iShares. Conversely, several factors may trigger a temporary increase in the price of gold prior to your investment in the iShares. If that is the case, you will be buying iShares at prices affected by the temporarily high prices of gold, and you may incur losses when the causes for the temporary increase disappear. Paradoxically, one of the causes for a temporary increase of this type would be a very enthusiastic reception of the iShares by the market. If a rush to acquire iShares results in large purchases of gold to be deposited in the trust, the price of gold may see an increase that will subside after the initial rush comes to an end. The amount of gold represented by the iShares will decrease over the life of the trust due to the sales necessary to pay the sponsor's fee and trust expenses. Without increases in the price of gold sufficient to compensate for that decrease, the price of the iShares will also decline and you will lose money on your investment in iShares. Under normal circumstances, gold will be the only asset of the trust. The trustee will not actively manage the gold held by the trust. This means that the trustee will not sell gold at times when its price is high, or acquire gold at low prices in the expectation of future price increases. It also means that the trustee will not make use of any of the hedging techniques available to professional gold investors to attempt to reduce the risks of losses resulting from price decreases. All gold owned by the trust will remain in the custody of the custodian until needed to pay the sponsor's fee or trust expenses or to redeem iShares surrendered for redemption. 6 Although the sponsor has agreed to assume all organizational and certain ordinary administrative and marketing expenses incurred by the trust, not all trust expenses have been assumed by the sponsor. For example, any taxes and other governmental charges that may be imposed on the trust's property will be not be paid by the sponsor. As part of its agreement to assume some of the trust's ordinary administrative expenses, the sponsor has agreed to pay legal expenses of the trust not in excess of $100,000 per annum. Any legal fees in excess of that amount will be the responsibility of the trust. Because the trust will not have any income, it will need to sell gold to cover the sponsor's fee and expenses not assumed by the sponsor. The trust may also be subject to other liabilities (for example, as a result of litigation) which have also not been assumed by the sponsor. The only source of funds to cover those liabilities will be sales of gold held by the trust. Even if there are no expenses other than those assumed by the sponsor, and there are no other liabilities of the trust, the trustee will still need to sell gold to pay the sponsor's monthly fee. The result of these periodic sales is that the amount of gold represented by each iShare will decrease. New deposits of gold, received in exchange for new iShares issued by the trust, will not reverse this trend. A decrease in the amount of gold represented by each iShare will result in a decrease in its price even if the price of gold has not changed. To retain the iShare's original price, the price of gold will have to increase. Without that increase, the lower amount of gold represented by the iShare will have a correspondingly lower price. There is no assurance that the price of gold will increase, or (if it increases) that the increase will suffice to counter the adverse effect of the decrease in the amount of gold represented by each iShare. If these increases do not occur, or are not sufficient to counter that adverse effect, you will sustain losses on your investment in iShares. An increase in the trust expenses not assumed by the sponsor, or the existence of unexpected liabilities affecting the trust, will force the trustee to sell larger amounts of gold, and will result in a more rapid decrease of the amount of gold represented by each iShare and a corresponding decrease in its value. Even without an increase in the expenses or liabilities owed by the trust, a reduction in the price of gold will require the trustee to sell higher amounts of gold to cover the sponsor fee, also resulting in a more rapid decrease of the amount of gold represented by each iShare and a corresponding decrease in its value. The trust is a passive investment vehicle. This means that the value of your iShares may be adversely affected by trust losses that, if the trust had been actively managed, it might have been possible to avoid. The trustee will not actively manage the gold held by the trust. This means that the trustee will not sell gold at times when its price is high, or acquire gold at low prices in the expectation of future price increases. It also means that the trustee will not make use of any of the hedging techniques available to professional gold investors to attempt to reduce the risks of losses resulting from price decreases. Any losses sustained by the trust will adversely affect the value of your iShares. The price received upon the sale of iShares may be less that the value of the gold represented by them. iShares are created to reflect, at any given time, the price of gold owned by the trust at that time less the trust's expenses and liabilities. The result obtained by subtracting the trust's expenses and liabilities on any day from the price of the gold owned by the trust on that day is the net asset value of the trust which, when divided by the number of iShares outstanding on that date, results in the net asset value per iShare, or NAV. iShares may trade at, above or below their NAV. The NAV of iShares will fluctuate with changes in the market value of the trust's assets. The trading prices of iShares will fluctuate in accordance with changes in their NAVs as well as market supply and demand. The amount of the discount or premium in the trading price relative to the NAV per iShare may be influenced by non-concurrent trading hours between the major gold markets and the AMEX. While the iShares will trade on the AMEX until 4:15 P.M. New York time, liquidity in the market for gold will be reduced after the close of the major world gold markets, including London, Zurich and COMEX (which usually closes at 1:30 P.M. New York time). As a result, during this time, trading spreads, and the resulting premium or discount on iShares may widen. 7 The liquidation of the trust may occur at a time when the disposition of the trust's gold will result in losses to investors in iShares. The trust will have limited duration. If certain events occur, at any time, the trustee will have to terminate the trust. Otherwise, the trust will terminate automatically after forty years. See "Description of the iShares and the Trust Agreement--Amendment and Termination" for more information about the termination of the trust, including when events outside the control of the sponsor, the trustee or the Shareholders may prompt the trust's termination. Upon termination of the trust, the trustee will sell gold in the amount necessary to cover all expenses of liquidation, and to pay any outstanding liabilities of the trust. The remaining gold will be distributed among investors surrendering iShares. Any gold remaining in the possession of the trustee after 90 days may be sold by the trustee and the proceeds of the sale will be held by the trustee until claimed by any remaining holders of iShares. Sales of gold in connection with the liquidation of the trust at a time of low prices will likely result in losses, or adversely affect your gains, on your investment in iShares. The liquidity of the iShares may also be affected by the withdrawal from participation of Authorized Participants. In the event that one of more Authorized Participants which have substantial interests in iShares withdraw from participation, the liquidity of the iShares will likely decrease. Authorized Participants with large holdings may choose to terminate the trust. Holders of 75% of the iShares have the power to terminate the trust. This power may be exercised by a relatively small number of holders. If it is so exercised, investors who wished to continue to invest in gold through the vehicle of the trust will have to find another vehicle, and may not be able to find another vehicle that offers the same features as the trust. The lack of an active trading market for the iShares may result in losses on your investment at the time of disposition of your iShares. Although iShares are listed for trading on the AMEX, you should not assume that an active trading market for the iShares will develop or be maintained. If you need to sell your iShares at a time when no active market for them exists, such lack of an active market will most likely adversely affect the price you receive for your iShares (assuming you are able to sell them). One of the factors that may affect the availability of an active market for the iShares is their novelty. Although the sponsor has endorsed other kinds of "iShares" before, all such other "iShares" have been issued by investment companies registered under the Investment Company Act of 1940. That is not the case with the iShares of the trust. This is the first time that iShares backed by gold are brought to market. Unanticipated operational difficulties could adversely affect the price of the iShares. The existence of unanticipated operational difficulties in the process of creation and redemption of the Baskets in which iShares are created or redeemed, or in the trading of iShares may adversely affect the existence of a wide market for them and, therefore, their price. There will be no stabilizing activities. The Initial Purchaser does not intend to engage in stabilizing activities in connection with the iShares. Therefore, any price volatility that might otherwise be moderated by those activities will not be moderated. 8 As an owner of iShares, you will not have the rights normally associated with ownership of other types of shares. iShares are not entitled to the same rights as shares issued by a corporation. By acquiring iShares, you are not acquiring the right to elect directors, to receive dividends, to vote on certain matters regarding the issuer of your iShares or to take other actions normally associated with the ownership of shares. You will only have the limited rights described under "Description of the iShares and the Trust Agreement". As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936. The trust is not registered as an investment company for purposes of United States federal securities laws, and is not subject to regulation by the SEC as an investment company. Consequently, the owners of iShares will not have the regulatory protections provided to investors in investment companies. The trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange Act (CEA), as administered by the Commodity Futures Trading Commission (CFTC). Furthermore, the Trust is not a commodity pool for purposes of the CEA, and its sponsor is not subject to regulation by the CFTC as a commodity pool operator, or a commodity trading advisor. Consequently, the owner of iShares will not have the regulatory protections provided to investors in CEA-regulated instruments or commodity pools. None of the sponsor or the trustee has experience with a trust the only assets of which are expected to be gold. Their experience may be inadequate or unsuitable to manage the trust. None of the sponsor, the trustee, or their respective management, have experience handling an investment vehicle designed to reflect, at any given time, the value of the gold that is its only asset. If this lack of experience adversely affects the operations of the trust, the value of the iShares may also be adversely affected. Gold owned by the trust may be lost or damaged in circumstances in which the trust is not in a position to recover the corresponding loss. If that occurs, the value of the iShares will be adversely affected. The responsibility of the custodian for loss or damage to the trust's gold is not unlimited. The agreement with the custodian contemplates that under certain circumstances the custodian will not be responsible for loss or damage to the trust's gold in the custodian's possession. For example, losses due to nuclear accidents, terrorism, riots, acts of God, insurrections, strikes and similar causes beyond the control of the custodian will be sustained by the trust. Any loss of gold owned by the trust will result in a corresponding loss in the NAV and it is reasonable to expect that will also result in a decrease in the value at which the iShares are traded on the AMEX. Gold transferred to the trust in connection with the creation of Baskets of iShares may not be of the quality required under the Trust Agreement. The trust will sustain a loss if the trustee issues iShares in exchange for gold of inferior quality and that loss will adversely affect the value of all existing iShares. The procedures agreed to with the custodian contemplate that the custodian must undertake certain tasks in connection with the inspection of gold delivered by Authorized Participants in exchange for Baskets of iShares. The Custodian's inspection includes review of the corresponding bar list to ensure that it accurately describes the weight, fineness, refiner marks and bar numbers appearing on the gold bars, but does not include any chemical or other tests designed to verify that the gold received does, in fact, meet the purity requirements referred to in the Trust Agreement. In addition, each person that deposits gold in the trust is liable to the trust if that gold does not meet the requirements of the Trust Agreement. The custodian will not be responsible or liable to the trust or to any investor in the event any gold otherwise properly inspected by it does not meet the purity requirements contained in the Trust Agreement. To the extent that Baskets of iShares are issued in exchange for gold of 9 inferior quality and the trust is not able to recover damages from the person that deposited that gold, the total value of the assets of the trust will be adversely affected and, with it, the NAV. In these circumstances, it is reasonable to expect that the value at which the iShares trade on the AMEX will also be adversely affected. Under the Trust Agreement, the sponsor has a right to be indemnified from the trust for any liability or expense it incurs without negligence, bad faith or willful misconduct on its part. That means the sponsor may require the assets of the trust to be sold in order to cover losses or liability suffered by the sponsor. Any sale of that kind would reduce the net asset value of the trust and the value of the iShares. USE OF PROCEEDS Proceeds received by the trust from the issuance and sale of Baskets will consist of gold deposits. Such deposits will be held by the custodian on behalf of the trust until (i) distributed to Authorized Participants in connection with redemptions of Baskets or (ii) sold to pay fees due to the sponsor and trust expenses not assumed by the sponsor. See "Business of the Trust--Trust Expenses". 10 THE GOLD INDUSTRY Introduction This section provides a brief introduction to the gold industry by looking at some of the key participants, detailing the primary sources of demand and supply and outlining the role of the "official" sector (i.e., central banks) in the market. Market Participants The participants in the world gold market may be classified in the following sectors: the mining and producer sector, the banking sector, the official sector, the investment sector; and the manufacturing sector. A brief description of each follows. Mining and Producer Sector This group includes mining companies that specialize in gold and silver production; mining companies that produce gold as a by-product of other production (such as a copper or silver producer); scrap merchants and recyclers. Banking Sector Bullion banks provide a variety of services to the gold market and its participants, thereby facilitating interactions between other parties. Services provided by the bullion banking community include traditional banking products as well as mine financing, physical gold purchases and sales, hedging and risk management, inventory management for industrial users and consumers, and gold deposit and loan instruments. The Official Sector The official sector encompasses the activities of the various central banking operations of gold-holding countries. According to statistics released by the World Gold Council, central banks are estimated to hold approximately 32,000 tonnes of gold reserves, or approximately 20% of existing above-ground stocks. In September 1999 a group of 15 central banks acting to clarify their intentions with respect to their gold holdings signed the Central Bank Gold Agreement commonly called the "Washington Accord on Gold". The signatories included the European Central Bank and the central banks of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland, and England. This agreement limited incremental sales by the 15 signatories to 400 tonnes per annum over the ensuing five-year period. The current Washington Accord on Gold is due to expire in September 2004. The Investment Sector This sector includes the investment and trading activities of both professional & private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges, and retail-level coin collectors. The Manufacturing Sector The fabrication and manufacturing sector represents all the commercial and industrial users of gold for whom gold is a daily part of their business. The jewelry industry is a large user of gold. Other industrial users of gold include the electronics and dental industries. 11 World Gold Supply and Demand (1993 - 2002) The following table sets forth a summary of the world gold supply and demand from 1993 to 2002:
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- (Tonnes)/(1)/ Supply Mine production............. 2,291 2,285 2,291 2,375 2,493 2,542 2,574 2,591 2,623 2,587 Old gold scrap.............. 577 621 631 644 626 1,099 608 609 708 835 Official sector sales....... 468 130 167 279 326 363 477 479 529 556 Net producer hedging........ 142 105 475 142 504 97 506 (15) (151) (423) ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Total Reported Supply....... 3,478 3,141 3,564 3,440 3,949 4,101 4,165 3,664 3,709 3,555 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Demand Gold fabrication in carat jewelry................... 2,559 2,640 2,812 2,856 3,311 3,182 3,154 3,232 3,038 2,689 Gold fabrication in electronics............... 178 187 204 207 235 225 247 285 204 210 Gold fabrication in dentistry................. 63 64 67 68 70 64 66 69 68 69 Gold fabrication in other industrial and decorative applications.............. 100 104 110 113 115 103 99 101 101 82 Retail investment........... 331 349 465 298 493 337 446 335 359 377 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Total Reported Demand.................... 3,232 3,344 3,657 3,541 4,223 3,911 4,011 4,022 3,769 3,427 ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== Supply less Demand/(2)/..... 246 (203) (92) (102) (275) 191 154 (357) (61) 128 ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
- -------- (1)"Tonne" refers to one metric tonne. This is equivalent to 1,000 kilograms or 32,150.7465 troy ounces. (2)A negative number means that total reported demand exceeded total reported supply. Totals may not add due to independent rounding. Source: Gold Fields Mineral Services Ltd Gold Survey 2003. The following are some of the main characteristics of the gold market illustrated by the table: . Gold supply over the past ten years has averaged 3,844 tonnes with primary production (new mine output) accounting for approximately two thirds of the total; . During the period shown old gold/scrap was the second largest contributor to supply averaging approximately 600 tonnes per annum with the exception of 1998 when supply surged to 1,099 tonnes during the Asian crisis. Higher gold prices over the past two years have resulted in an increase to the average level of scrap flows during 2001 and 2002; . Despite the Washington Accord on Gold, signed in 1999 and due to expire in September 2004, the supply of gold from the official sector (central bank sales) has increased in recent years; . Gold hedging activity by mining companies had the impact of supplying additional material to the market until 1999, but the past three years has seen a reversal of this activity as mining companies have responded to investor demands for less forward selling of production; . The biggest source of demand for gold output over the period shown has come from the jewelry sector which has accounted for an average of 77% of all demand. Demand from this sector has typically 12 exceeded annual world mine production, meaning additional sources of supply have been relied upon to fill the gap. . Total fabrication demand for gold over the 10-year period accounted for approximately 90% of all supply over the same period. Statistics published by Gold Fields Mineral Services Ltd in their 2003 Gold Survey estimate that existing above-ground stocks of gold at the end of 2002 were approximately 147,800 metric tonnes (approx 4.75 billion ounces). Historical Chart of the Price of Gold The price of gold is volatile and fluctuations are expected to have a direct impact on the value of the iShares. However, movements in the price of gold in the past are not a reliable indicator of future movements. Movements may be influenced by various factors, including announcements from central banks regarding a country's reserve gold holdings, agreements among central banks, political uncertainties around the world, and economic concerns. The following chart illustrates the movements in the price of an ounce of gold in dollars from January 1994 to November 2003: [CHART] Note: The vertical line represents the high and low price for the respective month, and the square indicates the settle price for the month. Source: COMEX Division of the New York Mercantile Exchange, Inc. 13 OPERATION OF THE GOLD MARKET Futures Exchanges The most significant gold futures exchanges are the COMEX, operated by Commodities Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc., and the Tokyo Commodity Exchange (TOCOM). The COMEX is the largest exchange in the world for trading metals futures and options and has been trading gold since 1974. The TOCOM has been trading gold since 1982. COMEX Future exchanges seek to provide a neutral, regulated marketplace for the trading of derivatives contracts for commodities. Future contracts are defined by the exchange for each commodity. For each commodity traded, this contract specifies the precise quality and quantity standards. The contract's terms and conditions also define the location and timing of physical delivery. An exchange does not buy or sell those contracts, but seeks to offer a transparent forum where members, on their own behalf or on the behalf of customers, can trade the contracts in a safe, efficient and orderly manner. During regular trading hours at COMEX, the commodity contracts are traded through open outcry; a verbal auction in which all bids, offers and trades must be publicly announced to all members. The prices at which each commodity trades throughout the day serve as world benchmarks. They are immediately transmitted around the world by a wide variety of price-reporting services under arrangement with the exchange. Electronic trading is offered by the exchange after regular market hours. Except for brief breaks to switch between open outcry and electronic trading in the evening and the morning, gold trades almost 24 hours a day, five business days a week. In addition to the public nature of the pricing, futures exchanges in the United States are regulated at two levels, internal and external governmental supervision. The internal is performed through self-regulation and consists of regular monitoring of the following: the open-outcry process to insure that it is conducted in conformance with all exchange rules; the financial condition of all exchange member firms to insure that they continuously meet financial commitments; and the positions of commercial and non-commercial customers to insure that physical delivery and other commercial commitments can be met, and that pricing is not being improperly affected by the size of any particular customer positions. External governmental oversight is performed by the CFTC, which reviews all the rules and regulations of United States futures exchanges and monitors their enforcement. Gold futures opened for trading on the COMEX on December 31, 1974, coinciding with the lifting of the Government's ban on gold ownership by private citizens in the United States. The clearing system of NYMEX seeks to minimize credit risk exposure for NYMEX participants. The system binds all the members through both financial deposits and other commitments into a unitary system guaranteeing the performance of each other and their customers. The NYMEX clearinghouse operates this system by holding member firms' funds on deposit, who in turn hold their member and non-member customer funds. The clearinghouse acts as fiscal transfer agent moving funds from account to account on a daily basis as dictated by price changes. The clearinghouse also insures that trading is conducted in an orderly manner by matching trades, and maintaining the delivery process. The COMEX rules and procedures seek to insure the integrity of the trading process. They are complemented by a system designed to insure the quality of the physical gold used for delivery under the futures contracts. For gold to be eligible for delivery upon a COMEX contract, it must be deposited into an exchange-licensed depository from a source that is capable of guaranteeing the gold's quality. The three sources include: (1) a refiner approved for COMEX gold delivery, (2) an assayer approved to assay such gold, or (3) from another licensed depository, when it entered that depository via either (1) or (2). Gold can only be moved from any of these sources by a 14 COMEX-approved deliverer. Throughout every step, the gold bar must be accompanied by a complete documentary history of its movement. If this chain of integrity is broken at any point, the bar is not eligible and either must be re-assayed to prove its quality or sent back to the refinery to be recast. The trading unit of COMEX gold futures contracts is 100 troy ounces. Gold bars tendered for delivery can be cast in the form of either one bar or three one-kilogram bars. In either form, the gross weight of the bar or bars tendered for each contract must be within a five-percent tolerance. The bars must assay at not less than 995 fineness, i.e. 99.5% pure gold. The weight, fineness, bar number and identifying stamp of the refiner must be clearly incised on each bar by the approved refiner. The buyer taking delivery pays for the actual gold content, called the fine weight, in the bar. The fine weight is determined by multiplying the gross weight of the bar or bars tendered for each contract by their fineness. For example, a bar with a gross weight of 100 oz. with a fineness of 995, has a fine weight of 99.5 troy ounces. Delivery of COMEX gold is based on negotiable warehouse receipts, called warrants, for specific bars identified on the receipt which are stored in licensed depositories located in New York City. All procedures described above are set forth in the COMEX rules and regulations as in effect as of the date of this prospectus. These rules and regulations are established by the Board of Directors of the NYMEX and subject to change by that body. TOCOM Gold trading on TOCOM commenced on March 23, 1982. TOCOM is a non-profit membership organization as defined under the Commodity Exchange Law (1950) which regulates all commodities futures and options trading in Japan. TOCOM uses a computerized system of trading for gold and employs a clearinghouse system, which becomes a counterpart and guarantees performance for each transaction. Trading is based on fixed delivery dates and transaction sizes for the futures contracts and requires margin payments. The contract size is one (1) kilogram and if delivered requires that the gold be a minimum of 999.9 fine or 99.99 percent pure. Other Exchanges There are other gold exchange markets, such as the Istanbul Gold Exchange (trading gold since 1995), the Shanghai Gold Exchange (trading gold since October 2002), the Bolsa de Mercadorias & Futuros in Brazil (trading gold since 1986) and the Hong Kong Chinese Gold & Silver Exchange Society (trading gold since 1918). Exchange Regulation In the United States, commodity futures trading, and the markets where it is conducted, are regulated under the federal Commodity Exchange Act, which is administered by the CFTC, an independent agency of the federal government. The CFTC oversees the operation of the U.S. commodity futures markets, including COMEX. One of the principal public policy objectives of the Commodity Exchange Act is to insure the integrity of the markets it oversees and the reliability of the prices of trades on those markets. The Commodity Exchange Act and CFTC require markets, including COMEX, to have rules and procedures to prevent market manipulation, abusive trade practice and fraud and the CFTC conducts regular review of the markets' rule enforcement programs. Japan's METI establishes the rules for operation of the commodity exchange and administers the exchange and its members through requirements of law and various supervisory functions. The TOCOM performs financial and operational surveillance on its members' trading activities, scrutinizes positions held by members and large-scale customers, and monitors the price movements of futures markets by comparing them with cash and other derivative markets' prices. 15 Over-the-Counter Market The OTC gold market includes spot, forward, and option and other derivative transactions conducted on a principal-to-principal basis. While this is a global 24-hour per day market, its main centers are London, New York and Zurich. Ten members of the LBMA, the trade association that acts as the coordinator for activities conducted on behalf of its members and other participants in the London bullion market, act as OTC market-makers and most OTC market trades are cleared through London. The LBMA plays an important role in setting OTC gold trading industry standards. The LBMA's "London Good Delivery Lists", identify approved refiners of gold. In the OTC market, gold that meets the specifications for weight, dimensions, fineness (or purity), identifying marks (including the assay stamp of an LBMA-acceptable refiner) and appearance set forth in "The Good Delivery Rules for Gold and Silver Bars" published by the LBMA are "London Good Delivery Bars." A London Good Delivery Bar (typically called a "400 ounce bar") must contain between 350 and 430 fine troy ounces of gold (1 troy ounce = 31.1034768 grams), with a minimum fineness (or purity) of 995 parts per 1000 (99.5%), be of good appearance and be easy to handle and stack. The fine gold content of a gold bar is calculated by multiplying the gross weight of the bar (expressed in units of 0.025 troy ounces) by the fineness of the bar. A London Good Delivery Bar must also bear the stamp of one of refiners who are on the LBMA-approved list. A London Gold Delivery Bar, which is acceptable for settlement of any OTC transaction will be acceptable for delivery to the trust in connection with the issuance of Baskets of iShares. London Market Regulation Regulation of the London gold market's participants, including the major participating members of the LBMA is the responsibility of the Financial Services Authority (FSA) pursuant to the Financial Services and Markets Act 2000 (FSM Act). This law makes all UK-based banks and investment firms, subject to certain fitness and properness, capital adequacy, liquidity, and systems and control requirements. Spot, commercial forwards, and deposits of gold not covered by the FSM Act is subject to The London Code of Conduct for Non-Investment Products, which was established by market participants in conjunction with the Bank of England. Not a Regulated Commodity Pool The trust will not trade in gold futures contracts on COMEX or on any other futures exchange. The trust will take delivery of physical gold that complies with the COMEX gold delivery rules or the LBMA gold delivery rules. Because the trust will not trade in gold futures contracts on any futures exchange, the trust with not be regulated by the CFTC under the Commodity Exchange Act as a "commodity pool," and will not be operated by a CFTC-regulated commodity pool operator. Investors in the trust will not receive the regulatory protections afforded to investors in regulated commodity pools, nor may COMEX or any futures exchange enforce its rules with respect to the trust's activities. In addition, investors in the trust will not benefit from the protections afforded to investors in gold futures contracts on regulated futures exchanges. 16 BUSINESS OF THE TRUST The activities of the trust will be limited to (1) issuing Baskets of iShares in exchange for the gold deposited with the custodian as consideration, (2) selling gold as necessary to cover the sponsor's fee, trust expenses not assumed by the sponsor and other liabilities and (3) delivering gold in exchange for Baskets of iShares surrendered for redemption. The trust will not be actively managed. It will not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of gold. Trust Objective The objective of the trust is for the value of the iShares to reflect, at any given time, the price of gold owned by the trust at that time less the trust's expenses and liabilities. The iShares are intended to constitute a simple and cost-effective means of making an investment similar to an investment in gold. An investment in physical gold requires expensive and sometimes complicated arrangements in connection with the assay, transportation, warehousing and insurance of the metal. Traditionally, such expense and complications have resulted in investments in physical gold being efficient only in amounts beyond the reach of many investors. The iShares have been designed to remove the obstacles represented by the expense and complications involved in an investment in physical gold, while at the same time having an intrinsic value that reflects, at any given time, the price of the gold owned by the trust at such time less the trust expenses and liabilities. Although the iShares will not be the exact equivalent of an investment in gold, they provide investors with an alternative that allows a level of participation in the gold market through the securities market. An investment in iShares is: Asset-backed. The iShares will be backed by the assets of the trust. The trustee's arrangements with the custodian contemplate that at the end of each business day there can be in the trust account no more than 430 ounces of gold in an unallocated form. Accordingly, the bulk of the trust's gold holdings will be represented by physical gold, identified on the custodian's books as the property of the trust and held by the custodian in New York, London and other locations that may be authorized in the future. As accessible and easy to handle as any other investment in shares. Retail investors may purchase and sell iShares through traditional brokerage accounts. Because the intrinsic value of each iShare will be a function of the price of only a fraction of an ounce of gold held by the trust, the cash outlay necessary for an investment in iShares should be less than the amount required for currently existing means of investing in physical gold. iShares will be eligible for margin accounts. Liquid. Although there can be no assurance that an actively traded market in the iShares will develop, the iShares will be listed and traded on the American Stock Exchange under the symbol "IAU". Relatively cost efficient. Because the expenses involved in an investment in physical gold will be dispersed among all holders of iShares, an investment in iShares may represent a cost-efficient alternative to investments in gold for investors not otherwise in a position to participate directly in the market for physical gold. Secondary Market Trading While the objective of the trust is for the value of the iShares to reflect, at any given time, the price of gold owned by the trust at that time less the trust's expenses and liabilities, iShares may trade at, above or below their NAV. The NAV of iShares will fluctuate with changes in the market value of the trust's assets. The trading prices of iShares will fluctuate in accordance with changes in their NAV as well as market supply and demand. The amount of the discount or premium in the trading price relative to the NAV may be influenced by 17 non-concurrent trading hours between the major gold markets and the AMEX. While the iShares will trade on the AMEX until 4:15 P.M. New York time, liquidity in the market for gold will be reduced after the close of the major world gold markets, including London, Zurich and COMEX (which usually closes at 1:30 P.M. New York time). As a result, during this time, trading spreads, and the resulting premium or discount, on iShares may widen. However, given that iShares can be created and redeemed only in Baskets at NAV, the sponsor believes that the arbitrage opportunities may provide a mechanism to mitigate the effect of such premium or discount. Valuation of Gold; Computation of Net Asset Value On each business day, as soon as practicable after the close of regular trading of COMEX gold futures contracts (which is normally 1:30 P.M. New York time), the trustee will evaluate the gold held by the trust and determine the net asset value of the trust. For purposes of making these calculations, a business day means any day other than a day when the AMEX is closed for regular trading. The trustee will value the trust's gold on the basis of that day's announced COMEX settlement price for the spot month gold futures contract. At any point in time, the spot month contract is the futures contract then closest to maturity. If there is no announced COMEX settlement price for spot month gold futures on a business day, the trustee will use the most recently announced COMEX settlement price for spot month gold futures contracts unless the trustee, in consultation with the sponsor, determines that such price is inappropriate as a basis for evaluation. The COMEX daily settlement price for each gold futures contract is established by a subcommittee of COMEX members shortly after the close of trading in New York. The daily settlement price for each contract (delivery month) is derived from the daily settlement price for the most active futures contract month, which is not necessarily the spot month. That settlement price for the most active futures contract month is the average, rounded off to the nearest multiple of ten cents, of the highest and lowest price of the trades for that contract month reported during the last one minute of trading prior to the close of the market. For all other gold futures contract months, which may include the spot month, the settlement prices are determined by COMEX based upon the differentials reflected in spread trades between adjacent months, such differentials being directly or indirectly related to the most active month. These differentials are determined by the average of the highest and lowest spread trades (trades based upon the differential between the price for two contract months) reported during the last fifteen minutes of trading prior to the close of the market. In the case that there were no such spread trades, the average of the bids and offers for spread transactions during that last fifteen-minute period are used. In the case that there were no such bids and offers during that time, the contracts are settled at prices consistent with the differentials for other contract months that were settled by the first or second method. If the third method is used, the subcommittee of the COMEX members establishing those settlement prices provides a record of the differentials from other contract months which formed the basis for those settlements. If the COMEX establishes, with the approval of, or after regulatory notification to, the CFTC, rules for regularly determining a gold price that is different from that described above, the trustee, in consultation with the sponsor, may decide to evaluate the gold held by the trust using such other COMEX gold price, and the new price will become effective 60 days after notice of the trustee's decision is sent to the holders of iShares. Once the value of the gold has been determined, the trustee will subtract all accrued fees (other than the fees to be computed by reference to the value of the trust or its assets), expenses and other liabilities of the trust from the total value of the gold and all other assets of the trust. The resulting figure is the adjusted net asset value of the trust, which is used to compute all fees (including the trustee's and the sponsor's fees) which are calculated from the value of the trust's assets. To determine the net asset value of the trust, the trustee will subtract from the adjusted net asset value of the trust the amount of accrued fees computed from the value of the trust's assets. The trustee will also determine the NAV by dividing the net asset value of the trust by the number of the iShares outstanding at the time the computation is made. 18 Trust Expenses The trust's only ordinary recurring expense is expected to be the sponsor's fee. In exchange for the sponsor's fee the sponsor has agreed to assume the following administrative and marketing expenses incurred by the trust: the trustee's monthly fee, the custodian's fee, AMEX listing fees, SEC registration fees, printing and mailing costs, audit fees and up to $100,000 per annum in legal expenses. The sponsor will also pay the costs of the trust's organization and the initial sale of the iShares, including the applicable SEC registration fees. The sponsor's fee will accrue daily at an annualized rate equal to 0.40% of the adjusted net asset value of the trust and will be payable monthly in arrears. The trustee will, when directed by the sponsor, and, in the absence of such direction, may, in its discretion, sell gold in such quantity and at such times, as may be necessary to permit payment of the sponsor's fee and of trust expenses not assumed by the sponsor. The trustee is authorized to sell gold at such times and in the smallest amounts required to permit such payments as they become due, it being the intention to avoid or minimize the trust's holdings of assets other than gold. Accordingly, the amount of gold to be sold will vary from time to time depending on the level of the trust's expenses and the market price of gold. The custodian has agreed to purchase from the trust, at the request of the trustee, gold needed to cover trust expenses at a price at least equal to the price used by the trustee to determine the value of the gold held by the trust on the date of the sale. Cash held by the trustee pending payment of the trust's expenses will not bear any interest. Each sale of gold by the trust will be a taxable event to Shareholders. See "United States Federal Tax Consequences--Taxation of U.S. Shareholders." Impact of Trust Expenses on the Trust's Net Asset Value The trust will sell gold to raise the funds needed for the payment of the sponsor's fee and all trust expenses not assumed by the sponsor. The purchase price received as consideration for such sales will be the trust's sole source of funds to cover its liabilities. The trust will not engage in any activity designed to derive a profit from changes in the price of gold. Gold not needed to redeem Baskets of iShares, or to cover the sponsor's fee and trust expenses not assumed by the trustee, will be held in physical form by the custodian (except for residual amounts not exceeding 430 ounces which will be held in unallocated form by the custodian on behalf of the trust). As a result of the recurring sales of gold necessary to pay the sponsor's fee and the trust expenses not assumed by the sponsor, the net asset value of the trust and, correspondingly, the fractional amount of physical gold represented by each iShare will decrease over the life of the trust. New deposits of gold, received in exchange for additional new Baskets issued by the trust, will not reverse this trend. The following table, prepared by the sponsor, illustrates the anticipated impact of the sales of gold discussed above on the fractional amount of gold represented by each outstanding iShare. It assumes that the only sales of gold will be those needed to pay the sponsor's fee and that the price of gold and the number of iShares remain constant during the three-year period covered. The table does not show the impact of any extraordinary expenses the trust may incur. Any such extraordinary expenses, if and when incurred, will accelerate the decrease in the fractional amount of gold represented by each iShare. Calculation of NAV: Year ---------------------------------- 1 2 3 ---------- ---------- ---------- Hypothetical gold price per ounce................... $ 400.00 $ 400.00 $ 400.00 Sponsor's fee....................................... 0.40% 0.40% 0.40% Shares of trust, beginning.......................... 100,000 100,000 100,000 Ounces of gold in trust, beginning.................. 10,000.00 9,960.00 9,920.16 Beginning adjusted net asset value of the trust..... $4,000,000 $3,984,000 $3,968,064 Ounces of gold to be sold to cover the sponsor's fee 40.00 39.84 39.68 Ounces of gold in trust, ending..................... 9,960.00 9,920.16 9,880.48 Ending adjusted net asset value of the trust........ $3,984,000 $3,968,064 $3,952,192 Ending NAV.......................................... $ 39.84 $ 39.68 $ 39.52
19 DESCRIPTION OF THE iSHARES AND THE TRUST AGREEMENT The trust was formed on [.], 2004 when the sponsor and the trustee signed the Trust Agreement and the Initial Purchaser made the initial deposit for the issuance of three Baskets. The purpose of the trust is to own gold transferred to the trust in exchange for iShares issued by the trust. The trust is governed by the Trust Agreement among the sponsor, the trustee, the registered holders and beneficial owners of iShares and all persons that deposit gold for the purpose of creating iShares. The Trust Agreement sets out the rights of depositors of gold and registered holders of iShares and the rights and obligations of the sponsor and the trustee. New York law governs the Trust Agreement, the trust and the iShares. The following is a summary of material provisions of the Trust Agreement. It is qualified by reference to the entire Trust Agreement, which is filed as an exhibit to the registration statement of which the prospectus is a part. Each iShare represents a fractional undivided beneficial interest in the net assets of the trust. The trust will issue iShares only in Baskets of 50,000 or integral multiples thereof. Baskets of iShares will be redeemed by the trust in exchange for the amount of gold having a value equal to the NAV times the number of iShares redeemed. The trust is not a registered investment company under the Investment Company Act of 1940 and is not required to register under such act. Deposit of Gold; Issuance of Baskets of iShares The trust expects to create and redeem iShares on a continuous basis but only in Baskets of 50,000 iShares. Upon the deposit of the corresponding amount of gold with the custodian, and the payment of the trustee's applicable fee and of any expenses, taxes or charges (such as stamp taxes or stock transfer taxes or fees), the trustee will deliver the appropriate number of Baskets to the DTC account of the depositing Authorized Participant. Only Authorized Participants can deposit gold and receive Baskets of iShares in exchange. The sponsor and the trustee will maintain a current list of Authorized Participants. The Basket Gold Amount necessary for the creation of a Basket will change from day to day. The initial Basket Gold Amount is 5,000 fine ounces of gold. The trustee will adjust the quantity of gold included in the Basket Gold Amount for a business day as appropriate to reflect sales of gold and any loss of deposited gold that occurs, through and including that business day and as may be required to reflect expenses accrued through and including that business day. The trustee will determine the quantity of gold equal in value to those expenses. See "Business of the Trust--Valuation of Gold; Computation of Net Asset Value" for an explanation of how the value of gold is determined by the trustee. The trustee will subtract that number of fine ounces of gold from the total number of fine ounces of gold then held by the trust as of that business day, and divide the resulting gold amount by the number of Baskets outstanding as of that business day. Fractions of a fine ounce of gold included in the Basket Gold Amount smaller than .001 fine ounce will be disregarded. Before making a deposit, the Authorized Participant must deliver to the trustee a written purchase order indicating the number of Baskets it intends to acquire and the city or cities where it expects to make the corresponding deposit of gold with the custodian. The trustee will acknowledge the purchase order unless it or the sponsor decides to refuse the deposit as described below under "Requirements for Trustee Actions." The date the trustee receives that order will determine the Basket Gold Amount the Authorized Participant needs to deposit. However, orders received by the trustee after the closing of regular trading of gold futures contracts on COMEX will be treated as received on the next following date on which COMEX is open for such trading. The trustee has entered into an agreement with the custodian which contains arrangements so that gold can be delivered to the custodian in New York, New York, London, England, or at other locations that may be authorized in the future. No iShares will be issued unless and until the custodian has informed the trustee that it has allocated to the trust's account the corresponding amount of gold in physical bars (except that any amounts of less than 430 ounces may be held in the trust account on an unallocated basis). 20 Redemption of Baskets of iShares; Withdrawal of Gold Authorized Participants, acting on authority of the registered holder of iShares, may surrender Baskets of iShares in exchange for the corresponding Basket Gold Amount announced by the trustee. Upon the surrender of such iShares and the payment of the trustee's applicable fee and of any expenses, taxes or charges (such as stamp taxes or stock transfer taxes or fees), the trustee will deliver to the order of the redeeming Authorized Participant the amount of gold corresponding to the redeemed Baskets. iShares can only be surrendered for redemption in Baskets of 50,000 iShares each. Before surrendering Baskets of iShares for redemption, an Authorized Participant must deliver to the trustee a written request indicating the number of Baskets it intends to redeem and the location where it would like to take delivery of the gold represented by such Baskets. The trustee will acknowledge the order unless it or the sponsor decides to refuse the surrender as described below under "Requirements for Trustee Actions." The date the trustee receives that order will determine the Basket Gold Amount to be received in exchange. However, orders received by the trustee after the closing of regular trading of gold futures contracts on COMEX will be treated as received on the next following date on which COMEX is open for such trading. The custodian will make the gold available for collection at its office or at the office of a sub-custodian if the gold is being held by a sub-custodian. Gold will be delivered at the locations designated by the trustee, in consultation with the custodian. Redeeming Authorized Participants will be entitled to express a preference as to where they would like to have gold delivered, but will have no right to receive delivery at a specified location. Gold will be delivered to the redeeming Authorized Participants in the form of physical bars only (except that any amount of no less than 430 ounces may be transferred to an unallocated account of or as ordered by, the redeeming Authorized Participant). Certificates Evidencing the iShares The iShares will be evidenced by certificates executed and delivered by the trustee on behalf of the trust. The sponsor expects that DTC will accept the iShares for settlement through its book-entry settlement system. So long as the iShares are eligible for DTC settlement, there will be only one certificate evidencing shares that will be registered in the name of a nominee of DTC. Investors will be able to own iShares only in the form of book-entry security entitlements with DTC or direct or indirect participants in DTC. No investor will be entitled to receive a separate certificate evidencing iShares. Because iShares can only be held in the form of book-entries through DTC and its participants, investors must rely on DTC, a DTC participant and any other financial intermediary through which they hold iShares to receive the benefits and exercise the rights described in this section. Investors should consult with their broker or financial institution to find out about the procedures and requirements for securities held in DTC book-entry form. Cash and Other Distributions If the sponsor and trustee determine that there is more cash being held in the trust than is needed to pay the trust's expenses for the next month, the trustee will distribute the extra cash to DTC. If the trust receives any property other than gold or cash, the trustee will distribute that property to DTC by any means it thinks is lawful, equitable and feasible. If it cannot make the distribution in that way, the trustee will sell the property and distribute the net proceeds, in the same way as it does with cash. Registered holders of iShares will receive these distributions in proportion to the number of iShares owned. Before making a distribution, the trustee will deduct any applicable withholding taxes and any fees and expenses of the trust that have not been paid. It will distribute only whole United States dollars and cents and will round fractional cents to the nearest whole cent. The trustee is not responsible if it decides that it is unlawful or impractical to make a distribution available to registered holders. 21 Voting Rights iShares do not have any voting rights. However, registered holders of at least 25% of the iShares have the right to require the trustee to cure any material breach by it of the Trust Agreement, and registered holders of at least 75% of the iShares have the right to require the trustee to terminate the Trust Agreement as described below. Fees and Expenses of the Trustee . Each deposit of gold for the creation of Baskets of iShares and each surrender of Baskets of iShares for the purpose of withdrawing trust property (including if the Trust Agreement terminates) must be accompanied by a payment to the trustee of a fee of $1,000. . The trustee will be entitled to reimburse itself from the assets of the trust for all expenses and disbursements incurred by it for extraordinary services it may provide to the trust or in connection with any discretionary action the trustee may take to protect the trust or the interests of the holders. Trust Expenses and Gold Sales In addition to the fee payable to the sponsor, the trustee will pay the following expenses out of the assets of the trust: . any expenses of the trust that are not assumed by the sponsor; . any taxes and other governmental charges that may fall on the trust or its property; . expenses and costs of any action taken by the trustee or the sponsor to protect the trust and the rights and interests of holders of iShares; and . any indemnification of the sponsor as described below. The trustee will sell the trust's gold from time to time as necessary to permit payment of the fees and expenses that the trust is required to pay. See "Business of the Trust--Trust Expenses." The trustee is not responsible for any depreciation or loss incurred by reason of sales of gold made in compliance with the Trust Agreement. Payment of Taxes The trustee may deduct the amount of any taxes owed from any distributions it makes. It may also sell trust assets, by public or private sale, to pay any taxes owed. Registered holders of iShares will remain liable if the proceeds of the sale are not enough to pay the taxes. Evaluation of Gold and the Trust Assets See "Business of the Trust--Valuation of Gold; Computation of Net Asset Value". Amendment and Termination The sponsor and the trustee may agree to amend the Trust Agreement without the consent of the holders of iShares. If an amendment imposes or increases fees or charges, except for taxes and other governmental charges, or prejudices a substantial right of holders of iShares, it will not become effective for outstanding iShares until 30 days after the trustee notifies DTC of the amendment. At the time an amendment becomes effective, by continuing to hold iShares, investors are deemed to agree to the amendment and to be bound by the Trust Agreement as amended. 22 The trustee will terminate the Trust Agreement if: . the trustee is notified that the iShares are delisted from the AMEX and are not approved for listing on another national securities exchange within five business days of their delisting; . holders of at least 75% of the outstanding iShares notify the trustee that they elect to terminate the trust; . 60 days have elapsed since the trustee notified the sponsor of the trustee's election to resign and a successor trustee has not been appointed and accepted its appointment; . the SEC determines that the trust is an investment company under the Investment Company Act of 1940, as amended, and the trustee has actual knowledge of that determination; . the aggregate market capitalization of the trust, based on the closing price for the iShares, was less than $350 million on each of five consecutive trading days and the trustee receives, within six months from the last of those trading days, notice that the sponsor has decided to terminate the trust; . the CFTC determines that the trust is a commodity pool under the Commodity Exchange Act and the trustee has actual knowledge of that determination; or . the trust fails to qualify for treatment, or ceases to be treated, as a grantor trust for United States federal income tax purposes and the trustee receives notice that the sponsor has determined that the termination of the trust is advisable. If not terminated earlier by the trustee, the trust will terminate on [.], 2044. The trustee will notify DTC at least 30 days before the date for termination of the Trust Agreement. After termination, the trustee and its agents will do the following under the Trust Agreement but nothing else: (1) collect distributions pertaining to trust property, (2) pay the trust's expenses and sell gold as necessary to meet those expenses and (3) deliver trust property upon surrender and cancellation of iShares. Ninety days or more after termination, the trustee may sell any remaining trust property by public or private sale. After that, the trustee will hold the money it received on the sale, as well as any other cash it is holding under the Trust Agreement for the pro rata benefit of the registered holders that have not surrendered their iShares. It will not invest the money and has no liability for interest. The trustee's only obligations will be to account for the money and other cash, after deduction of applicable fees, trust expenses and taxes and governmental charges. Limitations on Obligations and Liability The Trust Agreement expressly limits the obligations of the sponsor and the trustee. It also limits the liability of the sponsor and the trustee. The sponsor and the trustee: . are only obligated to take the actions specifically set forth in the Trust Agreement without negligence or bad faith; . are not liable if either of them is prevented or delayed by law or circumstances beyond their control from performing their obligations under the Trust Agreement; . are not liable if they exercise discretion permitted under the Trust Agreement; . have no obligation to prosecute a lawsuit or other proceeding related to the iShares or the Trust Agreement on behalf of the holders of iShares or on behalf of any other person; . may rely upon any documents they believe in good faith to be genuine and to have been signed or presented by the proper party. In addition, the sponsor will be indemnified by the trust for any liability or expense it incurs without negligence, bad faith or willful misconduct on its part. 23 Requirements for Trustee Actions Before the trustee will deliver or register a transfer of iShares, make a distribution on iShares, or permit withdrawal of trust property, the trustee may require: . payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any iShares or trust property; . satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and . compliance with regulations it may establish, from time to time, consistent with the Trust Agreement, including presentation of transfer documents. The trustee may suspend the delivery of iShares, registrations of transfer of iShares and surrenders of iShares for the purpose of withdrawing trust property generally, or may refuse particular deposit, transfer or withdrawal requests at any time if the trustee or the sponsor thinks it necessary or advisable for any reason. 24 THE SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM; GLOBAL SECURITY DTC will act as securities depository for the iShares. DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (Exchange Act). DTC was created to hold securities of its participants and to facilitate the clearance and settlement of transactions in such securities among the DTC Participants through electronic book-entry changes. This eliminates the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly. DTC agrees with and represents to its participants that it will administer its book-entry system in accordance with its rules and by-laws and requirements of law. Individual certificates will not be issued for the iShares. Instead, a global certificate will be signed by the trustee on behalf of the trust, registered in the name of Cede & Co., as nominee for DTC, and deposited with the trustee on behalf of DTC. The global certificate will represent all of the iShares outstanding at any time. Upon the settlement date of any creation, transfer or redemption of iShares, DTC will credit or debit, on its book-entry registration and transfer system, the amount of the iShares so created, transferred or redeemed to the accounts of the appropriate DTC Participants. The trustee and the DTC Participants will designate the accounts to be credited and charged in the case of creation or redemption of iShares. Beneficial ownership of the iShares will be limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Owners of beneficial interests in the iShares will be shown on, and the transfer of ownership will be effected only through, records maintained by DTC (with respect to DTC Participants), the records of DTC Participants (with respect to Indirect Participants, and the records of Indirect Participants (with respect to beneficial owners that are not DTC Participants or Indirect Participants). Beneficial owners are expected to receive from or through the DTC Participant a written confirmation relating to their purchase of the iShares. Investors may transfer the iShares through DTC by instructing the DTC Participant or Indirect Participant through which the Shareholders hold their iShares to transfer the iShares. Transfers will be made in accordance with standard securities industry practice. DTC may decide to discontinue providing its service for the iShares by giving notice to the trustee and the sponsor. Under such circumstances, the trustee and the sponsor will either find a replacement for DTC to perform its functions at a comparable cost or, if a replacement is unavailable, deliver separate certificates for iShares to the DTC Participants having iShares credited to their accounts. The rights of the Shareholders generally must be exercised by DTC Participants acting on their behalf in accordance with the rules and procedures of DTC. The Trust Agreement provides that, as long as the iShares are represented by a global certificate registered in the name of DTC or its nominee, as described above, the trustee will be entitled to treat DTC as the holder of the iShares. 25 THE SPONSOR The sponsor is a national banking association chartered in the United States and a wholly-owned subsidiary of Barclays Bank PLC. The sponsor operates as a limited purpose trust company. Its primary regulator is the Office of the Comptroller of the Currency, the agency of the U.S. Treasury Department that regulates United States national banks. The sponsor's principal office is located at 45 Fremont Street, San Francisco, CA 94105. The Sponsor's Role The sponsor will arrange for the creation of the trust, the registration of the iShares for their public offering in the United States and the listing of the iShares on the AMEX. The sponsor has agreed to assume the following administrative and marketing expenses incurred by the trust: the trustee's monthly fee, the custodian's fee, AMEX listing fees, SEC registration fees, printing and mailing costs, audit fees and up to $100,000 per annum in legal expenses. The sponsor will also pay the costs of the trust's organization and the initial sale of the iShares, including the applicable SEC registration fees. The sponsor will not exercise day-to-day oversight over the trustee or the custodian. The sponsor may remove the trustee and appoint a successor trustee if the trustee ceases to meet certain objective requirements (including the requirement that it have capital, surplus and undivided profits of at least $150 million) or if, having received written notice of a material breach of its obligations under the Trust Agreement, the trustee has not cured the breach within thirty days. The sponsor also has the right to replace the trustee during the ninety days following any merger, consolidation or conversion in which the trustee is not the surviving entity or, in its discretion, on the fifth anniversary of the creation of the trust or on any subsequent third anniversary thereafter. The sponsor also has the right to approve any new or additional custodian that the trustee may wish to appoint. The Sponsor's Fee The sponsor's fee will accrue daily at an annualized rate equal to 0.40% of the adjusted net asset value of the trust and will be payable monthly in arrears. 26 THE TRUSTEE The Bank of New York, a banking corporation organized under the laws of the State of New York with trust powers, will serve as the trustee. The Bank of New York has a trust office at 101 Barclay Street, Floor 6E, New York, New York 10286. The Bank of New York is subject to supervision by the New York State Banking Department and the Board of Governors of the Federal Reserve System. Information regarding creation and redemption Basket composition, NAV of the trust, transaction fees and the names of the parties that have each executed an Authorized Participant Agreement may be obtained from The Bank of New York by calling the following number: (212) 815-6250. A copy of the Trust Agreement is available for inspection at The Bank of New York's trust office identified above. The Bank of New York had at least $150 million in capital and retained earnings as of December 31, 2003. The Trustee's Role The trustee is responsible for the day-to-day administration of the trust. This includes (1) processing orders for the creation and redemption of Baskets; (2) coordinating with the custodian the receipt and delivery of gold transferred to, or by, the trust in connection with each issuance and redemption of Baskets; (3) calculating the net asset value and the adjusted net asset value of the trust on each business day; and (4) selling the trust's gold as needed to cover the trust's expenses. The trustee's monthly fees will be paid by the sponsor. The trustee and any of its affiliates may from time to time purchase or sell iShares for their own account, as agent for their customers and for accounts over which they exercise investment discretion. THE CUSTODIAN The Bank of Nova Scotia, a bank organized under the laws of Canada will serve as the custodian of the trust's gold. The Custodian's Role The custodian is responsible for safekeeping the gold deposited into the trust in connection with the creation of Baskets. The custodian is appointed by the trustee and is responsible to the trustee only. The custodian has no obligation to accept any additional delivery on behalf of the trust if, after giving effect to such delivery, the total value of the trust's gold held by the custodian exceeds $2 billion. If this limit is exceeded, the sponsor anticipates that the trustee, in consultation with the sponsor, would retain an additional custodian. The custodian is responsible for conducting certain limited inspections of the gold delivered by an Authorized Participant and exercising a level of care similar to that used for its own account. However, the custodian is not responsible for conducting any chemical or other tests designed to verify that such gold meets the purity requirements referred to in the Trust Agreement. The custodian's fees will be paid by the sponsor. The custodian has agreed to purchase from the trust, at the request of the trustee, gold needed to cover trust expenses at a price at least equal to the price used by the trustee to determine the value of the gold held by the trust on the date of the sale. The custodian and any of its affiliates may from time to time purchase or sell iShares for their own account, as agent for their customers and for accounts over which they exercise investment discretion. 27 CUSTODY OF THE TRUST'S GOLD The following is a description of the material provisions of the custodian agreement between the trustee and the custodian under which the custodian will hold the gold that belongs to the trust. For more complete information, see the form of custodian agreement that is filed as an exhibit to the registration statement of which this prospectus is a part. The custodian's office is located at One Liberty Plaza, New York, New York 10006. New York law governs the custodian agreement. The custodian will receive and hold gold that is deposited for the account of the trust. The custodian will release gold from the trust's account when instructed in writing by the trustee, and not otherwise. The custodian may keep the trust's gold at locations in New York, New York, London, England, or with the consent of the trustee and the sponsor, in other places. The custodian may, at its own expense and risk, use subcustodians to discharge its obligations to the trust under the custodian agreement. When instructed by the trustee, the custodian will make gold from the trust's account available for collection at its office or at the office of a subcustodian where the gold is being held or will deliver up to 430 ounces of gold on an unallocated basis to any account maintained with it or, if the custodian considers it lawful and practical, to an account maintained with any other custodial institution. As a result, in connection with redemptions of shares, gold may be received on an unallocated basis in an account maintained anywhere (if the custodian considers it lawful and practical to do so), or gold may be collected at any of the physical locations where the custodian is holding the trust's gold in New York City or in London, to the extent the gold is available in any particular location. The custodian will be liable and must indemnify the trustee for any loss or liability relating to any act or omission of the custodian, including any failure of the custodian to act in accordance with the trustee's instructions or any physical loss, destruction or damage to the gold held for the trust's account, except for losses due to nuclear accidents, terrorism, riots, acts of God, insurrections, strikes and similar causes beyond the control of the custodian for which the custodian will not be responsible to the trust. The custodian will be responsible for the trust's gold held at subcustodians to the same extent as if that gold were in the custodian's own vault. The custodian may hold gold for the account of the trust on an unallocated basis. However, the custodian must take reasonable action to minimize the amount of bullion in the trust's account that is on an unallocated basis, and the custodian must allocate gold bars to the account of the trust so that no more than 430 ounces of gold are held for the trust's account on an unallocated basis at the end of each business day of the custodian. The custodian must maintain at least the minimum amount of capital required to be an approved gold depository for the purposes of delivery with respect of gold futures traded on COMEX and must maintain adequate insurance covering any loss of property held for the trust. The sponsor expects the custodian's insurance will generally support the ability of the custodian to meet its obligations under the custodian agreement, but that insurance does not directly benefit the trust. Either the trustee or the custodian may terminate the custodian agreement on 60 days' prior notice. 28 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following discussion of the material United States federal income tax consequences that generally will apply to the purchase, ownership and disposition of iShares by a U.S. Shareholder (as defined below), and certain United States federal income consequences that may apply to an investment in iShares by a Non-U.S. Shareholder (as defined below), represents, insofar as it describes conclusions as to United States federal income tax law and subject to the limitations and qualifications described therein, the opinion of Clifford Chance US LLP, special United States federal income tax counsel to the sponsor. The discussion below is based on the Code, Treasury Regulations promulgated thereunder and judicial and administrative interpretations of the Code, all as in effect on the date of this prospectus and all of which are subject to change either prospectively or retroactively. The tax treatment of Shareholders may vary depending upon their own particular circumstances. Certain Shareholders (including banks, financial institutions, insurance companies, tax-exempt organizations, broker- dealers, traders, persons holding iShares as a position in a "hedging," "straddle," "conversion," or "constructive sale" transaction for United States federal income tax purposes, persons whose "functional currency" is not the United States dollar, or other investors with special circumstances) may be subject to special rules not discussed below. In addition, the following discussion applies only to investors who will hold iShares as "capital assets" within the meaning of section 1221 of the Code. Moreover, the discussion below does not address the effect of any state, local or foreign tax law on an owner of iShares. Purchasers of iShares are urged to consult their own tax advisors with respect to all federal, state, local and foreign tax law considerations potentially applicable to their investment in iShares. For purposes of this discussion, a "U.S. Shareholder" is a Shareholder that is: . An individual who is treated as a citizen or resident of the United States for United States federal income tax purposes; . A corporation or partnership (or entity treated as a corporation or partnership for United States federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, including the District of Columbia; . An estate, the income of which is includible in gross income for United States federal income tax purposes regardless of its source; or . A trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under applicable Treasury Regulations to be treated as a domestic trust. A Shareholder that is not a U.S. Shareholder as defined above is considered a "Non-U.S. Shareholder" for purposes of this discussion. Taxation of the Trust The sponsor and the trustee will treat the trust as a "grantor trust" for United States federal income tax purposes. In the opinion of Clifford Chance US LLP, although not free from doubt due to the lack of directly governing authority, the trust will be classified as a "grantor trust" for United States federal income tax purposes. As a result, the trust itself will not be subject to United States federal income tax. Instead, the trust's income and expenses will "flow through" to the Shareholders, and the trustee will report the trust's income, gains, losses and deductions to the IRS on that basis. The opinion of Clifford Chance US LLP represents only its best legal judgment and is not binding on the IRS or any court. Accordingly, there can be no assurance that the IRS will agree with the conclusions of counsel's opinion and it is possible that the IRS or another tax authority could assert a position contrary to one or all of those conclusions and that a court could sustain that contrary position. Neither the sponsor nor the trustee will request a ruling from the IRS with respect to the classification of the trust for United States federal income tax purposes. If the IRS were to assert successfully that the trust is not classified as a "grantor trust," the trust would be classified as a partnership for United States federal income tax purposes, which may affect timing and other tax consequences to the Shareholders. 29 The following discussion assumes that the trust will be classified as a "grantor trust" for United States federal income tax purposes. Taxation of U.S. Shareholders Shareholders will be treated, for United States federal income tax purposes, as if they directly owned a pro rata share of the underlying assets held in the trust. Shareholders also will be treated as if they directly received their respective pro rata shares of the trust's income, if any, and as if they directly incurred their respective pro rata shares of the trust's expenses. In the case of a Shareholder that purchases iShares for cash, its initial tax basis in its pro rata share of the assets held in the trust at the time it acquires its iShares will be equal to its cost of acquiring the iShares. In the case of a Shareholder that acquires its iShares as part of a creation of a Basket, the delivery of gold to the trust in exchange for the underlying gold represented by the iShares will not be a taxable event to the Shareholder, and the Shareholder's tax basis and holding period for the Shareholder's pro rata share of the gold held in the trust will be the same as its tax basis and holding period for the gold delivered in exchange therefor. For purposes of this discussion, and unless stated otherwise, it is assumed that all of a Shareholder's iShares are acquired on the same date and at the same price per iShare. Shareholders that hold multiple lots of iShares, or that are contemplating acquiring multiple lots of iShares, should consult their own tax advisers as to the determination of the tax basis and holding period for the underlying gold related to such iShares. When the trust sells gold, for example to pay expenses, a Shareholder will recognize gain or loss in an amount equal to the difference between (a) the Shareholder's pro rata share of the amount realized by the trust upon the sale and (b) the Shareholder's tax basis for its pro rata share of the gold that was sold. A Shareholder's tax basis for its share of any gold sold by the trust generally will be determined by multiplying the Shareholder's total basis for its share of all of the gold held in the trust immediately prior to the sale, by a fraction the numerator of which is the amount of gold sold, and the denominator of which is the total amount of the gold held in the trust immediately prior to the sale. After any such sale, a Shareholder's tax basis for its pro rata share of the gold remaining in the trust will be equal to its tax basis for its share of the total amount of the gold held in the trust immediately prior to the sale, less the portion of such basis allocable to its share of the gold that was sold. The delivery to the trust of gold in specified denominations (e.g., COMEX gold in denominations of 100 ounces) and the subsequent delivery by the trust of gold in different denominations (e.g., LBMA gold in denominations of 400 ounces) will not constitute a taxable event. Upon a Shareholder's sale of some or all of its iShares, the Shareholder will be treated as having sold the portion of its pro rata share of the gold held in the trust at the time of the sale that is attributable to the iShares sold. Accordingly, the Shareholder generally will recognize gain or loss on the sale in an amount equal to the difference between (a) the amount realized pursuant to the sale of the iShares, and (b) the Shareholder's tax basis for the portion of its pro rata share of the gold held in the trust at the time of sale that is attributable to the iShares sold, as determined in the manner described in the preceding paragraph. A redemption of some or all of a Shareholder's iShares in exchange for the underlying gold represented by the iShares redeemed generally will not be a taxable event to the Shareholder. In addition, a Shareholder that acquires its iShares as part of a creation of a Basket by the delivery to the trust of gold in specified denominations (e.g., COMEX gold in denominations of 100 ounces), the subsequent redemption of its iShares for gold delivered by the trust in different denominations (e.g., LBMA gold in denominations of 400 ounces) will not constitute a taxable event, provided that amount of gold received upon redemption contains the equivalent metallic content of the gold delivered upon creation, less amounts accrued or sold to pay the trust's expenses and other charges. The Shareholder's tax basis for the gold received in the redemption generally will be the same as the Shareholder's tax basis for the portion of its pro rata share of the gold held in the trust immediately prior to the redemption that is attributable to the iShares redeemed. The Shareholder's holding period with respect to the gold received should include the period during which the Shareholder held the iShares redeemed. A subsequent sale of the gold received by the Shareholder will be a taxable event. 30 After any sale or redemption of less than all of a Shareholder's iShares, the Shareholder's tax basis for its pro rata share of the gold held in the trust immediately after such sale or redemption generally will be equal to its tax basis for its share of the total amount of the gold held in the trust immediately prior to the sale or redemption, less the portion of such basis which is taken into account in determining the amount of gain or loss recognized by the Shareholder upon such sale or, in the case of a redemption, is treated as the basis of the gold received by the Shareholder in the redemption. Maximum 28% Long-Term Capital Gains Tax Rate for U.S. Shareholders Who Are Individuals Under current law, gains recognized by individuals from the sale of "collectibles," including gold, held for more than one year are taxed at a maximum rate of 28%, rather than the current 15% rate applicable to most other long-term capital gains. For these purposes, gain recognized by an individual upon the sale of an interest in a trust that holds collectibles is treated as gain recognized on the sale of collectibles, to the extent that the gain is attributable to unrealized appreciation in value of the collectibles held by the trust. Therefore, any gain recognized by an individual U.S. Shareholder attributable to a sale of iShares held for more than one year, or attributable to the trust's sale of any gold which the Shareholder is treated (through its ownership of iShares) as having held for more than one year, generally will be taxed at a maximum rate of 28%. The tax rates for capital gains recognized upon the sale of assets held by an individual U.S. Shareholder for one year or less or by a taxpayer other than an individual United States taxpayer are generally the same as those at which ordinary income is taxed. Brokerage Fees and Trust Expenses Any brokerage or other transaction fee incurred by a Shareholder in purchasing iShares will be treated as part of the Shareholder's tax basis in the underlying assets of the trust. Similarly, any brokerage fee incurred by a Shareholder in selling iShares will reduce the amount realized by the Shareholder with respect to the sale. Shareholders will be required to recognize the full amount of gain or loss upon a sale of gold by the trust (as discussed above), even though some or all of the proceeds of such sale are used by the trustee to pay trust expenses. Shareholders may deduct their respective pro rata shares of each expense incurred by the trust to the same extent as if they directly incurred the expense. Shareholders who are individuals, estates or trusts, however, may be required to treat some or all of the expenses of the trust as miscellaneous itemized deductions. Individuals may deduct certain miscellaneous itemized deductions only to the extent they exceed 2% of adjusted gross income. In addition, such deductions may be subject to phase-outs and other limitations under applicable provisions of the Code. Investment by Regulated Investment Companies Mutual funds and other investment vehicles which are "regulated investment companies" within the meaning of Code section 851 should consult with their tax advisors concerning (i) the likelihood that an investment in iShares, although they are a "security" within the meaning of the Investment Company Act of 1940, may be considered an investment in the underlying gold for purposes of Code section 851(b), and (ii) the extent to which an investment in iShares might nevertheless be consistent with preservation of their qualification under Code section 851. Investment by Certain Retirement Plans The purchase of iShares as an investment for an IRA, or for a participant-directed account maintained under any plan that is tax-qualified under section 401(a) of the Code, may be treated as the acquisition of a "collectible" that is treated as a taxable distribution from the account to the owner of the IRA, or to the participant for whom the plan account is maintained, of an amount equal to the cost to the account of acquiring the collectible. Such treatment would apply if an account's purchase of iShares would be treated, for these purposes, as the acquisition of an interest in the underlying gold held in the trust, and such bullion (i) is not treated as in the physical 31 possession of the IRA trustee, or (ii) is of a fineness less than the minimum fineness of a "contract market" (as defined in 7 United States Code (S) 7) required for a regulated futures contract. The sponsor intends to apply to the IRS for a private letter ruling to the effect that the purchase of iShares by an IRA or a participant-directed qualified plan account will not be treated as an acquisition by the account of a "collectible" for these purposes. Persons considering the purchase of iShares by an IRA, or by a participant-directed account under a Code section 401(a) plan, should consult their own tax advisers as to whether such purchase will be treated as resulting in a taxable distribution to the IRA owner or plan participant. See also "ERISA and Related Considerations." Taxation of Non-U.S. Shareholders A Non-U.S. Shareholder generally will not be subject to United States federal income tax with respect to gain recognized upon the sale or other disposition of iShares, or upon the sale of gold by the trust, unless (1) the Non-U.S. Shareholder is an individual and is present in the United States for 183 days or more during the taxable year of the sale or other disposition, and the gain is treated as being from United States sources; or (2) the gain is effectively connected with the conduct by the Non-U.S. Shareholder of a trade or business in the United States and certain other conditions are met. United States Information Reporting and Backup Withholding The trustee will file certain information returns with the IRS in connection with the trust. A U.S. Shareholder may be subject to United States backup withholding tax in certain circumstances unless it provides its taxpayer identification number and complies with certain certification procedures. Non-U.S. Shareholders may have to comply with certification procedures to establish that they are not a United States person in order to avoid the information reporting and backup withholding tax requirements. The amount of any backup withholding will be allowed as a credit against a Shareholder's United States federal income tax liability and may entitle such a Shareholder to a refund, provided that the required information is furnished to the IRS. Taxation in Jurisdictions Other Than the United States Prospective purchasers of iShares that are based in or acting out of a jurisdiction other than the United States are advised to consult their own tax advisers as to the tax consequences, under the laws of such jurisdiction (or any other jurisdiction not being the United States to which they are subject), of their purchase, holding, sale and redemption of or any other dealing in iShares and, in particular, as to whether any value added tax, other consumption tax or transfer tax is payable in relation to such purchase, holding, sale, redemption or other dealing. ERISA AND RELATED CONSIDERATIONS The Employee Retirement Income Security Act of 1974 (ERISA) and/or section 4975 of the Code impose certain requirements on employee benefit plans and certain other plans and arrangements, including individual retirement accounts and annuities, Keogh plans, and certain collective investment funds or insurance company general or separate accounts in which such plans or arrangements are invested, that are subject to ERISA and/or the Code (collectively, Plans), and on persons who are fiduciaries with respect to the investment of assets treated as "plan assets" of a Plan. Government plans and some church plans are not subject to the fiduciary responsibility provisions of ERISA or the provisions of section 4975 of the Code, but may be subject to substantially similar rules under state or other federal law. In contemplating an investment of a portion of Plan assets in iShares, the Plan fiduciary responsible for making such investment should carefully consider, taking into account the facts and circumstances of the Plan, 32 the "Risk Factors" discussed above and whether such investment is consistent with its fiduciary responsibilities, including, but not limited to: (a) whether the fiduciary has the authority to make the investment under the appropriate governing plan instrument; (b) whether the investment would constitute a direct or indirect non-exempt prohibited transaction with a party in interest; (c) the Plan's funding objectives; and (d) whether under the general fiduciary standards of investment prudence and diversification such investment is appropriate for the Plan, taking into account the overall investment policy of the Plan, the composition of the Plan's investment portfolio and the Plan's need for sufficient liquidity to pay benefits when due. It is anticipated that the iShares will constitute "publicly-held offered securities" as defined in Department of Labor Regulations (S) 2510.3-101(b)(2). Accordingly, iShares purchased by a Plan, and not the Plan's interest in the underlying gold held in the trust represented by the iShares, should be treated as assets of the Plan, for purposes of applying the "fiduciary responsibility" and "prohibited transaction" rules of ERISA and the Code. See also "United States Federal Tax Consequences--Investment by Certain Retirement Plans." 33 PLAN OF DISTRIBUTION In addition to, and independent of the initial purchases by the Initial Purchaser (described below), the trust will issue iShares in Baskets to Authorized Participants in exchange for deposits of gold on a continuous basis. Because new iShares can be created and issued on an ongoing basis, at any point during the life of the trust, a "distribution," as such term is used in the Securities Act, may be occurring. Broker-dealers and other persons are cautioned that some of their activities may result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus-delivery and liability provisions of the Securities Act. For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it purchases a Basket from the trust, breaks the Basket down into the constituent iShares and sells the iShares directly to its customers; or if it chooses to couple the creation of a supply of new iShares with an active selling effort involving solicitation of secondary market demand for the iShares. A determination of whether a particular market participant is an underwriter must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could lead to designation as an underwriter. Investors that purchase iShares through a commission/fee-based brokerage account may pay commissions/fees charged by the brokerage account. We recommend that investors review the terms of their brokerage accounts for details on applicable charges. Dealers that are not "underwriters" but are participating in a distribution (as contrasted to ordinary secondary trading transactions), and thus dealing with iShares that are part of an "unsold allotment" within the meaning of Section 4(3)(C) of the Securities Act, would be unable to take advantage of the prospectus-delivery exemption provided by Section 4(3) of the Securities Act. The sponsor intends to qualify the iShares in states selected by the sponsor and that sales be made through broker-dealers who are members of the NASD. Investors intending to create or redeem Baskets through Authorized Participants in transactions not involving a broker-dealer registered in such investor's state of domicile or residence should consult their legal advisor regarding applicable broker-dealer or securities regulatory requirements under the state securities laws prior to such creation or redemption. Barclays Capital, Inc. is the Initial Purchaser. On [.], 2004, the Initial Purchaser agreed to purchase 150,000 iShares which compose the initial Baskets. The Initial Purchaser intends to make a public offering of the initial Baskets. The Initial Purchaser will not receive a fee. With respect to sale of the iShares comprising the initial Baskets and in the event that the Initial Purchaser or any affiliate acts as Authorized Participant, it may receive commissions/fees from investors who purchase iShares. The trust will not bear any expenses in connection with the offering or sales of the initial Baskets of iShares. The sponsor has agreed to indemnify the Initial Purchaser against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"), and to contribute to payments that the Initial Purchaser may be required to make in respect thereof. The offering of Baskets is being made in compliance with Conduct Rule 2810 of the NASD. Accordingly, the Initial Purchaser will not make any sales to any account over which it has discretionary authority without the prior written approval of a purchaser of iShares. The Initial Purchaser and the Sponsor, each of whom is a 100% subsidiary of Barclays Bank PLC, have a working relationship involving the development of business opportunities within the Barclays Bank PLC group. The Initial Purchaser will not act as an Authorized Participant with respect to the initial Baskets, and its activities with respect to the initial Baskets will be distinct from those of an Authorized Participant. 34 The Initial Purchaser has represented, warranted and agreed that: . the offering of the iShares will be made on a private placement basis in Canada (in the provinces of British Columbia, Ontario and Quebec) (1) through the Initial Purchaser or its affiliates who are permitted under applicable securities laws or available exemptions to offer and sell the iShares in Canada; (2) solely to purchasers who are entitled under applicable provincial securities laws to purchase the iShares without the benefit of a prospectus qualified under the securities laws; and (3) in the case of purchasers in provinces other than Ontario, without the services of a dealer registered pursuant to those securities laws; . the offering and sale of iShares in Japan can only be effected through a licensed Commodity Investment Dealer ("shohin toushi hanbai gyosha") or a person exempt under the law Concerning Regulations of Commodities Investment Business (Commodities Law). The prospectus cannot be distributed in Japan other than to a licensed Commodity Investment Dealer or a person exempt under the Commodities Law; . the offering and sale of iShares in Switzerland will be on the basis of a non-public offering. This prospectus does not constitute a prospectus according to articles 652a or 1156 of the Swiss Federal Code of Obligations and the iShares may not be offered or distributed on a professional basis in or from Switzerland and neither this prospectus nor any other offering material relating to the iShares may be publicly issued in connection with any such offer or distribution. The iShares have not been and will not be approved by any Swiss regulatory authority. In particular, neither the iShares nor the trust are or will be supervised by the Swiss Federal Banking Commission, and investors may not claim protection under the Swiss Investment Fund Act; . the trust is a collective investment scheme as defined in the Financial Services and Markets Act 2000. The trust has not been authorized, or otherwise recognized or approved, by the Financial Services Authority and, as an unregulated scheme, it accordingly cannot be promoted in the United Kingdom to the general public. The Initial Purchaser has represented, warranted and agreed that it will promote the trust in the United Kingdom in accordance with applicable law and regulation only to (1) persons who are investment professionals (as defined in Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the "CIS Order")); (2) persons who are within any of the categories of persons described in Article 22 of the CIS Order; or (3) persons to whom this prospectus may otherwise lawfully be communicated; . this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"). Accordingly, this Information Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the iShares may not be circulated or distributed, nor may the iShares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person specified in Section 274 of the SFA, (ii) to a sophisticated investor, and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA; . it will comply with the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the "WV Act") of the Federal Republic of Germany and all other applicable legal and regulatory requirements. In particular, the Initial Purchaser represents that it has not engaged and agrees that it will not engage in a public offering (offentliches Angebot) within the meaning of the WV Act with respect to any iShares otherwise than in accordance with the WV Act; . the iShares may not be offered, sold or distributed in Spain save in compliance with the requirements of the Spanish Securities Market Law (Ley 24/1988, de 28 de julio, del Mercado de Valores), as amended and restated, and Royal Decree 291/1992 on Issues and Public Offerings of Securities (Real Decreto 291/1992, de 27 de marzo, sobre Emisiones y Ofertas Publicas de Venta de Valores), as amended and restated, and other applicable Spanish laws and regulations; 35 . the iShares may not be acquired by or offered, directly or indirectly to, individuals or entities in the Netherlands and this prospectus may not be circulated in the Netherlands as part of initial distribution or at any time thereafter, except to individuals or entities whose ordinary business or profession is (1) to trade or invest in securities or (2) involves the acquisition and disposal of investment objects of the same kind as the assets or a substantial part of the assets of the trust, in either case within the meaning of Article 1 of the regulation dated October 9, 1990 (as amended) issued pursuant to Article 14 of the Investment Institutions Supervision Act (Wet Toezicht Beleggingsinstellingen) of 27 June 1990; . the offering of the iShares has not been registered pursuant to the Italian securities legislation and, accordingly, the Initial Purchaser has represented and agreed that it has not offered or sold, and will not offer or sell, any iShares in the Republic of Italy in a solicitation to the public, and that sales of the iShares in the Republic of Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations. The Initial Purchaser has represented and agreed that it will not offer, sell or deliver any iShares or distribute copies of this prospectus or any other document relating to the iShares in the Republic of Italy except: (1) to "Professional Investors", as defined in Article 31.2 of CONSOB Regulation No. 11522 of 1 July 1998 as amended ("Regulation No. 11522"), pursuant to Article 30.2 and 100 of Legislative Decree No. 58 of 24 February 1998 as amended ("Decree No. 58"), or in any other circumstances where an expressed exemption to comply with the solicitation restrictions provided by Decree No. 58 or CONSOB Regulation No. 11971 of 14 May 1999 as amended applies, provided, however, that any such offer, sale or delivery of the iShares or distribution of copies of this prospectus or any other document relating to the iShares in the Republic of Italy must be: (a) made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 385 of 1 September 1993 as amended ("Decree No. 385"), Decree No. 58, Regulation No. 11522 and any other applicable laws and regulations; and (b) in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy; or (2) if Italian residents submit unsolicited offers to the Initial Purchaser to purchase the iShares"; . (1) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any iShares other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and (2) it has not issued and will not issue any advertisement, invitation or document relating to the iShares, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to iShares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules made thereunder; In addition, this prospectus has not been submitted to the registration procedures of the French Autorite des Marches Financiers and, accordingly, the iShares may not be offered or sold to the public in France. Offers and sales of the iShares in France may be made only to qualified investors (investisseurs qualifies) in accordance with Article L.411-2 of the French Code monetaire et financier and decree no. 98-880 dated 1 October 1998 (the "French Code"). This prospectus or any other offering material relating to the iShares may not be distributed in France to any person other than a qualified investor, as defined in the French Code. The iShares will be listed on the American Stock Exchange under the symbol "IAU". 36 REPORT OF THE INDEPENDENT AUDITORS [To be furnished by amendment] FORM OF STATEMENT OF FINANCIAL CONDITION OPENING OF BUSINESS ., 2004 Assets Investment in gold, at value/1/............................. $ [a] Total assets................................................ [a] Liabilities and Interest of Beneficial Owners Total liabilities/2/........................................ -- NET ASSETS Total net assets (applicable to 150,000 iShares outstanding)/3/ $ [a] Net Asset Value per Equity Gold Share NAV (comprising [a] / 150,000 iShares outstanding)/3/.......... $ $[a/150,000]
- -------- (1)On the date of the formation of the trust, the custodian received from the Initial Purchaser 15,000 ounces of gold on behalf of the trust, in exchange for 3 Baskets equivalent to 150,000 iShares. The value of the gold deposited with the trust has been based on a price for an ounce of gold of $[.]. This price is the price for an ounce of gold based on the COMEX settlement price for spot month gold futures on [.], 2004, the date on which the trust was formed. (2)The costs of the trust's organization and the initial offering of the iShares, will be borne by the sponsor. The trust will pay on an ongoing basis the expenses of its operation, including the fees of its trustee, as described under "Business of the Trust--Trust Expenses". (3)The iShares are created and redeemed in Baskets of 50,000 iShares. See "Description of the iShares and the Trust Agreement". 37 LEGAL MATTERS The validity of the iShares will be passed upon for the sponsor by Clifford Chance US LLP, New York, New York, who, as special United States tax counsel to the sponsor, will also render an opinion regarding the material federal income tax consequences relating to the iShares. License Agreements Without conceding that the operation of the trust or the marketing or trading in iShares would infringe upon any intellectual property owned by The Bank of New York, the sponsor has entered into a license agreement with The Bank of New York under which The Bank of New York grants to the sponsor a perpetual, world-wide, non-exclusive, non-transferable license under The Bank of New York's patents and patent applications that cover securitized gold products solely for the purpose of establishing, operating and marketing any securitized gold financial product that is sold, sponsored or issued by the sponsor. Without conceding that operation of the trust or the marketing or trading in iShares would otherwise infringe upon any intellectual property owned by COMEX, in order to facilitate the use by the trust and the American Stock Exchange of COMEX gold market data to calculate the trust's net asset value and related iShare values and marketing and trading of iShares, the Trust has entered into a license agreement with COMEX under which COMEX grants the trust a perpetual, worldwide non-exclusive, non-transferable license to use certain COMEX gold market data and the COMEX name in connection with the operations of the trust and the trading and marketing of iShares. EXPERTS PricewaterhouseCoopers will audit the Statement of Financial Condition of the trust as of [.], 2004. The Statement of Financial Condition of the trust appears in this prospectus in reliance on their report thereon, given on their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION The sponsor has filed on behalf of the trust a registration statement on Form S-1 with the SEC under the Securities Act. This prospectus does not contain all of the information set forth in the registration statement (including the exhibits to the registration statement), parts of which have been omitted in accordance with the rules and regulations of the SEC. For further information about the trust or the iShares, please refer to the registration statement, which you may inspect, without charge, at the public reference facilities of the SEC at the below address or online at www.sec.gov, or obtain at prescribed rates from the public reference facilities of the SEC at the below address. The trust is subject to the informational requirements of the Exchange Act and the sponsor and the trustee will each, on behalf of the trust, file certain reports and other information with the SEC. The sponsor will file an updated prospectus annually for the trust pursuant to the Securities Act. The reports and other information can be inspected at the public reference facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549 and online at www.sec.gov. You may also obtain copies of such material from the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may obtain more information concerning the operation of the public reference facilities of the SEC by calling the SEC at 1-800-SEC-0330 or visiting online at www.sec.gov. 38 ================================================================================ iShares COMEX Gold Trust [.] iShares PROSPECTUS [.], 2004 Until [.], 2004, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions ================================================================================ PART II--INFORMATION NOT REQUIRED IN PROSPECTUS TABLE OF CONTENTS Item 13. Other Expenses of Issuance and Distribution. The trust shall not bear any expenses incurred in connection with the issuance and distribution of the securities being registered. These expenses shall be paid by the sponsor. Item 14. Indemnification of Directors and Officers. Section 5.6(b) of the Trust Agreement provides that the trustee shall indemnify the sponsor, its directors, employees and agents against, and hold each of them harmless from, any loss, liability, cost, expense or judgment (including reasonable fees and expenses of counsel) (i) caused by the negligence or bad faith of the trustee or (ii) arising out of any information furnished in writing to the sponsor by the trustee expressly for use in the registration statement, or any amendment thereto, filed with the SEC relating to the iShares that is not materially altered by the sponsor. Section 5.6(d) of the Trust Agreement provides that the sponsor and its shareholders, directors, officers, employees, affiliates (as such term is defined under the Securities Act of 1933, as amended) and subsidiaries shall be indemnified from the trust and held harmless against any loss, liability or expense incurred without their (1) negligence, bad faith, willful misconduct or willful malfeasance arising out of or in connection with the performance of its obligations under the Trust Agreement or any actions taken in accordance with the provisions of the Trust Agreement or (2) reckless disregard of their obligations and duties under the Trust Agreement. Item 15. Recent Sales of Unregistered Securities. Not applicable. Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits
Exhibit No. Description - ----------- ----------- 1.1 Form of Distribution Agreement* 4.1 Form of Depositary Trust Agreement 4.2 Form of Authorized Participant Agreement 5.1 Form of Opinion of Clifford Chance US LLP as to legality* 8.1 Form of Opinion of Clifford Chance US LLP as to tax matters* 10.1 Form of Custodian Agreement 10.2 License Agreement with The Bank of New York* 10.3 License Agreement with Commodity Exchange, Inc.* 23.1 Consent of PricewaterhouseCoopers* 23.2 Consents of Clifford Chance US LLP are included in Exhibits 5.1 and 8.1 24.1 Powers of attorney are included on the signature page to this registration statement.
- -------- * To be furnished by amendment. (b) Financial Statement Schedules Not applicable. II-1 Item 17. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (4) That insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, California, on January 29, 2004. Barclays Global Investors, N.A. sponsor of the iShare COMEX Gold Trust By: /s/ BLAKE R. GROSSMAN ----------------------------- Blake R. Grossman Chief Executive Officer - President By: /s/ FRANCIS S. RYAN ----------------------------- Francis S. Ryan Chief Financial Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes Blake R. Grossman and Francis S. Ryan, and each of them singly, his true and lawful attorneys-in-fact with full power to sign on behalf of such person, in the capacities indicated below, any and all amendments to this registration statement and any subsequent related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and generally to do all such things in the name and on behalf of such person, in the capacities indicated below, to enable the Registrant to comply with the provisions of the Securities Act of 1933 and all requirements of the Securities and Exchange Commission thereunder, hereby ratifying and confirming the signature of such person as it may be signed by said attorneys-in-fact, or any of them, on any and all amendments to this registration statement or any such subsequent related registration statement. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities* and on the dates indicated. Signature Capacity Date --------- -------- ---- /s/ BLAKE R. GROSSMAN Chief Executive Officer, January 29, 2004 - ----------------------------- Director, President /s/ RICHARD T. RICCI Chief Operating Officer, January 29, 2004 - ----------------------------- Director /s/ FRANCIS S. RYAN Director, Chief Financial January 29, 2004 - ----------------------------- Officer /s/ ANDREW G. SKIRTON Director January 29, 2004 - ----------------------------- - -------- * The Registrant will be a trust and the persons are signing in their capacities as officers or directors of Barclays Global Investors, N.A., the sponsor of the Registrant. II-3 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 1.1 Form of Distribution Agreement* 4.1 Form of Depositary Trust Agreement 4.2 Form of Authorized Participant Agreement 5.1 Form of Opinion of Clifford Chance US LLP as to legality* 8.1 Form of Opinion of Clifford Chance US LLP as to tax matters* 10.1 Form of Custodian Agreement 10.2 License Agreement with The Bank of New York* 10.3 License Agreement with Commodity Exchange, Inc.* 23.1 Consent of PricewaterhouseCoopers* 23.2 Consents of Clifford Chance US LLP are included in Exhibits 5.1 and 8.1 24.1 Powers of attorney are included on the signature page to this registration statement.
- -------- * To be furnished by amendment. EX-4.1 3 dex41.txt FORM OF DEPOSITARY TRUST AGREEMENT EXHIBIT 4.1 BARCLAYS GLOBAL INVESTORS, N.A., as Sponsor and THE BANK OF NEW YORK, as Trustee ---------- Depositary Trust Agreement iShares COMEX Gold Trust ---------- Dated as of __________, 2004 TABLE OF CONTENTS
Page ---- DEPOSITARY TRUST AGREEMENT............................................................................. 1 ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION........................................................ 2 Section 1.1. Definitions............................................................................ 2 Section 1.2. Rules of Construction.................................................................. 7 ARTICLE 2 CREATION AND DECLARATION OF TRUSTS; FORM OF CERTIFICATES; DEPOSIT OF GOLD; DELIVERY, REGISTRATION OF TRANSFER AND SURRENDER OF SHARES............................................. 8 Section 2.1. Creation and Declaration of Trust; Business of the Trust............................... 8 Section 2.2. Form of Certificates; Book-Entry System; Transferability of Shares..................... 8 Section 2.3. Deposit of Gold........................................................................11 Section 2.4. Delivery of Shares.....................................................................12 Section 2.5. Registration and Registration of Transfer of Shares; Combination and Split-up of Certificates...........................................................................13 Section 2.6. Surrender of Shares and Withdrawal of Trust Property...................................14 Section 2.7. Limitations on Delivery, Registration of Transfer and Surrender of Shares..............15 Section 2.8. Lost Certificates, Etc. ...............................................................16 Section 2.9. Cancellation and Destruction of Surrendered Certificates...............................16 Section 2.10. Splits and Reverse Splits of Shares....................................................16 ARTICLE 3 CERTAIN OBLIGATIONS OF REGISTERED OWNERS OF SHARES...........................................17 Section 3.1. Liability of Registered Owner for Taxes and Other Governmental Charges.................17 Section 3.2. Warranties on Deposit of Gold..........................................................18 ARTICLE 4 ADMINISTRATION OF THE TRUST..................................................................18 Section 4.1. Evaluation of Gold.....................................................................18 Section 4.2. Responsibility of the Trustee for Evaluations..........................................19 Section 4.3. Trust Evaluation.......................................................................19 Section 4.4. Cash Distributions.....................................................................20 Section 4.5. Other Distributions....................................................................20 Section 4.6. Fixing of Record Date..................................................................21 Section 4.7. Payment of Expenses; Gold Sales........................................................21
i Section 4.8. Statements and Reports.................................................................22 Section 4.9. Further Provisions for Gold Sales......................................................23 Section 4.10. Counsel................................................................................23 Section 4.11. Grantor Trust..........................................................................23 ARTICLE 5 THE TRUSTEE AND THE SPONSOR..................................................................24 Section 5.1. Maintenance of Office and Transfer Books by the Trustee................................24 Section 5.2. Prevention or Delay in Performance by the Sponsor or the Trustee.......................25 Section 5.3. Obligations of the Sponsor and the Trustee.............................................25 Section 5.4. Resignation or Removal of the Trustee; Appointment of Successor Trustee................26 Section 5.5. The Custodian..........................................................................28 Section 5.6. Indemnification........................................................................29 Section 5.7. Charges of Trustee.....................................................................33 Section 5.8. Charges of Sponsor.....................................................................33 Section 5.9. Retention of Trust Documents...........................................................34 Section 5.10. Federal Securities Law Filings.........................................................34 Section 5.11. Prospectus Delivery....................................................................35 Section 5.12. Discretionary Actions by Trustee; Consultation.........................................35 ARTICLE 6 AMENDMENT AND TERMINATION....................................................................36 Section 6.1. Amendment..............................................................................36 Section 6.2. Termination............................................................................36 ARTICLE 7 MISCELLANEOUS................................................................................39 Section 7.1. Counterparts...........................................................................39 Section 7.2. Third-Party Beneficiaries..............................................................39 Section 7.3. Severability...........................................................................39 Section 7.4. Registered Owners, Beneficial Owners and Depositors as Parties; Binding Effect.........39 Section 7.5. Notices................................................................................40 Section 7.6. Agent for Service; Submission to Jurisdiction..........................................41 Section 7.7. Governing Law..........................................................................42
EXHIBIT A FORM OF CERTIFICATE EVIDENCING SHARES ii DEPOSITARY TRUST AGREEMENT THIS DEPOSITARY TRUST AGREEMENT dated as of ________, 2004, between BARCLAYS GLOBAL INVESTORS, N.A., a national banking association, as sponsor, THE BANK OF NEW YORK, a New York banking corporation, as trustee, all Registered Owners and Beneficial Owners from time to time of iShares COMEX Gold Trust Shares issued hereunder and all Depositors. W I T N E S S E T H : WHEREAS the Sponsor desires to establish a trust, to be known as the "iShares COMEX Gold Trust", pursuant to the laws of the State of New York; and WHEREAS the Sponsor desires to establish the terms on which Gold (as herein defined) may be deposited in the trust and provide for the creation of iShares COMEX Gold Trust Shares in Baskets (as herein defined) representing fractional undivided interests in the net assets of the trust and the execution and delivery of Certificates (as herein defined) evidencing the iShares COMEX Gold Trust Shares; and WHEREAS the Sponsor desires to provide for other terms and conditions upon which the trust shall be established and administered, as hereinafter provided; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the Sponsor and the Trustee hereby agree as follows: ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1. Definitions. Except as otherwise specified in this Depositary Trust Agreement or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Depositary Trust Agreement. "Agreement" means this Depositary Trust Agreement, as amended or supplemented in accordance with its terms. "Authorized Participant" means a Person that, at the time of submitting a Purchase Order or a Redemption Order (i) is a registered broker-dealer or other securities market participant, (ii) is a DTC Participant or an Indirect Participant and (iii) has in effect a valid Authorized Participant Agreement. "Authorized Participant Agreement" means an agreement among the Trustee, the Sponsor and an Authorized Participant that authorizes the Authorized Participant to submit Purchase Orders and Redemption Orders under this Agreement. "Basket" means 50,000 Shares, except that the Trustee, in consultation with the Sponsor, may from time to time increase or decrease the number of Shares comprising a Basket. "Basket Gold Amount" is the amount of Gold that must be deposited for issuance of one Basket or that is deliverable upon Surrender of one Basket. The Basket Gold Amount will be determined as provided in Section 2.3(b). "Beneficial Owner" means any Person owning a beneficial interest in any Shares. 2 "Business Day" means any day other than (i) a Saturday or Sunday or (ii) a day on which the Exchange is not open for regular trading. "Certificate" means a certificate that is executed and delivered by the Trustee under this Agreement evidencing Shares. "CFTC" means the Commodity Futures Trading Commission or any successor governmental agency in the United States. "COMEX" means Commodity Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc. "COMEX Relevant Price" means, as of any day, (i) such day's COMEX settlement price for the spot month gold futures contract; or (ii) such other price regularly announced by COMEX, with the approval of, or following regulatory notification to, the CFTC, as the Sponsor, in consultation with the Trustee, may determine fairly represents the commercial value of Gold held by the Trust. "COMEX Rules" means the rules of the COMEX applicable to trading, delivery specifications, and settlement of gold futures contracts. "Commission" means the Securities and Exchange Commission of the United States or any successor governmental agency in the United States. "Corporate Trust Office" means the office of the Trustee at which its depositary receipt business is administered which, at the date of this Agreement, is located at 101 Barclay Street, New York, New York 10286. "Custodian" means The Bank of Nova Scotia, as agent of the Trust for the purposes of this Depositary Trust Agreement, and any substitute or additional Custodian appointed by the Trustee as provided in Section 5.5. 3 "Deliver" means (a) when used with respect to Gold, (i) physically delivering that Gold to, or making that Gold available for collection by, the Person entitled to the delivery at the specified location, (ii) obtaining evidence that ownership of that Gold has been transferred to, and the Gold is being duly held by a custodian for the account of, the Person entitled to that delivery or (iii) in respect of amounts of not more than 430 Ounces, obtaining an acknowledgement from a custodian of a credit of Gold on an Unallocated Basis to the account of the Person entitled to that delivery and (b) when used with respect to Shares, either (i) one or more book-entry transfers of those Shares to an account or accounts at DTC designated by the Person entitled to such delivery for further credit as specified by that Person or (ii) in the circumstances specified in Section 2.2(e), execution and delivery at the Corporate Trust Office of the Trustee of one or more Certificates evidencing those Shares. "Depositor" means any Authorized Participant that deposits Gold into the Trust, either for its own account or on behalf of another Person that is the owner or beneficial owner of that Gold. "DTC" means The Depository Trust Company, its nominees and their respective successors. "DTC Participant" means a Person that, pursuant to DTC's governing documents, is entitled to deposit securities with DTC in its capacity as a "participant". "Exchange" means the exchange on which the Shares are principally traded, as specified by the Sponsor. "Fine Ounce" means an Ounce of 100% pure gold. The number of Fine Ounces in a gold bar may be calculated by multiplying the gross weight in Ounces by the fineness, expressed as a fraction of the fine metal content in parts per 1000, in accordance with the COMEX Rules or the "good delivery" rules of the London Bullion Market Association. 4 "Gold" means (a) gold that (i) would be eligible for delivery in settlement of a COMEX gold futures contract in accordance with COMEX Rules or (ii) meets the requirements of "good delivery" under the rules of the London Bullion Market Association and (b) credit to an account on an Unallocated Basis. "Indirect Participant" means a Person that, by clearing securities through, or maintaining a custodial relationship with, a DTC Participant, has access to the DTC clearing system. "Net Asset Value per Share" means the value of a Share determined under Section 4.3. "Net Asset Value" means the net value of the Trust determined under Section 4.3. "Order Cutoff Time" means, with respect to any day, (i) the time at which regular trading in gold futures contracts on the COMEX closes on that day or (ii) another time agreed to by the Sponsor and the Trustee and of which Registered Owners and all existing Authorized Participants have been notified by the Trustee. "Order Date" means, with respect to a Purchase Order, the date specified in Section 2.3(a) and, with respect to a Redemption Order, the date specified in Section 2.6(a). "Ounce" means a troy ounce, equal to 1.0971428 ounces avoirdupois. "Person" means any natural person or any limited liability company, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Purchase Order" is defined in Section 2.3. 5 "Qualified Bank" means a bank, trust company, corporation or national banking association organized and doing business under the laws of the United States or any State of the United States that is authorized under those laws to exercise corporate trust powers and that (i) is a DTC Participant or a participant in such other securities depository as is then acting with respect to the Shares, (ii) unless counsel to the Sponsor, the appointment of which is acceptable to the Trustee, determines that the following requirement is not necessary for the exception under Section 408(m) of the Internal Revenue Code of 1986, as amended (the "Code"), to apply, is a banking institution as defined in Section 408(n) of the Code and (iii) had, as of the date of its most recent annual financial statements, an aggregate capital, surplus and undivided profits of at least $150,000,000. "Redemption Order" is defined in Section 2.6. "Registered Owner" means the Person in whose name Shares are registered on the books of the Trustee maintained for that purpose. "Registrar" means any bank or trust company that is appointed to register Shares and transfers of Shares as herein provided. "Shares" means iShares COMEX Gold Trust Shares created under this Agreement, each representing a fractional undivided ownership interest in the net assets of the Trust, which interest shall equal a fraction, the numerator of which is 1 and the denominator of which is the total number of Shares outstanding. "Sponsor" means Barclays Global Investors, N.A., a national banking association, or its successor. "Surrender" means, when used with respect to Shares, (a) one or more book-entry transfers of Shares to the DTC account of the Trustee or (b) surrender to the Trustee at its Corporate Trust Office of one or more Certificates evidencing Shares. 6 "Trust Property" means the Gold that is deposited under this Agreement and any cash or other property that is received by the Trustee in respect of Trust Property and that is being held under this Agreement. "Trust" means the iShares COMEX Gold Trust, the trust entity created by this Agreement. "Trustee" means The Bank of New York, a New York banking corporation, in its capacity as trustee under this Agreement, or any successor as trustee under this Agreement. "Unallocated Basis" means that the Person in whose name Gold is so held is entitled to receive delivery of Gold standing to the credit of that Person's account, but that Person has no ownership interest in any particular Gold that the custodian maintaining that account owns or holds. Section 1.2. Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect in the United States; (iii) "or" is not exclusive; (iv) the words "herein", "hereof", "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (v) "including" means including without limitation; and 7 (vi) words in the singular include the plural and words in the plural include the singular. ARTICLE 2 CREATION AND DECLARATION OF TRUSTS; FORM OF CERTIFICATES; DEPOSIT OF GOLD; DELIVERY, REGISTRATION OF TRANSFER AND SURRENDER OF SHARES Section 2.1. Creation and Declaration of Trust; Business of the Trust. (a) The Trustee acknowledges that it has received an initial deposit of Gold under and in accordance with this Agreement from Barclays Capital, Inc. The Trustee declares that it will hold that initial deposit and all other Trust Property as trustee for the benefit of the Registered Owners for the purposes of, and subject to and limited by the terms and conditions set forth in, this Agreement. The trust created by this Agreement shall be known as the "iShares COMEX Gold Trust". (b) The Trust shall not engage in any business or activities other than those authorized by this Agreement or incidental and necessary to carry out the duties and responsibilities set forth in this Agreement. Other than issuance of the Shares, the Trust shall not issue or sell any certificates or other obligations or, except as provided in this Agreement, otherwise incur, assume or guarantee any indebtedness for money borrowed. Section 2.2. Form of Certificates; Book-Entry System; Transferability of Shares. (a) The Certificates evidencing Shares shall be substantially in the form set forth in Exhibit A annexed to this Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Shares shall be entitled to any benefits under this Agreement or be valid or obligatory for any purpose unless a Certificate evidencing those Shares has been executed by the Trustee by the manual or facsimile signature of a duly authorized signatory of the Trustee and, if a Registrar (other 8 than the Trustee) for the Shares shall have been appointed, countersigned by the manual signature of a duly authorized officer of the Registrar. The Trustee shall maintain books on which the registered ownership of each Share and transfers, if any, of such registered ownership shall be recorded. Certificates evidencing Shares bearing the manual or facsimile signature of a duly authorized signatory of the Trustee and the manual signature of a duly authorized officer of the Registrar, if applicable, who was, at the time such Certificates were executed, a proper signatory of the Trustee or Registrar, if applicable, shall bind the Trustee, notwithstanding that such signatory has ceased to hold such office prior to the delivery of such Certificates. (b) The Certificates may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Agreement as may be required by the Trustee or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which the Shares evidenced by a particular Certificate are subject. (c) The Sponsor and the Trustee will apply to DTC for acceptance of the Shares in its book-entry settlement system. Shares deposited with DTC shall be evidenced by one or more global Certificates which shall be registered in the name of Cede & Co., as nominee for DTC, and shall bear the following legend: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF 9 DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. (d) So long as the Shares are eligible for book-entry settlement with DTC and such settlement is available, unless otherwise required by law, notwithstanding the provisions of Sections 2.2(a) and (b), all Shares shall be evidenced by one or more global Certificates the Registered Owner of which is DTC or a nominee of DTC and (i) no Beneficial Owner of Shares will be entitled to receive a separate Certificate evidencing those Shares, (ii) the interest of a Beneficial Owner in Shares represented by a global Certificate will be shown only on, and transfer of that interest will be effected only through, records maintained by DTC or a DTC Participant or Indirect Participant through which the Beneficial Owner holds that interest and (iii) the rights of a Beneficial Owner with respect to Shares represented by a global Certificate will be exercised only to the extent allowed by, and in compliance with, the arrangements in effect between such Beneficial Owner and DTC or the DTC Participant or Indirect Participant through which that Beneficial Owner holds an interest in Shares. (e) If, at any time when Shares are evidenced by a global Certificate, DTC ceases to make its book-entry settlement system available for such Shares, the Trustee shall execute and deliver separate Certificates evidencing Shares to the DTC Participants entitled thereto, with such additions, deletions and modifications to this Agreement and to the form of Certificate evidencing Shares as the Sponsor and the Trustee may agree. (f) Title to a Certificate evidencing Shares (and to the Shares evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of New York; provided, however, that the Trustee, notwithstanding any notice to the contrary, may treat the Registered Owner of Shares as the absolute owner thereof for the purpose of determining the person entitled to any distribution or to any notice provided for in this Agreement and for all other purposes. 10 Section 2.3. Deposit of Gold. (a) After the initial deposit of Gold in the Trust, the issuance and Delivery of Shares will take place only in integral numbers of Baskets and in compliance with the provisions of this Agreement, as supplemented by any procedures attached to an applicable Authorized Participant Agreement, to the extent those procedures are consistent with this Agreement. Authorized Participants wishing to acquire from the Trustee one or more Baskets must place an order with the Trustee (a "Purchase Order") no later than 4:00 p.m. (New York time) on any Business Day. Purchase Orders received by the Trustee prior to the Order Cutoff Time on a Business Day on which a COMEX Relevant Price is announced will have that Business Day as the Order Date. Purchase Orders received by the Trustee on or after the Order Cutoff Time on a Business Day, or on a Business Day on which COMEX does not announce a COMEX Relevant Price, will have as their Order Date the next Business Day on which COMEX announces a COMEX Relevant Price. As consideration for each Basket acquired, Authorized Participants must deposit with the Custodian the Basket Gold Amount determined by the Trustee on the Order Date of the corresponding Purchase Order. Gold must be Delivered to the Custodian in the form of Gold bars only, except that an amount of Gold not exceeding 430 Ounces may be Delivered to the Custodian on an Unallocated Basis. (b) The Trustee shall determine the Basket Gold Amount for each Business Day. The initial "Basket Gold Amount" is 5,000 Fine Ounces. After the initial deposit, the "Basket Gold Amount" shall be an amount of Gold equal to the result obtained by dividing the Net Asset Value per Basket on the date on which the determination is being made by the price used by the Trustee to evaluate Gold held by the Trust on such date in compliance with Section 4.1. For purposes of this computation, "Net Asset Value per Basket" is the result obtaining by multiplying (x) the Net Asset Value per Share determined in compliance with Section 4.3, by (y) the number of Shares which constitute a Basket on the date on which the determination is being made. Fractions of a Fine Ounce of Gold included in the Basket Gold Amount smaller than .001 11 Fine Ounce shall be disregarded. The Sponsor intends to publish, or may designate other persons to publish, for each Business Day, the Basket Gold Amount. (c) If the Trust Property includes money or any property other than Gold, no deposits of Gold will be accepted until after a record date for distribution of that money or property, or proceeds of that property, has passed. (d) All deposited Gold shall be owned by the Trust and held for the Trust by the Custodian. The Trustee shall require the Custodian to agree that the Custodian will use reasonable efforts to minimize the amount of Gold held for the Trust on an Unallocated Basis at all times and the Custodian must allocate ownership of gold bars to the Trust such that no more than 430 Fine Ounces of Gold are held on an Unallocated Basis for the Trust at the end of each business day of the Custodian. Cash and any other assets of the Trust shall be held by the Trustee at such place and in such manner as the Trustee shall determine. Section 2.4. Delivery of Shares. Upon receipt by the Trustee of any deposit in accordance with Section 2.3, together with a Purchase Order and the other documents required as above specified, if any, and a confirmation from the Custodian that the Gold Deposit Amount has been Delivered to the Custodian for each Basket of Shares and the Custodian is holding that Gold for the account of the Trust, the Trustee, subject to the terms and conditions of this Agreement, shall Deliver to the Depositor the number of Baskets of Shares issuable in respect of such deposit as requested in the corresponding Purchase Order, but only upon payment to the Trustee of the fees and expenses of the Trustee as provided in Section 5.7 and of all taxes and governmental charges and fees payable in connection with such deposit, the transfer of the Gold and the issuance and Delivery of the Shares. 12 Section 2.5. Registration and Registration of Transfer of Shares; Combination and Split-up of Certificates. (a) The Trustee shall keep or cause to be kept a register of Registered Owners of Shares and shall provide for the registration of Shares and the registration of transfers of Shares. (b) The Trustee, subject to the terms and conditions of this Agreement, shall register transfers of ownership of Shares on its transfer books from time to time, upon any Surrender of a Certificate evidencing such Shares, by the Registered Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Trustee shall execute a new Certificate or Certificates evidencing such Shares, and deliver the same to or upon the order of the Person entitled thereto. (c) The Trustee, subject to the terms and conditions of this Agreement, shall, upon Surrender of a Certificate or Certificates evidencing Shares for the purposes of effecting a split-up or combination of that certificate or certificates, execute and deliver one or more new Certificates evidencing those Shares. (d) The Trustee may, with the written approval of the Sponsor (which approval shall not be unreasonably withheld), appoint one or more co-transfer agents for the purpose of effecting registration of transfers of Shares and combinations and split-ups of Certificates at designated transfer offices on behalf of the Trustee. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Registered Owners or Persons entitled to Shares and will be entitled to protection and indemnity to the same extent as the Trustee. 13 Section 2.6. Surrender of Shares and Withdrawal of Trust Property. (a) Upon Surrender of any integral number of Baskets for the purpose of withdrawal of the amount of Trust Property represented thereby, and upon payment of the fee of the Trustee in connection with the Surrender of Shares as provided in Section 5.7 and payment of all taxes and charges payable in connection with such Surrender and withdrawal of Trust Property, and subject to the terms and conditions of this Agreement, an Authorized Participant acting on authority of the Registered Owner of those Shares will be entitled to Delivery, in accordance with the provisions of this Agreement, as supplemented by any procedures attached to an applicable Authorized Participant Agreement, to the extent those procedures are consistent with this Agreement, of the amount of Trust Property at the time represented by such Baskets, including the Basket Gold Amounts corresponding to such Baskets on the applicable Order Date (determined as provided below). Authorized Participants wishing to redeem one or more Baskets must place an order with the Trustee (a "Redemption Order") no later than 4:00 p.m. (New York time) on any Business Day. Redemption Orders received by the Trustee prior to the Order Cutoff Time on a Business Day on which a COMEX Relevant Price is announced will have that Business Day as the Order Date. Redemption Orders received by the Trustee on or after the Order Cutoff Time on any Business Day, or on a Business Day on which COMEX does not announce a COMEX Relevant Price, will have as their Order Date the next Business Day on which COMEX announces a COMEX Relevant Price. Gold will be Delivered by the Custodian in the form of Gold bars only, except that an amount of Gold not exceeding 430 Ounces may be Delivered by the Custodian on an Unallocated Basis. While a redeeming Authorized Participant will be entitled to express a preference as to the city where it would like to have the Basket Gold Amount delivered, the Trustee, in consultation with the Custodian and taking into account the best interests of the Trust and the Registered Owners, will have final authority to decide where such Delivery will take place. 14 (b) The Trustee may require that a Certificate evidencing Shares Surrendered for the purpose of withdrawal is properly endorsed in blank or accompanied by proper instruments of transfer in blank. Upon a Surrender of an integral number of Baskets of Shares and satisfaction of all the conditions for withdrawal of Trust Property, the Trustee shall instruct the Custodian to Deliver, at the Custodian's office or at another location at which Trust Property Gold is then being held, to or to the order of the Surrendering Authorized Participant the amount of Gold represented by the Surrendered Baskets of Shares and the Trustee shall pay or deliver to or to the order of the Surrendering Authorized Participant the amount of any other Trust Property represented by the Surrendered Baskets of Shares. Any Delivery of Gold other than at the office of the Custodian or a sub-custodian designated by the Custodian will be at the expense and risk of the Authorized Participant. The Trustee will not be responsible to any Person if it is not practical for the Custodian to make Delivery of Gold in the city requested or if the Trustee determines to effect Delivery in a city other than the city requested by the Surrendering Authorized Participant. The Trustee is not required to effect any physical movement of Gold from one custody location to another to meet any request by a Surrendering Authorized Participant as to where Gold will be Delivered. Section 2.7. Limitations on Delivery, Registration of Transfer and Surrender of Shares. (a) As a condition precedent to the Delivery, registration of transfer, split-up, combination or Surrender of any Shares or withdrawal of any Trust Property, the Trustee or Registrar may require payment from the Depositor or the Authorized Participant Surrendering the Shares of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to any securities being withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also 15 require compliance with any regulations the Trustee may establish consistent with the provisions of this Agreement, including, without limitation, this Section 2.7. (b) The Delivery of Shares against deposits of Gold, the registration of transfer of Shares or the Surrender of Shares for the purpose of withdrawal of Trust Property may be suspended generally, or refused with respect to particular requested Deliveries or Surrenders, during any period when the transfer books of the Trustee are closed or if any such action is deemed necessary or advisable by the Trustee or the Sponsor for any reason at any time or from time to time. Section 2.8. Lost Certificates, Etc. The Trustee shall execute and deliver a new Certificate of like tenor in exchange and substitution for a mutilated Certificate upon cancellation thereof, or in lieu of and in substitution for a destroyed, lost or stolen Certificate if the Registered Owner thereof has (a) filed with the Trustee (i) a request for such execution and delivery before the Trustee has notice that the Shares evidenced by the Certificate have been acquired by a protected purchaser and (ii) a sufficient indemnity bond, and (b) satisfied any other reasonable requirements imposed by the Trustee. Section 2.9. Cancellation and Destruction of Surrendered Certificates. All Certificates Surrendered to the Trustee shall be canceled by the Trustee. The Trustee is authorized to destroy certificates so canceled. Section 2.10. Splits and Reverse Splits of Shares. If requested in writing by the Sponsor, the Trustee shall effect a split or reverse split of the Shares as of a record date set by the Trustee in accordance with procedures determined by the Trustee. 16 The Trustee is not required to distribute any fraction of a Share in connection with a split or reverse split of the Shares. The Trustee may sell the aggregated fractions of Shares that would otherwise be distributed in a split or reverse split of the Shares or the amount of Trust Property that would be represented by those Shares and distribute the net proceeds of those Shares or that Trust Property to the Record Owners entitled to them. The amount of Trust Property represented by each Share and the Basket Gold Amount shall be adjusted as appropriate as of the open of business on the Business Day following the record date for a split or reverse split of the Shares. ARTICLE 3 CERTAIN OBLIGATIONS OF REGISTERED OWNERS OF SHARES Section 3.1. Liability of Registered Owner for Taxes and Other Governmental Charges. If any tax or other governmental charge shall become payable by the Trustee with respect to any transfer or redemption of Shares, such tax or other governmental charge shall be payable by the Registered Owner of such Shares to the Trustee. The Trustee shall refuse to effect any registration of transfer of such Shares or any withdrawal of Trust Property represented by such Shares until such payment is made, and may withhold any distributions, or may sell for the account of the Registered Owner thereof Trust Property or Shares, and may apply such distributions or the proceeds of any such sale in payment of such tax or other governmental charge, and the Registered Owner of such Shares shall remain liable for any deficiency. The Trustee shall distribute any net proceeds of a sale made under the preceding sentence that remain, after payment of the tax or other governmental charge, to the Registered Owners entitled thereto as in the case of a distribution in cash. 17 Section 3.2. Warranties on Deposit of Gold. Every Person depositing Gold under this Agreement shall be deemed thereby to represent and warrant that the Gold meets the requirements to be Gold and contains the required number of Fine Ounces, that the person making such deposit is duly authorized to do so and that at the time of delivery, the Gold is free and clear of any lien, pledge, encumbrance, right, charge or claim (other than the rights created by this Agreement). All representations and warranties deemed made under this Section 3.3 shall survive the deposit of Gold, Delivery or Surrender of Shares or termination of this Agreement. ARTICLE 4 ADMINISTRATION OF THE TRUST Section 4.1. Evaluation of Gold. As promptly as practicable after COMEX announces the COMEX Relevant Price on each Business Day, the Trustee shall determine the value of the Gold held or receivable by the Trust on the basis of the COMEX Relevant Price for that day. If the COMEX does not announce a COMEX Relevant Price on a Business Day, the Trustee shall determine the value of the Gold held or receivable by the Trust for that day on the basis of the most recently announced COMEX Relevant Price. However, if the Trustee and the Sponsor determine that the price specified in the two preceding sentences is inappropriate as a basis for evaluation, they shall identify an alternative basis for evaluation to be employed by the Trustee. Gold deliverable under a Purchase Order shall be included in the evaluation beginning on the Order Date. Gold deliverable under a Redemption Order shall not be included in the evaluation on and after the Order Date. Neither the Trustee nor the Sponsor shall be liable to any Person for the determination that the most recently announced COMEX Relevant Price is not appropriate as a basis for evaluation of the Gold held or receivable by the Trust or for any determination as to the alternative basis for evaluation, provided that such determination is made in good faith. 18 If the Sponsor determines that COMEX Relevant Price will have the meaning set forth in part (ii) of the definition of that term, the Trustee shall give notice to the Registered Owners, and the Trustee shall not apply the new definition of COMEX Relevant Price until 60 days after the date of that notice. Section 4.2. Responsibility of the Trustee for Evaluations. The Sponsor, Depositors, Registered Owners and Beneficial Owners may rely on any evaluation or determination of any amount made by the Trustee, and the Sponsor shall have no responsibility for the accuracy thereof. The determinations made by the Trustee under this Agreement shall be made in good faith upon the basis of, and the Trustee shall not be liable for any errors contained in, information reasonably available to it. The Trustee shall be under no liability to the Sponsor, or to Depositors, Registered Owners or Beneficial Owners, for errors in judgment; provided, however, that this provision shall not protect the Trustee against any liability to which it would otherwise be subject by reason of negligence or bad faith in the performance of its duties. Section 4.3. Trust Evaluation. As promptly as practicable after completion of the evaluation required under Section 4.1 on each Business Day, the Trustee shall subtract all accrued fees (other than the fees computed by reference to the value of the Trust or its assets), expenses and other liabilities of the Trust from the total value of the deposited Gold determined by the Trustee pursuant to Section 4.1 and all other assets of the Trust. The resulting figure is the "Adjusted Net Asset Value" of the Trust. All fees computed by reference to the value of the Trust or its assets shall be calculated on the Adjusted Net Asset Value. The Trustee shall subtract from the Adjusted Net Asset Value the amount of accrued fees so computed and the resulting figure is the "Net Asset Value" of the Trust. The Trustee shall also divide the Net Asset Value of the Trust by the number of Shares outstanding as of the close of business on the date of the evaluation then being made, which figure is the "Net Asset Value per Share." All fees, expenses and other liabilities of the Trust that are or 19 will be incurred or accrued through the close of business on a Business Day shall be included in the calculations required by this Section 4.3 for that Business Day. Shares deliverable under a Purchase Order shall be considered to be outstanding for purposes of this Section 4.3 beginning on the Order Date. Shares deliverable under a Redemption Order shall not be considered to be outstanding for purposes of this Section 4.3 on and after the Order Date. Adjusted Net Asset Value, Net Asset Value and Net Asset Value per Share shall be computed in accordance with generally accepted accounting principles in the United States. Section 4.4. Cash Distributions. Whenever the Trustee distributes any cash, the Trustee shall distribute the amount available for the distribution to the Registered Owners entitled thereto, in proportion to the number of Shares held by them respectively; provided, however, that in the event that the Trustee shall be required to withhold and does withhold from such cash an amount on account of taxes, the amount distributed to the Registered Owners shall be reduced accordingly. The Trustee shall distribute only such amount, however, as can be distributed without attributing to any Registered Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Registered Owners entitled thereto. Section 4.5. Other Distributions. Whenever the Trustee receives any property in respect of Trust Property other than cash proceeds of a sale of Trust Property (including any claim that accrues in favor of the Trust on account of any loss of deposited Gold or other Trust Property), the Trustee shall cause the securities or other property received by it to be distributed to the Registered Owners entitled thereto, in proportion to the number of Shares held by them respectively, after deduction or upon payment of the expenses of the Trustee, in any manner that the Trustee may deem lawful, equitable and feasible for accomplishing such 20 distribution; provided, however, that if in the opinion of the Trustee such distribution cannot be made proportionately among the Registered Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Trustee withhold an amount on account of taxes or other governmental charges or that securities must be registered under the Securities Act of 1933 in order to be distributed to Registered Owners) the Trustee deems such distribution not to be lawful and feasible, the Trustee shall adopt such method as it deems lawful, equitable and feasible for the purpose of effecting such distribution, after deduction or upon payment of the expenses of the Trustee, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale shall be distributed by the Trustee to the Registered Owners entitled thereto as in the case of a distribution received in cash. Section 4.6. Fixing of Record Date. Whenever any distribution will be made, or whenever the Trustee receives notice of any solicitation of proxies or consents from Registered Owners, or whenever for any reason there is split, reverse split or other change in the outstanding Shares, or whenever the Trustee shall find it necessary or convenient in respect of any matter, the Trustee, in consultation with the Sponsor, shall fix a record date for the determination of the Registered Owners who shall be (i) entitled to receive such distribution or the net proceeds of the sale thereof, (ii) entitled to give such proxies or consents in respect of any such solicitation or (iii) entitled to act in respect of any other matter for which the record date was set. Section 4.7. Payment of Expenses; Gold Sales. (a) The following charges are or may be accrued and paid by the Trust: (1) the service fee payable to the Sponsor as set forth in Section 5.8; 21 (2) expenses of the Trust not assumed by the Sponsor pursuant to Section 5.3(g); (3) taxes and other governmental charges; (4) expenses and costs of any extraordinary services performed by the Trustee or the Sponsor on behalf of the Trust or action taken by the Trustee or the Sponsor to protect the Trust or the interests of Registered Owners; and (5) indemnification of the Sponsor as provided in Section 5.6(d). The Trustee shall, when directed by the Sponsor, and, in the absence of such direction, may, in its discretion, sell Gold in such quantity and at such times, as may be necessary to permit payment of expenses under this Agreement. The Trustee is authorized to sell Gold at such times and in the smallest amounts required to permit payment of expenses as they come due, it being the intention to avoid or minimize the Trust's holdings of assets other than Gold. Neither the Trustee nor the Sponsor shall have any liability for loss or depreciation resulting from sales of Gold so made. The Trustee shall not be liable or responsible in any way for depreciation or loss incurred by reason of any sale made pursuant to the Sponsor's direction or otherwise in accordance with this Section. (b) If at any time and from time to time, the Trustee and Sponsor determine that the amount of cash included in the Trust Property exceeds the anticipated expenses of the Trust during the following month, the Trustee shall distribute the excess to the Registered Owners under Section 4.4. Section 4.8. Statements and Reports. After the end of each fiscal year and within the time period required by applicable laws, rules and regulations, at the Sponsor's expense, the Trustee shall send to the Registered Owners at the end of such fiscal year, an annual report of the Trust containing financial statements audited by independent accountants designated by the 22 Sponsor and such other information as may be required by such laws, rules and regulations or otherwise, or which the Sponsor determines shall be included. The Trustee may distribute the annual report by any means acceptable to the Registered Owners. Section 4.9. Further Provisions for Gold Sales. In addition to selling Gold in accordance with Section 4.7, the Trustee shall sell Gold whenever any one or more of the following conditions exist: (a) the Sponsor has notified the Trustee that such sale is required by applicable law or regulation; or (b) this Agreement has been terminated and the Trust Property is to be liquidated in accordance with Section 6.2. Unless otherwise directed by the Sponsor, when selling Gold the Trustee shall endeavor to place orders with dealers (which may include the Custodian) through which it may reasonably expect to obtain a favorable price and good execution of orders. The Trustee and the Sponsor shall not be liable or responsible in any way for depreciation or loss incurred by reason of any sale made pursuant to this Section 4.9. Section 4.10. Counsel. The Sponsor may from time to time employ counsel to act on behalf of the Trust and perform any legal services in connection with the Gold and the Trust, including any legal matters relating to the possible disposition or acquisition of any Gold. The fees and expenses of such counsel shall be paid by the Sponsor. Section 4.11. Grantor Trust. Nothing in this Agreement, any agreement with a Custodian, or otherwise, shall be construed to give the Trustee the power to vary the investment of the Beneficial Registered Owners within the meaning of Section 301.7701-4(c) under the Internal 23 Revenue Code of 1986, as amended (the "Code") or any similar or successor provision of the regulations under the Code, nor shall the Sponsor give the Trustee any direction that would vary the investment of the Beneficial Owners. However, the Trustee shall not be liable to any Person for any failure of the Trust to qualify as a grantor trust under the Code or any comparable provision of the laws of any State or other jurisdiction where that treatment is sought, except that this sentence shall not limit the Trustee's responsibility for the administration of the Trust in accordance with this Agreement. ARTICLE 5 THE TRUSTEE AND THE SPONSOR Section 5.1. Maintenance of Office and Transfer Books by the Trustee. (a) Until termination of this Agreement in accordance with its terms, the Trustee shall maintain facilities for the execution and Delivery, registration, registration of transfers and Surrender of Shares in accordance with the provisions of this Agreement. (b) The Trustee shall keep books for the registration of Shares and registration of transfers of Shares which at all reasonable times shall be open for inspection by the Registered Owners. (c) The Trustee may, and at the reasonable written request of the Sponsor shall, close the transfer books at any time or from time to time if such action is deemed necessary or advisable in the reasonable judgment of the Trustee of the Sponsor. (d) If any Shares are listed on one or more stock exchanges in the United States, the Trustee shall act as Registrar or, with the written approval of the Sponsor (which approval shall not be unreasonably withheld), appoint a registrar or one or more co-registrars for registry of such Shares in accordance with any requirements of such exchange or exchanges. 24 Section 5.2. Prevention or Delay in Performance by the Sponsor or the Trustee. Neither the Sponsor nor the Trustee nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Registered Owner, Beneficial Owner or Depositor if, by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any act of God or war or terrorism or other circumstances beyond its control, the Sponsor or the Trustee is prevented or forbidden from, or would be subject to any civil or criminal penalty on account of, or is delayed in, doing or performing any act or thing which by the terms of this Agreement it is provided shall be done or performed and accordingly the Sponsor or the Trustee does not do that thing or does that thing at a later time than would otherwise be required. The Sponsor and the Trustee will not incur any liability to any Registered Owner or Beneficial Owner or Depositor by reason of any non-performance or delay in the performance of any act or thing which by the terms of this Agreement it is provided may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Agreement. Section 5.3. Obligations of the Sponsor and the Trustee. (a) Neither the Sponsor nor the Trustee assumes any obligation nor shall either of them be subject to any liability under this Agreement to any Registered Owner or Beneficial Owner or Depositor (including, without limitation, liability with respect to the worth of the Trust Property), except that each of them agrees to perform its obligations specifically set forth in this Agreement without negligence or bad faith. (b) Neither the Sponsor nor the Trustee shall be under any obligation to prosecute any action, suit or other proceeding in respect of any Trust Property or in respect of the Shares on behalf of a Registered Owner, Beneficial Owner, Depositor or other Person. 25 (c) Neither the Sponsor nor the Trustee shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any Depositor, any Registered Owner or any other person believed by it in good faith to be competent to give such advice or information. (d) The Trustee shall not be liable for any acts or omissions made by a successor Trustee whether in connection with a previous act or omission of the Trustee or in connection with any matter arising wholly after the resignation of the Trustee, provided that in connection with the issue out of which such potential liability arises the Trustee performed its obligations without negligence or bad faith while it acted as Trustee. (e) The Trustee and the Sponsor shall have no obligation to comply with any direction or instruction from any Registered Owner or Beneficial Owner or Depositor regarding Shares except to the extent specifically provided in this Agreement. (f) The Trustee shall be a fiduciary under this Agreement; provided, however, that the fiduciary duties and responsibilities and liabilities of the Trustee shall be limited by, and shall be only those specifically set forth in, this Agreement. (g) The Sponsor shall be responsible for all organizational expenses of the Trust, and for the following administrative and marketing expenses of the Trust: the Trustee's monthly fee, the Custodian's fee, listing fees of the Exchange, registration fees charged by the Commission, printing and mailing costs, audit fees and legal expenses not in excess of $100,000 per year. Section 5.4. Resignation or Removal of the Trustee; Appointment of Successor Trustee. (a) The Trustee may at any time resign as Trustee hereunder by written notice of its election so to do, delivered to the Sponsor, and such resignation shall take 26 effect upon the appointment of a successor Trustee and its acceptance of such appointment as hereinafter provided. (b) The Sponsor may remove the Trustee in its discretion by written notice delivered to the Trustee in the manner provided in Section 7.5 at least 90 days prior to the fifth anniversary of the date of this Agreement or, thereafter, by written notice delivered to the Trustee at least 90 days prior to the last day of any subsequent three-year period. If at any time the Trustee ceases to be a Qualified Bank or is in material breach of its obligations under this Agreement and the Trustee fails to cure such breach within 30 days after receipt by the Trustee of written notice from the Sponsor or Registered Owners acting on behalf of at least 25% of the outstanding Shares specifying such default and requiring the Trustee to cure such default, the Sponsor, acting on behalf of the Registered Owners, may remove the Trustee by written notice delivered to the Trustee in the manner provided in Section 7.5, and such removal shall take effect upon the appointment of a successor Trustee and its acceptance of such appointment as hereinafter provided. (c) If the Trustee acting hereunder resigns or is removed, the Sponsor, acting on behalf of the Registered Owners, shall use its reasonable efforts to appoint a successor Trustee, which shall be a Qualified Bank. Every successor Trustee shall execute and deliver to its predecessor and to the Sponsor, acting on behalf of the Registered Owners, an instrument in writing accepting its appointment hereunder, and thereupon such successor Trustee, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Sponsor, acting on behalf of the Registered Owners, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Trust Property to such successor, and shall deliver to such successor a list of the Registered Owners of all outstanding Shares. The Sponsor or any such successor Trustee shall 27 promptly mail notice of the appointment of such successor Trustee to the Registered Owners. (d) Any corporation into which the Trustee may be merged, consolidated or converted in a transaction in which the Trustee is not the surviving corporation shall be the successor of the Trustee without the execution or filing of any document or any further act. During the 90-day period following the effectiveness of a merger, consolidation or conversion described in the preceding sentence, the Sponsor may, by written notice to the Trustee, remove the Trustee and designate a successor Trustee in compliance with the provisions of subsection (c) above. Section 5.5. The Custodian. The Custodian will be subject at all times and in all respects to the directions of the Trustee and will be responsible solely to it. Any Custodian may resign and be discharged from its duties by notice of such resignation delivered to the Trustee at least 60 days prior to the date on which such resignation is to become effective. If upon the effectiveness of such resignation there would be no Custodian acting hereunder, the Trustee shall, promptly after receiving such notice, with the written approval of the Sponsor (which approval shall not be unreasonably withheld or delayed), appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian hereunder. Whenever the Trustee in its discretion determines that it is in the best interest of the Registered Owners to do so, it may with the written approval of the Sponsor (which approval shall not be unreasonably withheld or delayed), appoint a substitute or additional custodian or custodians, which shall thereafter be one of the Custodians hereunder. After the date of this Agreement, the Trustee shall not enter into or amend any custody agreement with a Custodian without the written approval of the Sponsor (which approval shall not be unreasonably withheld or delayed). Upon demand of the Trustee any Custodian shall deliver such of the Gold held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Trustee, forthwith upon its 28 appointment, an acceptance of such appointment satisfactory in form and substance to the Trustee. Upon the appointment of any successor Trustee hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor Trustee and the appointment of such successor Trustee shall in no way impair the authority of each Custodian hereunder; but the successor Trustee so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority as agent hereunder of such successor Trustee. Section 5.6. Indemnification. (a) The Sponsor shall indemnify the Trustee, its directors, employees and agents (the "Trustee Indemnified Persons") against, and hold each of them harmless from, any loss, liability, cost, expense or judgment (including, but not limited to, the reasonable fees and expenses of counsel) (collectively "Indemnified Amounts") that is incurred by any of them and that arises out of or is related to (i) any offer or sale by the Trust of Baskets of Shares under this Agreement, (ii) acts performed or omitted pursuant to the provisions of this Agreement, as the same may be amended, modified or supplemented from time to time, (A) by a Trustee Indemnified Person or (B) by the Sponsor or (iii) any filings with or submissions to the Commission in connection with or with respect to the Shares (which by way of illustration and not by way of limitation, include any registration statement and any amendments or supplements thereto filed with the Commission or any periodic reports or updates that may be filed under the Securities Exchange Act of 1934, as amended, or any failure to make any filings with or submissions to the Commission which are required to be made in connection with or with respect to the Shares), except that the Sponsor shall not have any obligations under this Section 5.6(a) to pay Indemnified Amounts incurred as a result of and attributable to (x) the negligence or bad faith of, or material breach of the terms of this Agreement by, the 29 Trustee, (y) written information furnished in writing by the Trustee to the Sponsor expressly for use in the registration statement, or any amendment thereto, filed with the Commission relating to the Shares that is not materially altered by the Sponsor or (z) any misrepresentations or omissions made by a Depositor (other than Sponsor) in connection with such Depositor's offer and sale of Shares. (b) The Trustee shall indemnify the Sponsor, its directors, employees and agents against, and hold each of them harmless from, any Indemnified Amounts (i) caused by the negligence or bad faith of the Trustee or (ii) arising out of any information furnished in writing to the Sponsor by the Trustee expressly for use in the registration statement, or any amendment thereto, filed with the Commission relating to the Shares that is not materially altered by the Sponsor. (c) If the indemnification provided for in Section 5.6(a) or (b) is unavailable or insufficient to hold harmless the indemnified party under subsection (a) or (b) above, then the indemnifying party shall contribute to the Indemnified Amounts referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Sponsor on the one hand and the Trustee on the other hand from the offering of the Shares which are the subject of the action or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Sponsor on the one hand and the Trustee on the other hand in connection with the action, statement or omission which resulted in such Indemnified Amount as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact from which the action arises relates to information supplied by the Sponsor or the Trustee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission or the act or omission from which the action arises. The amount of Indemnified Amounts referred to in the first 30 sentence of this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (c). (d) The Sponsor and its shareholders, directors, officers, employees, affiliates (as such term is defined under the Securities Act of 1933, as amended) and subsidiaries (each a "Sponsor Indemnified Party") shall be indemnified from the Trust and held harmless against any loss, liability or expense incurred without (1) negligence, bad faith, willful misconduct or willful malfeasance on the part of such Sponsor Indemnified Party arising out of or in connection with the performance of its obligations under this Agreement or any actions taken in accordance with the provisions of this Agreement or (2) reckless disregard on the part of such Sponsor Indemnified Party of its obligations and duties under this Agreement. Such indemnity shall include payment from the Trust of the costs and expenses incurred by such Sponsor Indemnified party in defending itself against any claim or liability in its capacity as Sponsor. Any amounts payable to a Sponsor Indemnified Party under this Section 5.6(d) may be payable in advance or shall be secured by a lien on the Trust. The Sponsor may, in its discretion, undertake any action which it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto and the interests of the Registered Owners and, in such event, the legal expenses and costs of any such actions shall be expenses and costs of the Trust and the Sponsor shall be entitled to be reimbursed therefor by the Trust. (e) If an action, proceeding (including, but not limited to, any governmental investigation), claim or dispute (collectively, a "Proceeding") in respect of which indemnity may be sought by either party is brought or asserted against the other party, the party seeking indemnification (the "Indemnitee") shall promptly (and in no event more than seven (7) days after receipt of notice of such Proceeding) notify the party obligated to provide such indemnification (the "Indemnitor") of such Proceeding. The failure of the Indemnitee to so notify the Indemnitor shall not impair the Indemnitee's 31 ability to seek indemnification from the Indemnitor (but only for costs, expenses and liabilities incurred after such notice) unless such failure adversely affects the Indemnitor's ability to adequately oppose or defend such Proceeding. Upon receipt of such notice from the Indemnitee, the Indemnitor shall be entitled to participate in such Proceeding and, to the extent that it shall so desire and provided no conflict of interest exists as specified in clause (i) below and there are no other defenses available to Indemnitee as specified in clause (iii) below, to assume the defense thereof with counsel reasonably satisfactory to the Indemnitee (in which case all attorney's fees and expenses shall be borne by the Indemnitor and the Indemnitor shall in good faith defend the Indemnitee). The Indemnitee shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but, in such case, no fees and expenses of such counsel shall be borne by the Indemnitor unless such fees and expenses are otherwise required to be indemnified under Section 5.06(a), (b) or (d), as applicable, and (i) there is such a conflict of interest between the Indemnitor and the Indemnitee as would preclude, in compliance with the ethical rules in effect in the jurisdiction in which the Proceeding was brought, one lawyer from representing both parties simultaneously, (ii) the Indemnitor fails, within the earlier of (x) twenty (20) days following receipt of notice of the Proceeding from the Indemnitee or (y) seven (7) days prior to the date the first response or appearance is required to be made in such Proceeding, to assume the defense of such Proceeding with counsel reasonably satisfactory to the Indemnitee or (iii) there are legal defenses available to Indemnitee that are different from or are in addition to those available to the Indemnitor. No compromise or settlement of such Proceeding may be effected by either party without the other party's consent unless (m) there is no finding or admission of any violation of law and no effect on any other claims that may be made against such other party and (n) the sole relief provided is monetary damages that are paid in full by the party seeking the settlement. Neither party shall have any liability with respect to any compromise or settlement effected without its consent, which shall not be unreasonably withheld. The Indemnitor shall have no obligation to indemnify and hold harmless the Indemnitee from any loss, expense or liability incurred by the Indemnitee as 32 a result of a default judgment entered against the Indemnitee unless such judgment was entered after the Indemnitor agreed, in writing, to assume the defense of such Proceeding. Section 5.7. Charges of Trustee. (a) Each Depositor, and each person surrendering Shares for the purpose of withdrawing Trust Property, shall pay to the Trustee a fee of $1,000 or less per transaction for the Delivery of Shares pursuant to Section 2.4 and the Surrender of Baskets of Shares pursuant to Section 2.6 or 6.2. (b) The Trustee is entitled to receive from the Sponsor fees for its services and reimbursement for its out-of-pocket expenses in accordance with written agreements between the Sponsor and the Trustee. (c) The Trustee is entitled to charge the Trust for all expenses and disbursements incurred by it under Section 5.12(a) or that are of the type described in Sections 4.7(a)(2) or (3) of this Agreement (including the fees and disbursements of its legal counsel), except that the Trustee is not entitled to charge the Trust for (i) expenses and disbursements incurred by it prior to the commencement of trading of Shares on the Exchange and (ii) fees of agents for performing services the Trustee is required to perform under this Agreement. Section 5.8. Charges of Sponsor. (a) The Sponsor is entitled to receive from the Trust, as an expense of the Trust, a fee for services that will accrue daily at an annualized rate of 0.40% of Adjusted Net Asset Value and will be payable monthly in arrears. (b) The Sponsor is entitled to receive reimbursement from the Trust for all expenses and disbursements incurred by it under the last sentence of Section 5.6(d) or that are of the type described in Sections 4.7(a)(2), (3) or (4) of this Agreement, except that the Sponsor is not entitled to charge the Trust for (i) expenses and 33 disbursements incurred by it prior to the commencement of trading of Shares on the Exchange and (ii) fees of agents for performing services the Sponsor is required to perform under this Agreement. Section 5.9. Retention of Trust Documents. The Trustee is authorized to destroy those documents, records, bills and other data compiled during the term of this Agreement at the times permitted by the laws or regulations governing the Trustee, unless the Sponsor reasonably requests the Trustee in writing to retain those items for a longer period. Section 5.10. Federal Securities Law Filings. The Sponsor shall (i) prepare and file a registration statement with the Commission and take such action as is necessary from time to time to qualify the Shares for offering and sale under the federal securities laws of the United States, including the preparation and filing of amendments and supplements to such registration statement, (ii) promptly notify the Trustee of any amendment or supplement to the registration statement or prospectus, of any order preventing or suspending the use of any prospectus, of any request for the amending or supplementing of the registration statement or prospectus or if any event or circumstance occurs which is known to the Sponsor as a result of which the registration statement or prospectus, as then amended or supplemented, would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) provide the Trustee from time to time with copies, including copies in electronic form, of the prospectus, as amended and supplemented, in such quantities as the Trustee may reasonably request and (iv) prepare and file any periodic reports or updates that may be required under the Securities Exchange Act of 1934, as amended. The Trustee shall furnish to the Sponsor any information from the records of the Trust that the Sponsor reasonably requests in writing 34 that is needed to prepare any filing or submission that the Sponsor or the Trust is required to make under the federal securities laws of the United States. Section 5.11. Prospectus Delivery. The Trustee shall, if required by the federal securities laws of the United States, in any manner permitted by such laws, deliver at the time of issuance of Shares, a copy of the relevant prospectus, as most recently furnished to the Trustee by the Sponsor, to each Depositor. Section 5.12. Discretionary Actions by Trustee; Consultation. (a) The Trustee may, in its discretion, undertake any action that it considers necessary or desirable to protect the Trust or the interests of the Registered Owners. The expenses incurred by the Trustee in connection with taking any action under the preceding sentence (including the fees and disbursements of legal counsel) shall be expenses of the Trust, and the Trustee shall be entitled to be reimbursed for those expenses by the Trust. (b) The Trustee shall notify and consult with the Sponsor before undertaking any action under subsection (a) above or if the Trustee becomes aware of any development or event that affects the administration of the Trust but is not contemplated or provided for in this Agreement. (c) The Sponsor shall notify and consult with the Trustee before undertaking any action under the last sentence of Section 5.6(d) or if the Sponsor becomes aware of any development or event that affects the administration of the Trust but is not contemplated or provided for in this Agreement. 35 ARTICLE 6 AMENDMENT AND TERMINATION Section 6.1. Amendment. The Trustee and the Sponsor may amend any provisions of this Agreement without the consent of any Registered Owner. Any amendment that imposes or increases any fees or charges (other than taxes and other governmental charges, registration fees or other such expenses), or that otherwise prejudices any substantial existing right of the Registered Owners will not become effective as to outstanding Shares until 30 days after notice of such amendment is given to the Registered Owners. Every Registered Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold any Shares or an interest therein, to consent and agree to such amendment and to be bound by this Agreement as amended thereby. In no event shall any amendment impair the right of the Registered Owner of Shares to Surrender Baskets of Shares and receive therefor the amount of Trust Property represented thereby, except in order to comply with mandatory provisions of applicable law. Section 6.2. Termination. (a) The Trustee shall set a date on which this Agreement will terminate and mail notice of that termination to the Registered Owners at least 30 days prior to the date set for termination if any of the following occurs: (i) The Trustee is notified that the Shares are delisted from a national securities exchange and are not approved for listing on another national securities exchange within five business days of their delisting; (ii) Registered Owners acting in respect of at least 75% of the outstanding Shares notify the Trustee that they elect to terminate the Trust; 36 (iii) 60 days have elapsed since the Trustee notified the Sponsor of the Trustee's election to resign and a successor trustee has not been appointed and accepted its appointment as provided in Section 5.4; (iv) the Commission determines that the Trust is an investment company under the Investment Company Act of 1940, as amended, and the Trustee has actual knowledge of such Commission determination; (v) the aggregate market capitalization of the Trust, based on the closing price for the Shares was less than $350 million for five consecutive trading days and the Trustee receives, within six months after the last of those trading days, notice from the Sponsor of its decision to terminate the Trust; (vi) the CFTC determines that the Trust is a commodity pool under the Commodity Exchange Act of 1936, as amended, and the Trustee has actual knowledge of that determination; or (vii) the Trust fails to qualify for treatment, or ceases to be treated, for United States federal income tax purposes, as a grantor trust, and the Trustee receives notice from the Sponsor that the Sponsor determines that, because of that tax treatment or change in tax treatment, termination of the Trust is advisable. (b) If no event specified in subsection (a) above occurs first, the Trust shall terminate on __________, 2044, and the Trustee shall mail a notice of that impending termination to the Registered Owners at least 30 days before that anniversary. (c) On and after the date of termination of this Agreement, the Registered Owner of Shares will, upon (i) Surrender of those Shares, (ii) payment of the fee of the Trustee for the Surrender of Shares provided in Section 5.7, and (iii) payment of any applicable taxes or other governmental charges, be entitled to Delivery, to him or upon his order, of the amount of Trust Property represented by those Shares. The Trustee shall not accept any deposits of Gold after the date of termination of this Agreement. If 37 any Shares remain outstanding after the date of termination of this Agreement, the Trustee thereafter shall discontinue the registration of transfers of Shares, shall not make any distributions to Registered Owners, and shall not give any further notices or perform any further acts under this Agreement, except that the Trustee shall continue to collect distributions pertaining to Trust Property and hold the same uninvested and without liability for interest, pay the Trust's expenses and sell Gold as necessary to meet those expenses and shall continue to deliver Trust Property, together with any distributions received with respect thereto and the net proceeds of the sale of any other property, in exchange for Shares Surrendered to the Trustee (after deducting or upon payment of, in each case, the fee of the Trustee set forth in 5.7 for the Surrender of Shares, any expenses for the account of the Registered Owner of such Shares in accordance with the terms and conditions of this Agreement, and any applicable taxes or other governmental charges). At any time after the expiration of 90 days following the date of termination of this Agreement, the Trustee may sell the Trust Property then held under this Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it under this Agreement, unsegregated and without liability for interest, for the pro rata benefit of the Registered Owners of Shares that have not theretofore been Surrendered, such Registered Owners thereupon becoming general creditors of the Trustee with respect to such net proceeds. After making such sale, the Trustee shall be discharged from all obligations under this Agreement, except to account for such net proceeds and other cash (after deducting, in each case, any fees, expenses, taxes or other governmental charges payable by the Trust, the fee of the Trustee for the Surrender of Shares and any expenses for the account of the Registered Owner of such Shares in accordance with the terms and conditions of this Agreement, and any applicable taxes or other governmental charges). Upon the termination of this Agreement, the Sponsor shall be discharged from all obligations under this Agreement except for its obligations to the Trustee under Section 5.6. Sections 5.6, 5.7 and 5.8 shall survive termination of this Agreement. 38 ARTICLE 7 MISCELLANEOUS Section 7.1. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Agreement shall be filed with the Trustee and shall be open to inspection by any Registered Owner during the Trustee's business hours. Section 7.2. Third-Party Beneficiaries. This Agreement is for the exclusive benefit of the parties hereto, and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person. Section 7.3. Severability. In case any one or more of the provisions contained in this Agreement should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall in no way be affected, prejudiced or disturbed thereby. Section 7.4. Registered Owners, Beneficial Owners and Depositors as Parties; Binding Effect. The Registered Owners, Beneficial Owners and Depositors from time to time shall be parties to this Agreement and shall be bound by all of the terms and conditions hereof by their acceptance of Shares or any interest therein or by their depositing Gold, as the case may be. 39 Section 7.5. Notices. (a) All notices given under this Agreement must be in writing. (b) Any and all notices to be given to the Trustee or the Sponsor shall be deemed to have been duly given (i) when it is actually delivered by a messenger or recognized courier service, (ii) five days after it is mailed by registered or certified mail, postage paid or (iii) when receipt of a facsimile transmission is acknowledged via a return receipt or receipt confirmation as requested by the original transmission, in each case to or at the address set forth below: To the Trustee: THE BANK OF NEW YORK 101 Barclay Street, 22-W New York, New York 10286 Attention: ADR Administration Fax: 212-571-3050 or any other place to which the Trustee may have transferred its Corporate Trust Office with notice to the Sponsor. To the Sponsor: BARCLAYS GLOBAL INVESTORS, N.A. 45 Fremont Street San Francisco, California 94105 Attention: ______________________ Facsimile: ______________________ __________________________________ __________________________________ __________________________________ or any other place to which the Sponsor may have transferred its principal office with notice to the Trustee. (c) Any and all notices to be given to a Registered Owner shall be deemed to have been duly given (i) when actually delivered by messenger or a recognized courier service, (ii) when mailed, postage prepaid or (iii) when sent by facsimile transmission confirmed by letter, in each case at or to the address of such Registered Owner as it 40 appears on the transfer books of the Trustee, or, if such Registered Owner shall have filed with the Trustee a written request that any notice or communication intended for such Registered Owner be delivered to some other address, at the address designated in such request. Section 7.6. Agent for Service; Submission to Jurisdiction. The Sponsor hereby (i) irrevocably designates and appoints Barclays Bank PLC, New York Branch, General Counsel's Office, located at 200 Park Avenue, 4th Floor, New York, New York 10166, in the State of New York, as the Sponsor's authorized agent upon which process may be served in any suit or proceeding arising out of or relating to the Shares, the Trust Property or this Agreement, (ii) consents and submits to the jurisdiction of any state or federal court in The City of New York, State of New York, in which any such suit or proceeding may be instituted, and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Sponsor in any such suit or proceeding. The Sponsor agrees to deliver, upon the execution and delivery of this Agreement, a written acceptance by such agent of its appointment as such agent. The Sponsor further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect for so long as any Shares remain outstanding or this Agreement remains in force. In the event the Sponsor fails to continue such designation and appointment in full force and effect, the Sponsor hereby waives personal service of process upon it and consents that any such service of process may be made by certified or registered mail, return receipt requested, directed to the Sponsor at its address last specified for notices hereunder, and service so made shall be deemed completed five (5) days after the same shall have been so mailed. 41 Section 7.7. Governing Law. This Agreement shall be interpreted under, and all rights and duties under this Agreement shall be governed by, the internal substantive laws (but not the choice of law rules) of the State of New York. 42 IN WITNESS WHEREOF, BARCLAYS GLOBAL INVESTORS, N.A. and THE BANK OF NEW YORK have duly executed this Agreement as of the day and year first set forth above. BARCLAYS GLOBAL INVESTORS, N.A. By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee By: --------------------------------- Name: Title: Vice President 43 EXHIBIT A [Form of Certificate] THE SHARES EVIDENCED HEREBY REPRESENT RIGHTS WITH RESPECT TO UNDERLYING TRUST PROPERTY (AS DEFINED IN THE DEPOSITARY TRUST AGREEMENT REFERRED TO HEREIN) HELD BY THE TRUST AND DO NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND ARE NOT GUARANTEED BY THE SPONSOR OR THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE SHARES NOR THE UNDERLYING TRUST PROPERTY ARE INSURED UNDER ANY AGREEMENT THAT DIRECTLY BENEFITS THE TRUST OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE AGENT AUTHORIZED BY THE ISSUER FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 1 iSHARES COMEX GOLD TRUST SHARES ISSUED BY iSHARES COMEX GOLD TRUST REPRESENTING FRACTIONAL INTERESTS IN DEPOSITED GOLD AND ANY OTHER TRUST PROPERTY THE BANK OF NEW YORK, as Trustee No.____ * Shares CUSIP: ____________ THE BANK OF NEW YORK, as Trustee (hereinafter called the Trustee), hereby certifies that CEDE & CO., as nominee of the Depository Trust Company, or registered assigns, IS THE OWNER OF * Shares issued by iShares COMEX Gold Trust, each representing a fractional undivided interest in the net assets of the Trust, as provided in the Agreement referred to below. At the time of delivery of the Agreement, each 50,000 Shares represented an interest in 5,000 Fine Ounces of Gold that are deposited under the Agreement and held by the Custodian referred to in the Agreement. The amount of Gold in which each 50,000 Shares represents an interest will decline over time as provided in the Agreement. The Trustee's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, New York 10286, and its principal executive office is located at One Wall Street, New York, New York 10286. This Certificate is issued upon the terms and conditions set forth in the Depositary Trust Agreement dated as of _________, 2004 (the "Agreement") among Barclays Global Investors, N.A. (herein called the Sponsor), the Trustee, all Registered Owners and Beneficial Owners from time to time of Shares issued thereunder and all Depositors. By becoming a Registered Owner or Beneficial Owner, or by depositing Gold, a Person becomes a party to the Agreement and is bound by all the terms and conditions of the Agreement. The Agreement sets forth the rights of Depositors and Registered Owners and the rights and duties of the Trustee and the Sponsor. Copies of the Agreement are on file at the Trustee's Corporate Trust Office in New York City. - ---------- * That number of Shares held at The Depository Trust Company at any given point in time. 2 The Agreement is hereby incorporated by reference into and made a part of this Certificate as if set forth in full in this place. Capitalized terms not defined herein shall have the meanings set forth in the Agreement. This Certificate shall not be entitled to any benefits under the Agreement or be valid or obligatory for any purpose unless it is executed by the Trustee by the manual or facsimile signature of a duly authorized signatory of the Trustee and, if a Registrar (other than the Trustee) for the Shares shall have been appointed, countersigned by the manual signature of a duly authorized officer of the Registrar. Dated: THE BANK OF NEW YORK, --------------------- as Trustee By: --------------------------- THE TRUSTEE'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, NEW YORK 10286 3 EX-4.2 4 dex42.txt FORM OF AUTHORIZED PARTICIPANT AGREEMENT Exhibit 4.2 FORM OF AUTHORIZED PARTICIPANT AGREEMENT AUTHORIZED PARTICIPANT AGREEMENT (this "Agreement") dated as of [ ] among (i) [XYZ], a [ ] (the "Authorized Participant"), (ii) The Bank of New York, a New York Banking corporation acting in its capacity as trustee (in such capacity, the "Trustee") of the [ABC] trust (the "Trust"), a trust created under New York law pursuant to the provisions of the Depositary Trust Agreement (the "Trust Agreement") dated [ ], between the Trustee and Barclays Global Investors, N.A., a national banking association, in its capacity as sponsor of the Trust (in such capacity, the "Sponsor"), and (iii) the Sponsor. R E C I T A L S A. Pursuant to the provisions of the Trust Agreement, the Trust may from time to time issue or redeem equity securities representing an interest in the assets of the Trust ("iShares"), in each case only in aggregate amounts of [ ] (such aggregate amount, a "Basket"), and integral multiples thereof, and only in transactions with a party who, at the time of the transaction, shall have signed and in effect an Authorized Participant Agreement with the Trust. B. [XYZ] has requested to become an "Authorized Participant" with respect to the Trust (as such term is defined in the Trust Agreement), and the Sponsor and the Trustee have agreed to such request. NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties, hereto, intending to be legally bound, agree as follows: Section 1. Procedures. The Authorized Participant will purchase or redeem Baskets of iShares of the Trust in compliance with the Trust Agreement as supplemented by the Creation and Redemption Procedures attached to this Agreement as Schedule 1 (such procedures, as the same may be amended or modified from time to time in compliance with the provisions hereof and thereof, the "Procedures"), using the form attached thereto as Annex I in the case of an order to purchase one or more Baskets of iShares (the "Purchase Order"), or the form attached thereto as Annex II in case of an order to redeem one or more Baskets of iShares (the "Redemption Order"). All Purchase Orders and Redemption Orders (collectively, "Orders") shall be placed and executed in accordance with the Trust Agreement as supplemented by the Procedures. Section 2. Incorporation of Standard Terms. The Standard Terms attached hereto as Schedule 2 are hereby incorporated by reference into, and made a part of, this Agreement. Section 3. Conflicts Rules. In case of any inconsistency between the provisions of this Agreement and the Trust Agreement, the provisions of the Trust Agreement shall control. In case of inconsistency between the provisions incorporated by reference into this Agreement pursuant to Section 2 above and any other provision of this Agreement, the latter will control. Section 4. Authorized Representatives. Pursuant to Section 2.01 of the Standard Terms, attached hereto as Schedule 3 is a certificate listing the Authorized Representatives of the Authorized Participant. Section 5. Notices. Except as otherwise specifically provided in the Procedures, all notices required or permitted to be given pursuant hereto shall be given in writing and delivered by personal delivery or by postage prepaid registered or certified United States first class mail, return receipt requested, or by telex, telegram or facsimile or similar means of same day delivery (with a confirming copy by mail) addressed as follows: (i) If to the Trustee: The Bank of New York 101 Barclay Street -- Floor 6E New York, NY 10286 Attn: Telephone: Facsimile: (ii) If to the Sponsor: Barclays Global Investors, N.A. 45 Freemont Street San Francisco, CA 94105 Attn: Telephone: Facsimile: with a copy to: Barclays Global Investors, N.A. 45 Freemont Street San Francisco, CA 94105 Attn: Legal Department Telephone: Facsimile: (iii) If to the Authorized Participant: [XYZ] [Address] [City, State, ZIP] Attn: Telephone: Facsimile: or to such other address as any of the parties hereto shall have communicated in writing to the remaining parties in compliance with the provisions hereof. 2 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above. THE BANK OF NEW YORK, in its capacity as Trustee of the [ABC] Trust, By: --------------------------------- NAME: TITLE: BARCLAYS GLOBAL INVESTORS, N.A., in its capacity as Sponsor By: By: --------------------------------- --------------------------------- NAME: NAME: TITLE: TITLE: [XYZ] By: --------------------------------- NAME: TITLE: 3 Schedule 1 ---------- CREATION AND REDEMPTION PROCEDURES ---------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........1 Section 1.01. Definitions................................................1 Section 1.02. Interpretation.............................................3 Section 1.03. Conflicts..................................................3 ARTICLE II CREATION PROCEDURES..............................................3 Section 2.01. Initial Creation of iShares................................3 Section 2.02. Subsequent Creation of iShares.............................3 ARTICLE III REDEMPTION PROCEDURES............................................5 Section 3.01. Redemption of iShares......................................5 -i- iSHARES COMEX GOLD TRUST CREATION AND REDEMPTION PROCEDURES ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions. For purposes of these Procedures, unless the context otherwise requires, the following terms will have the following meanings: "Authorized Participant" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Authorized Participant Agreement" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Authorized Representative" shall mean, with respect to an Authorized Participant, each individual who, pursuant to the provisions of the Authorized Participant Agreement between such Authorized Participant and the Trustee, has the power and authority to act on behalf of the Authorized Participant in connection with the placement of Purchase Orders or Redemption Orders and is in possession of the personal identification number (PIN) assigned by the Trustee for use in any communications regarding Purchase or Redemption Orders on behalf of such Authorized Participant. "Basket" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Basket Gold Amount" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Business Day" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "COMEX" means Commodity Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc. "Creation" means the process that begins when an Authorized Participant first indicates to the Trustee its intention to purchase one or more Baskets pursuant to these Procedures and concludes with the issuance by the Trustee and Delivery to such Authorized Participant of the corresponding number of iShares. "Custodian Day" shall mean a day on which the Custodian is open for business at each location at which a Delivery of Gold to or by the Custodian is expected to take place pursuant to a Purchase Order or Redemption Order (as applicable). "Creation and Redemption Line" shall mean a telephone number designated as such by the Trustee and communicated to each Authorized Participant in compliance with the notice provisions of the respective Authorized Participant Agreement. "Custodian" shall mean The Bank of Nova Scotia, a bank organized under the laws of Canada, in its capacity as custodian under the Custodian Agreement, and any successor thereto in compliance with the provisions thereof. "Custodian Agreement" shall mean the Custodian Agreement dated [ ], 2004 by and between the Trustee and the Custodian. S1-1 "Custodial Account" shall mean the account established by the Trustee with the Custodian pursuant to the Custodian Agreement. "Delivery" shall mean a delivery of Gold or Shares, as applicable, in each case effected according to the definition of "Deliver" in Section 1.1 of the Trust Agreement. "DTC" shall mean The Depository Trust Company, its nominees and their respective successors. "Fine Ounces" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Gold" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "iShares" shall mean shares issued by the Trustee representing fractional, undivided interests in the net assets of the Trust. "Initial Creation" shall mean the initial creation of iShares pursuant to the provisions of 2.01. "Order Cut-Off Time" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. "Order Date" shall have, (i) with respect to a Purchase Order, the meaning ascribed to the term in Section 2.3 of the Trust Agreement; and (ii) with respect to a Redemption Order, the meaning ascribed to the term in Section 2.6 of the Trust Agreement. "Purchase Order" shall mean an order to purchase one or more Baskets in the form attached hereto as Annex I. "Redemption Order" shall mean an order to redeem one or more Baskets in the form attached hereto as Annex II. "Sponsor" shall mean Barclays Global Investors, N.A., a national banking association, in its capacity as sponsor under the Trust Agreement. "Trustee" shall mean The Bank of New York, a New York banking corporation, in its capacity as Trustee under the Trust Agreement, and any successor thereto in compliance with the provisions thereof. "Trust" shall mean the iShares COMEX Gold Trust, a trust governed by the provisions of the Trust Agreement. "Trust Agreement" shall mean the Depositary Trust Agreement dated [ ], 2004 among the Trustee, the Sponsor, all owners and beneficial owners from time to time of iShares and all depositors. "Unallocated Basis" shall have the meaning ascribed to the term in Section 1.1 of the Trust Agreement. Section 1.02. Interpretation. In these Procedures: Unless otherwise indicated, all references to Sections, clauses, paragraphs, schedules or exhibits, are to Sections, clauses, paragraphs, schedules or exhibits in or to these Procedures. The words "hereof", "herein", "hereunder" and words of similar import shall refer to these Procedures as a whole, and not to any individual provision in which such words may appear. S1-2 A reference to any statute, law, decree, rule, regulation or other applicable norm shall be construed as a reference to such statute, law, decree, rule, regulation or other applicable norm as re-enacted, re-designated or amended from time to time. A reference to any agreement, instrument or document shall be construed as a reference to such agreement, instrument or document as the same may have been amended from time to time in compliance with the provisions thereof. S1-3 Section 1.03. Conflicts. In case of conflict between any provision of these Procedures and the terms of the Trust Agreement, the terms of the Trust Agreement shall control. ARTICLE II CREATION PROCEDURES Section 2.01. Initial Creation of iShares. The initial creation of iShares will take place in compliance with such procedures as the Trustee, the Sponsor and the initial Depositor may agree. Section 2.02. Subsequent Creation of iShares. After the Initial Creation, the issuance and Delivery of iShares shall take place only in integral numbers of Baskets in compliance with the following rules: a. Authorized Participants wishing to acquire from the Trustee one or more Baskets shall place a Purchase Order with the Trustee no later than 4:00 p.m. (New York time) on any Business Day; provided, however, that only Purchase Orders received by the Trustee prior to the Order Cut-Off Time on a Business Day on which a COMEX Relevant Price is announced shall have such Business Day as the Order Date. Purchase Orders received by the Trustee on or after the Order Cut-Off Time on a Business Day, or on a Business Day on which COMEX does not announce a COMEX Relevant Price, shall be considered received at the opening of business on the next Business Day on which a COMEX Relevant Price is announced and shall have as their Order Date such next Business Day. b. For purposes of paragraph "a" above, a Purchase Order shall be deemed "received" by the Trustee only when each of the following has occurred: c. An Authorized Representative shall have placed a telephone call to the Trustee's Creation and Redemption Line informing the Trustee that the Authorized Participant wishes to place a Purchase Order for a specified number of Baskets and the city or cities where the Authorized Participant expects to make Delivery to the Custodian of the Basket Gold Amount corresponding to each Basket (such city or cities to be limited to those where, in compliance with the Custodian Agreement, the Custodian is authorized to hold Gold on behalf of the Trust). d. Within one hour following such telephone call, the Trustee shall have received, via facsimile or electronic mail message, a duly completed, irrevocable Purchase Order executed by an Authorized Representative of such Authorized Participant. e. The Trustee will ask the Custodian to confirm whether it can take delivery in the cities indicated by the Authorized Participant and, if so, to identify the facilities where the Authorized Participant shall make Delivery of the Basket Gold Amount. The Custodian shall have no obligation to take delivery if the Custodian confirms to the Trustee that it cannot take delivery because of lack of capacity. For purposes of the foregoing sentence, "capacity" means: (i) the maximum amount of gold that can be physically stored in vaults available to the Custodian in the relevant city; and (ii) the maximum amount of gold that the can be physically accepted on a given date at vaults available to the Custodian in the relevant city. The Custodian will also be deemed to lack "capacity" to accept additional gold if, after giving effect to a new delivery, the value of gold held in the Custodial Account would exceed $2 billion. S1-4 f. Should the Trustee elect to accept the Purchase Order, it shall communicate its decision by sending to the Authorized Participant (with copies to the Custodian at the offices of the Custodian in New York and at each location at which the Authorized Participant will be expected to Deliver Gold pursuant to "e" above), via facsimile or electronic mail message, no later than 5:00 p.m. (New York time) on the Order Date for such Purchase Order a copy of the corresponding Purchase Order endorsed "Accepted" by the Trustee and indicating the Basket Gold Amount that the Authorized Participant shall Deliver to the Custodian in respect of each Basket. g. The Basket Gold Amount corresponding to each Basket must be delivered no later than 11:30 a.m. (local time at the place of Delivery) on the first Custodian Day following the Order Date, at the locations specified by the Custodian. At the election of the Authorized Participant such delivery may be made for deposit in the Trustee's Custodial Account or in the account of the Authorized Participant with the Custodian. If delivery is made for deposit in the Authorized Participant's Account, it will be accompanied by an irrevocable order to the Custodian authorizing the transfer of the Gold so delivered to the Trustee's Custodial Account against the delivery by the Trustee of the corresponding number of iShares as provided in paragraph "j" or "l" below, as applicable. The Authorized Participant shall contact the Custodian to obtain information regarding the location of the facilities where Delivery shall take place. The Custodian shall take all necessary measures to ensure that the facilities at which Delivery is to take place in respect of a Purchase Order are prepared to take such Delivery no later than 11:30 a.m. (local time at the place of Delivery) on the first Custodian Day following the applicable Order Date. h. Gold must be Delivered to the Custodian in the form of Gold bars only and must be accompanied by the corresponding bar list; provided, that an amount of Gold not exceeding 430 Ounces may be Delivered to the Custodian on an Unallocated Basis. Gold that has been Delivered to the Custodian no later than 11:30 a.m. (local time at the place of Delivery) on a Custodian Day shall be allocated by the Custodian to the Trustee's Custodial Account no later than 9:00 a.m. (New York time) (A) on the second Custodian Day following the date of such Delivery, provided that it does not exceed (i) in the case of Gold already in the possession of the Custodian prior to such Delivery, 500,000 Fine Ounces, and (ii) in the case of Gold that was not in the possession of the Custodian prior to such Delivery, 50,000 Fine Ounces, or (B) on the fourth Custodian Day following the date of such Delivery, in the case of more than 50,000, but less than 100,000, Fine Ounces of Gold that was not in the possession of the Custodian prior to such Delivery. In all other cases Gold Delivered to the Custodian shall be allocated by the Custodian to the Trustee's Custodial Account as soon as practicable. i. The Custodian shall allocate Gold to the Trustee's Custodial Account by (i) making entries in the Custodian's books and records to identify such Gold as being held for the Trust, it being understood that such entries shall identify each bar of Gold so allocated by refiner, assay, serial number and gross and fine weight; (ii) physically segregating from Gold held by the Custodian for its own account or on behalf of other clients the Gold so allocated to the Trustee's Custodial Account; and (iii) sending to the Trustee, via signed facsimile and electronic mail message, a written confirmation of the allocation, including the identification of the bars allocated as described above. Any Gold received by the Custodian on an Unallocated Basis in compliance with the provisions of paragraph "h" above, shall be transferred to the Trustee's Custodial Account by the Custodian. j. Provided that, by 9:00 a.m. (New York time) on the third Custodian Day following the Order Date corresponding to a Purchase Order, S1-5 (i) the Custodian shall have reported in writing to the Trustee that it has reviewed the bar list and the Gold received from the Authorized Participant to assure that the Gold matches the description in the bar list in terms of weight, fineness, refiner's marks and bar numbers and that, based on that review and on such further examination as the Custodian customarily performs in respect of gold purchased for its own account, the Gold deposited by the Authorized Participant in respect to such Purchase Order (A) complies with (1) the "Good Delivery" Rules of the London Bullion Market Association, and/or (2) the specifications for delivery in settlement of a COMEX gold futures contract, and/or (3) such other standards as the Custodian and the Trustee, with the approval of the Sponsor, may have adopted; and (B) is held by the Custodian on behalf of the Trust in allocated form (except for amounts not to exceed in the aggregate 430 Fine Ounces); (ii) the Trustee shall have received from the Authorized Participant a per order transaction fee in the amount of US$1,000.00; and (iii) any other conditions to the issuance under the Trust Agreement shall have been satisfied, k. the Trustee (on such date, if it is a Business Day and, if not, on the next Business Day) shall issue the aggregate number of iShares corresponding to the Baskets ordered by the Authorized Participant and Deliver them by credit to the account at DTC which the Authorized Participant shall have identified for such purpose in its Purchase Order. l. In all other cases, the Trustee shall issue the aggregate number of iShares corresponding to the Baskets ordered by the Authorized Participant and Deliver them by credit to the account at DTC which the Authorized Participant shall have identified for such purpose in its Purchase Order on the Business Day following the date on which the conditions set forth in clauses (i) to (iii) of paragraph "j" above shall have been met. ARTICLE III REDEMPTION PROCEDURES Section 3.01. Redemption of iShares. Redemption of iShares shall take place only in integral numbers of Baskets in compliance with the following rules: a. Authorized Participants wishing to redeem one or more Baskets shall place a Redemption Order with the Trustee no later than 4:00 p.m. (New York time) on any Business Day; provided, however, that only Redemption Orders received by the Trustee prior to the Order Cut-Off Time on a Business Day on which a COMEX Relevant Price is announced shall have such Business Day as the Order Date. Redemption Orders received by the Trustee on or after the Order Cut-Off Time on any Business Day, or on a Business Day on which COMEX does not announce a COMEX Relevant Price, shall be considered received at the opening of business on the next Business Day on which a COMEX Relevant Price is announced and shall have as their Order Date such next Business Day. b. For purposes of paragraph "a" above, a Redemption Order shall be deemed "received" by the Trustee only when each of the following has occurred: (i) An Authorized Representative shall have placed a telephone call to the Trustee's Creation and Redemption Line informing the Trustee that the Authorized Participant wishes to place a Redemption Order for a specified number of Baskets. S1-6 (ii) Within one hour following such telephone call, the Trustee shall have received, via facsimile or electronic mail message, a duly completed, irrevocable Redemption Order executed by an Authorized Representative of such Authorized Participant. (iii) Should the Trustee elect to accept such Redemption Order, it shall communicate its decision to the Authorized Participant by sending to the Authorized Participant (with copy to the Custodian), via facsimile or electronic mail message, no later than 5:00 p.m. (New York time) on the Order Date for such Redemption Order a copy of the corresponding Redemption Order endorsed "Accepted" by the Trustee and indicating the Gold Basket Amount that the Custodian shall Deliver to the Authorized Participant in respect of each Basket being redeemed. c. Gold will be Delivered by the Custodian in the form of Gold bars only; provided, that an amount of Gold not exceeding 430 Ounces may be Delivered by the Custodian on an Unallocated Basis. While a redeeming Authorized Participant will be entitled to express a preference as to the city or facility where it would like to have the Gold Basket Amount delivered, the Trustee, in consultation with the Custodian and taking into account the best interests of the Trust and the Owners, will have final authority to decide where such delivery will take place. The Custodian shall inform via electronic mail message or facsimile sent to an Authorized Person of the redeeming Authorized Participant no later than 11:00 a.m. (New York time) on the first Custodian Day following the Order Date of such Redemption Order the exact location(s) where Delivery will be made, and the amount of Gold to be Delivered to the Authorized Participant at each such location. d. Provided that (1) a Redemption Order does not require Delivery by the Custodian of more than 500,000 Fine Ounces of Gold that, following such Delivery, will continue to be held at the Custodian, or more than 50,000 Fine Ounces of Gold that will not be held at the Custodian following such Delivery, and (2) by 9:00 a.m. (New York time) on the third Custodian Day following the Order Date of a Redemption Order, the Trustee shall have confirmed in writing to the Custodian that (i) the Authorized Participant has Delivered to the Trustee's account at DTC the total number of iShares to be redeemed by such Authorized Participant pursuant to such Redemption Order; (ii) the Trustee has received a per order transaction fee of US$1,000.00; and (iii) any other conditions to the redemption under the Trust Agreement have been satisfied, the Custodian will, as applicable, on such day, at the locations and in the amounts specified in the communication sent in compliance with paragraph "c" above, effect physical Delivery to such Authorized Participant of the corresponding amounts of Gold which complies with (1) the "Good Delivery" Rules of the London Bullion Market Association, and/or (2) the specifications for delivery in settlement of a COMEX gold futures contract, and/or (3) such other standards as the Custodian and the Trustee, with the approval of the Sponsor, may have adopted. Having made such Delivery, the Custodian will send written confirmation thereof to the Trustee who will then cancel the iShares so redeemed. S1-7 e. If a Redemption Order requires Delivery by the Custodian of between 50,000 and 100,000 Fine Ounces of Gold that will not be held at the Custodian following such Delivery, the Custodian, following receipt of written confirmation from the Trustee as described in clauses "i" to "iii" of paragraph "d" above, will make such Delivery on the fourth Custodian Day following the Order Date of such Redemption Order. f. In all other cases, Delivery must be completed by the Custodian as soon as, in the reasonable judgment of the Custodian, it is practicable following receipt of written confirmation from the Trustee as described in clauses "i" to "iii" of paragraph "d" above. g. The foregoing provisions notwithstanding, the Custodian shall not be liable for any failure or delay in making Delivery of Gold in respect of a Redemption Order arising from nuclear fission or fusion, radioactivity, war, terrorist event, invasion, insurrection, civil commotion, riot, strike, act of government, public authority or act of God, or a similar cause that is beyond the Custodian's control. In the event of any such delay, the time to complete Delivery in respect of a Redemption Order will be extended for a period equal to that during which the inability to perform continues. h. In the event that, by 9:00 a.m. (New York time) on the third Custodian Day following the Order Date of a Redemption Order governed by paragraph "d" above, or on the fourth Custodian Day following the Order Date of a Redemption Order governed by paragraph "e" above, Trustee's account at DTC shall not have been credited with the total number of iShares corresponding to the total number of Baskets to be redeemed pursuant to such Redemption Order, the Trustee will cancel such Redemption Order and will send via fax or electronic mail message notice of such cancellation to the respective Authorized Participant and the Custodian. S1-8 ANNEX I TO CREATION AND REDEMPTION PROCEDURES --------------------------------------------- PURCHASE ORDER -------------- Authorized Participant: ______________________ Date: ____________________________ PIN: _________________________ Number of fine ounces of gold to be delivered: --------------------- Location(s) where gold will be delivered: Number of Baskets to be Issued: ------------------------ Additional information required for issuance of iShares: This Purchase Order is subject to the terms and conditions of the Depositary Trust Agreement of the iShares COMEX Gold Trust as currently in effect and the Authorized Participant Agreement between the Authorized Participant, the Trustee and the Sponsor named therein. All representations and warranties of the Authorized Participant set forth in such Depositary Trust Agreement and the Authorized Participant Agreement are incorporated herein by reference and are true and accurate as of the date hereof. The undersigned does hereby certify as of the date set forth below that he/she is an Authorized Representative under the Authorized Participant Agreement and that he/she is authorized to deliver this Purchase Order to the Trustee on behalf of the Authorized Participant. Date: By: -------------------------------- ---------------------------------- Name: Title: S1-9 ANNEX II TO CREATION AND REDEMPTION PROCEDURES ---------------------------------------------- REDEMPTION ORDER ---------------- Authorized Participant: ______________________ Date: ____________________________ PIN: _________________________ Number of iShares to be redeemed: --------------------- Additional information required for delivery of the Trust Property: This Redemption Order is subject to the terms and conditions of the Depositary Trust Agreement of the iShares COMEX Gold Trust as currently in effect and the Authorized Participant Agreement between the Authorized Participant, the Trustee and the Sponsor named therein. All representations and warranties of the Authorized Participant set forth in such Depositary Trust Agreement and the Authorized Participant Agreement are incorporated herein by reference and are true and accurate as of the date hereof. The undersigned does hereby certify as of the date set forth below that he/she is an Authorized Representative under the Authorized Participant Agreement and that he/she is authorized to deliver this Redemption Order to the Trustee on behalf of the Authorized Participant. Date: By: -------------------------------- ---------------------------------- Name: Title: S1-10 Schedule 2 ---------- Standard Terms -------------- STANDARD TERMS FOR AUTHORIZED PARTICIPANT AGREEMENTS (the "Standard Terms") agreed to as of [ ], 2004 by and between The Bank of New York, a New York banking corporation, and Barclays Global Investors, N.A., a national banking association. S2-1 ARTICLE I ORDERS FOR PURCHASE AND REDEMPTION Section 1.01. Authorization to Purchase and Redeem Baskets. Subject to the provisions of the Authorized Participant Agreement, during the term of the Authorized Participant Agreement the Authorized Participant will be authorized to purchase and redeem Baskets of iShares in compliance with the provisions of the Trust Agreement. Section 1.02. Procedures for Orders. Each party hereto agrees to comply with the provisions of the Trust Agreement and the Procedures to the extent applicable to it. Section 1.03. Consent to Recording. The phone lines used by the Trustee, the Custodian or their affiliated persons may be recorded, and the Authorized Participant hereby consents to the recording of all calls with any of those parties. Section 1.04. Irrevocability. The Authorized Participant agrees on behalf of itself and any Authorized Participant Client that delivery to the Trustee of an Order shall be irrevocable; provided that each of the Trust and the Sponsor reserves the right to reject any Order in compliance with the provisions of the Trust Agreement. Section 1.05. Costs and Expenses. The Authorized Participant shall be responsible for any and all expenses and costs incurred by the Trust in connection with any Orders. Section 1.06. Delivery of Property to the Trust. The Authorized Participant understands and agrees that in the event Deposit Property is not transferred to the Trust by the time specified in the Purchase Order and in compliance with the Procedures and the Trust Agreement, a Purchase Order may be cancelled by the Trustee and the Authorized Participant will be solely responsible for all costs incurred by the Trust or the Trustee related to the cancelled Order. Section 1.07. Title to Deposit Property and iShares Surrendered for Redemption. The Authorized Participant represents and warrants to the Trustee that a. in connection with each Purchase Order, the Authorized Participant will have full power and authority to transfer to the Trust the corresponding Deposit Property, and that upon delivery of such Deposit Property to the Custodian and/or the relevant subcustodian in accordance with the Procedures, the Trust will acquire good and unencumbered title to such property, free and clear of all liens, charges, duties imposed on the transfer of assets and encumbrances and not subject to any adverse claims or transferability restrictions, whether arising by operation of law or otherwise; and b. in connection with a Redemption Order, the Authorized Participant will have full power and authority to surrender to the Trustee for redemption the corresponding iShares, and upon such surrender the Trust will acquire good and unencumbered title to such iShares, free and clear of all liens, charges, duties imposed on the transfer of assets and encumbrances and not subject to any adverse claims, transferability restrictions (whether arising by operation of law or otherwise), loan, pledge, repurchase or securities lending agreements or other arrangements which would preclude the delivery of such iShares on a "regular way" basis. Section 1.08. Certain Payments or Distributions. S2-2 a. With respect to any Purchase Order, the Trust acknowledges and agrees to return to the Authorized Participant any payment, distribution or other amount paid to the Trust in respect of any Deposit Property transferred to the Trust that, based on the valuation of such Deposit Property at the time of transfer, should have been paid to the Authorized Participant. Likewise, the Authorized Participant acknowledges and agrees to return to the Trust any payment, distribution or other amount paid to the Authorized Participant or any Authorized Participant Client in respect of any Deposit Property transferred to the Trust that, based on the valuation of such Deposit Property at the time of transfer, should have been paid to the Trust. b. With respect to any Redemption Order, the Authorized Participant on behalf of itself and any Authorized Participant Client acknowledges and agrees to return to the Trust any payment, distribution or other amount paid to it or an Authorized Participant Client in respect of any property transferred to the Authorized Participant or any Authorized Participant Client that, based on the valuation of such property at the time of transfer, should have been paid to the Trust. The Trust is entitled to reduce the amount of any property due to the Authorized Participant or any Authorized Participant Client by an amount equal to any payment, distribution or other sum to be paid to the Authorized Participant or to the Authorized Participant Client in respect of any property transferred to the Authorized Participant or any Authorized Participant Client that, based on the valuation of such property at the time of transfer, should be paid to the Trust. Likewise, the Trust acknowledges and agrees to return to the Authorized Participant or any Authorized Participant Client any payment, distribution or other amount paid to it in respect of any iShares transferred to the Trust that, based on the valuation of such iShares at the time of transfer, should have been paid to the Authorized Participant or such Authorized Participant Client. ARTICLE II AUTHORIZED REPRESENTATIVES Section 2.01. Certification. Concurrently with the execution of the Authorized Participant Agreement, and as requested from time to time by the Trustee but no less frequently than annually, the Authorized Participant shall deliver to the Trust a certificate signed by the Authorized Participant's Secretary or other duly authorized official setting forth the names, e-mail addresses and telephone and facsimile numbers of all persons authorized to give instructions relating to any activity contemplated hereby or any other notice, request or instruction on behalf of the Authorized Participant (each an "Authorized Representative"). Such certificate may be accepted and relied upon by the Trust as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Trust of a superseding certificate in a form approved by the Trust bearing a subsequent date. Section 2.02. PIN Numbers. The Trustee shall issue to each Authorized Participant a unique personal identification number ("PIN Number") by which such Authorized Participant shall be identified and instructions issued by the Authorized Participant shall be authenticated. The PIN Number shall be kept confidential and only provided to Authorized Representatives. The Authorized Participant may revoke the PIN Number at any time upon written notice to the Trustee, and the Authorized Participant shall be responsible for doing so in the event that it becomes aware that an unauthorized person has received access to its PIN Number or has or intends to use the PIN Number in an unauthorized manner. Upon receipt of such written request, the Trustee shall, as promptly as practicable, de-activate the PIN Number. If an Authorized Participant's PIN Number is changed, the new PIN Number will become effective on a date mutually agreed upon by the Authorized Participant and the Trustee. The Authorized Participant agrees that none of the Trust or the Trustee shall be liable, absent fraud or willful misconduct, for losses incurred by the Authorized Participant as a result of unauthorized use of the Authorized Participant's PIN Number. S2-3 Section 2.03. Termination of Authority. Upon the termination or revocation of authority of an Authorized Representative by the Authorized Participant, the Authorized Participant shall (i) give immediate written notice of such fact to the Trustee and such notice shall be effective upon receipt by the Trustee; and (ii) request a new PIN Number. The Trustee shall, as promptly as practicable, de-activate the PIN Number upon receipt of such written notice. Section 2.04. Verification. The Trustee may assume that all instructions issued to it using the Authorized Participant's PIN Number have been properly placed by Authorized Representatives, unless the Trustee has actual knowledge to the contrary or the Authorized Participant has revoked its PIN Number. The Trustee shall have no duty to verify that an Order is being placed by an Authorized Representative. The Authorized Participant agrees that the Trustee shall not be responsible for any losses incurred by the Authorized Participant as a result of an Authorized Representative identifying himself or herself as a different Authorized Representative or an unauthorized person identifying himself or herself as an Authorized Representative, unless the Trustee previously received from the Authorized Participant written notice to revoke its PIN Number. ARTICLE III STATUS OF THE AUTHORIZED PARTICIPANT Section 3.01. Clearing Status. The Authorized Participant represents, covenants and warrants that, as of the date of execution of the Authorized Participant Agreement, and at all times during the term of the Authorized Participant Agreement, the Authorized Participant is and will be entitled to use the clearing and settlement services of each of the national or international clearing and settlement organizations through which, in compliance with the Procedures, the transactions contemplated hereby will clear and settle. Any change in the foregoing status of the Authorized Participant shall terminate the Authorized Participant Agreement and the Authorized Participant shall give prompt written notice thereof to the Trustee. Section 3.02. Broker-Dealer Status. The Authorized Participant represents and warrants that, unless the following paragraph is applicable to it, it is (i) registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, (ii) qualified to act as a broker or dealer in the states or other jurisdictions where it transacts business, and (iii) a member in good standing of the NASD. The Authorized Participant agrees that it will maintain such registrations, qualifications, and membership in good standing and in full force and effect throughout the term of the Authorized Participant Agreement. The Authorized Participant further agrees to comply with all applicable Federal laws, the laws of the states or other jurisdictions concerned, and the rules and regulations promulgated thereunder and with the Constitution, By-Laws and Conduct Rules of the NASD, and that it will not offer or sell iShares in any state or jurisdiction where they may not lawfully be offered and/or sold. Section 3.03. Foreign Status. If the Authorized Participant is offering and selling iShares in jurisdictions outside the several states, territories and possessions of the United States and is not otherwise required to be registered, qualified, or a member of the NASD as set forth in the preceding paragraph, the Authorized Participant nevertheless agrees to observe the applicable laws of the jurisdiction in which such offer and/or sale is made (e.g., it will not offer or sell iShares of any Trust in any state or jurisdiction where they may not lawfully be offered and/or sold), to comply with the full disclosure requirements of the 1933 Act and the regulations promulgated thereunder and to conduct its business in accordance with the spirit of the NASD Conduct Rules. Section 3.04. Compliance with Certain Laws. If the Authorized Participant is subject to the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to S2-4 Intercept and Obstruct Terrorism ("U.S.A. PATRIOT Act"), the Authorized Purchaser is in compliance with the anti-money laundering and related provisions of the U.S.A. PATRIOT Act. Section 3.05. Authorized Participant Status. The Authorized Participant understands and acknowledges that the method by which Baskets of iShares will be created and traded may raise certain issues under applicable securities laws. For example, because new Baskets of iShares may be issued and sold by the Trust on an ongoing basis, at any point a "distribution", as such term is used in the 1933 Act, may occur. The Authorized Participant understands and acknowledges that some activities on its part, depending on the circumstances, may result in its being deemed a participant in a distribution in a manner which could render it a statutory underwriter and subject it to the prospectus delivery and liability provisions of the 1933 Act. ARTICLE IV ROLE OF AUTHORIZED PARTICIPANT Section 4.01. Independent Contractor. The Authorized Participant acknowledges and agrees that for all purposes of the Authorized Participant Agreement, the Authorized Participant will be deemed to be an independent contractor, and will have no authority to act as agent for the Trust or the Trustee in any matter or in any respect. The Authorized Participant agrees to make itself and its employees available, upon request, during normal business hours to consult with the Trustee, the Sponsor or their designees concerning the performance of the Authorized Participant's responsibilities under the Authorized Participant Agreement. Section 4.02. Rights and Obligations of DTC Participant. In executing the Authorized Participant Agreement, the Authorized Participant agrees in connection with any purchase or redemption transactions in which it acts for an Authorized Participant Client or for any other DTC Participant or indirect participant, or any other Beneficial Owner, that it shall extend to any such party all of the rights, and shall be bound by all of the obligations, of a DTC Participant in addition to any obligations that it undertakes hereunder or in accordance with the Procedures. Section 4.03. Maintenance of Records. The Authorized Participant agrees to maintain records of all sales of iShares made by or through it and to furnish copies of such records to the Trustee or the Sponsor upon request. ARTICLE V MARKETING MATERIALS AND REPRESENTATIONS Section 5.01. Authorized Participant's Representation. The Authorized Participant represents, warrants and agrees that it will not make, or permit any of its representatives to make, any representations concerning iShares other than those contained in the Trust's then current Prospectus or in any promotional materials or sales literature furnished to the Authorized Participant by the Sponsor. The Authorized Participant agrees not to furnish or cause to be furnished to any person or display or publish any information or materials relating to iShares (including, without limitation, promotional materials and sales literature, advertisements, press releases, announcements, statements, posters, signs or other similar materials), except such information and materials as may be furnished to the Authorized Participant by the Sponsor and such other information and materials as may be approved in writing by the Sponsor. The Authorized Participant understands that the Trust will not be advertised as offering redeemable securities, and that any advertising materials will prominently disclose that the iShares are not redeemable units of beneficial interest in the Trust. Notwithstanding the foregoing, the Authorized Participant may, without S2-5 the written approval of the Sponsor, prepare and circulate in the regular course of its business reports, research or similar materials that include information, opinions or recommendations relating to iShares (i) for public dissemination, provided that such reports, research or similar materials compare the relative merits and benefits of iShares with other products and are not used for purposes of marketing iShares and (ii) for internal use by the Authorized Participant. Copies of the then current Prospectus of the Trust will be supplied by the Sponsor to the Authorized Participant in reasonable quantities upon request. ARTICLE VI INDEMNIFICATION; LIMITATION OF LIABILITY Section 6.01. Indemnification. The provisions of this Article shall survive termination of the Agreement. a. The Authorized Participant shall indemnify and hold harmless the Trustee, the Trust, the Custodian (which the parties agree is a third-party beneficiary under this Subsection 6.01(a)) their respective subsidiaries, Affiliates, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each a "Trustee Indemnified Party") from and against any loss, liability, cost and expense (including attorneys' fees) incurred by such Trustee Indemnified Party as a result of (i) any breach by the Authorized Participant of any representations or warranties of the Authorized Participant; (ii) any failure on the part of the Authorized Participant to perform any of its obligations set forth in the Authorized Participant Agreement; (iii) any failure by the Authorized Participant to comply with applicable laws, including rules and regulations of self-regulatory organizations; (iv) actions of such Trustee Indemnified Party in reliance upon any instructions issued in accordance with the Procedures reasonably believed by such Trustee Indemnified Party to be genuine and to have been given by the Authorized Participant; (v) any representation by the Authorized Participant, its employees, agents or other representatives about the iShares, the Trust or any Trustee Indemnified Party that is not consistent with the Trust's then current Prospectus made in connection with the offer or the solicitation of an offer to buy or sell iShares or (vi) any untrue statement or alleged untrue statement of a material fact contained in any marketing materials or research regarding the iShares prepared by the Authorized Participant, or the omission, or alleged omission, of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. b. The Authorized Participant shall not be liable to any Trustee Indemnified Party for any damages arising out of (i) mistakes or errors in data provided in connection with purchase or redemption transactions except for data provided by the Authorized Participant, or (ii) mistakes or errors by, or arising out of interruptions or delays of communications with, the Trustee or any Trustee Indemnified Party. ARTICLE VII MISCELLANEOUS Section 7.01. Commencement of Trading. The Authorized Participant may not submit an Order until five Business Days after the date of execution of the Authorized Participant Agreement or a date agreed upon by the Trustee and the Authorized Participant. Section 7.02. Definitions. The capitalized terms used herein are defined as follows. S2-6 a. "1933 Act" means the U.S. Securities Act of 1933, as amended. b. "Affiliate" shall have the meaning given to it by Rule 501(b) under the 1933 Act. c. "Authorized Participant Agreement" shall mean each Authorized Participant Agreement among the Authorized Participant, the Trustee and the Sponsor into which these Standard Terms shall have been incorporated by reference. d. "Authorized Participant" shall have the meaning ascribed to it in the introductory paragraph of the Authorized Participant Agreement. e. "Authorized Participant Client" means any party on whose behalf the Authorized Participant acts in connection with an Order (whether a customer or otherwise). f. "Authorized Representative" shall have the meaning ascribed to it in Section 2.01 hereof. g. "Basket" shall have the meaning ascribed to it in the Recitals to the Authorized Participant Agreement. h. "Beneficial Owner" shall have the meaning given to it by Rule 16a-1(a)(2) of the Securities Exchange Act of 1934. i. "Business Day" shall mean each day the exchange on which the iShares trade is open for regular trading. j. "Custodian" shall have the meaning ascribed to it in the Procedures. k. "Deposit Property" means property which, in compliance with the provisions of the Trust Agreement, must be transferred by the Authorized Participant to the Trust in exchange for iShares. l. "DTC" means The Depository Trust Company. m. "iShares" means iShares issued by the Trust pursuant to the provisions of the Trust Agreement. n. "NASD" means the National Association of Securities Dealers, Inc. o. "Order" shall have the meaning ascribed to it in Section 1 of the Authorized Participant Agreement. p. "Procedures" shall have the meaning ascribed to it in Section 1 of the Authorized Participant Agreement. q. "Prospectus" means the Trust's current prospectus included in its effective registration statement, as supplemented or amended from time to time. r. "Purchase Order" shall have the meaning ascribed to it in Section 1 of the Authorized Participant Agreement. s. "Redemption Order" shall have the meaning ascribed to it in Section 1 of the Authorized Participant Agreement. S2-7 t. "Sponsor" shall have the meaning ascribed to it in the introductory paragraph of the Authorized Participant Agreement. u. "Trust" shall have the meaning ascribed to it in the introductory paragraph of the Authorized Participant Agreement. v. "Trust Agreement" shall have the meaning ascribed to it in the introductory paragraph of the Authorized Participant Agreement. w. "Trustee" shall have the meaning ascribed to it in the introductory paragraph of the Authorized Participant Agreement. x. "Trustee Indemnified Party" shall have the meaning ascribed to it in Section 6.01.a hereof. Section 7.03. Effectiveness, Termination and Amendment. The Authorized Participant Agreement shall become effective upon execution and delivery by each of the parties thereto. The Authorized Participant Agreement may be terminated at any time by any party upon sixty days prior written notice to the other parties and may be terminated earlier by the Trustee or the Sponsor at any time in the event of a breach by the Authorized Participant of any provision of the Authorized Participant Agreement or the Procedures. The Authorized Participant Agreement supersedes any such prior agreement between or among the parties. The Authorized Participant Agreement may be amended by the Trustee and the Sponsor from time to time without the consent of the Authorized Participant or any Beneficial Owner by the following procedure: the Trustee and the Sponsor will mail a copy of the amendment to the Authorized Participant in compliance with the notice provisions of the Authorized Participant Agreement; if the Authorized Participant does not object in writing to the amendment within ten Business Days after receipt of the proposed amendment, the amendment will become part of the Authorized Participant Agreement in accordance with its terms. Section 7.04. Governing Law. The Authorized Participant Agreement shall be governed by and interpreted in accordance with the laws of the State of New York. The parties irrevocably submit to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to the Authorized Participant Agreement. Section 7.05. Assignment. No party to the Authorized Participant Agreement shall assign any rights, or delegate the performance of any obligations, arising hereunder without the prior written consent of the other parties hereto; provided, that an entity into which a party hereto may be merged or converted, or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which a party hereunder shall be a party, shall be the successor of such party hereto. Any purported assignment or delegation in violation of these provisions shall be null and void. Notwithstanding the foregoing, any successor Trustee appointed in compliance with the Trust Agreement shall automatically become a party hereto and shall assume all the obligations, and be entitled to all the rights and remedies of the Trustee hereunder. Section 7.06. Counterparts. The Authorized Participant Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. S2-8 Schedule 3 ---------- CERTIFICATE OF AUTHORIZED REPRESENTATIVES ----------------------------------------- Each of the following employees of [XYZ] (each, an "Authorized Representative") is authorized, in accordance with the Authorized Participant Agreement dated [ ] among [XYZ], the Sponsor and the Trustee, to submit Purchase Orders and Redemption Orders on behalf and in the name of [XYZ] and to give instructions or any other notice or request on behalf of [XYZ] with respect to such Orders or any other activity contemplated by the Authorized Participant Agreement. Name: e-mail Address: Telephone: Fax: Name: e-mail Address: Telephone: Fax: Name: e-mail Address: Telephone: Fax: Name: e-mail Address: Telephone: Fax: The undersigned, [name of secretary or authorized officer], [title] of [XYZ], does hereby certify that the persons listed above have been duly authorized to act as Authorized Representatives pursuant to the Authorized Participant Agreement. By: --------------------------------- Name: Title: Date: S3-1 EX-10.1 5 dex101.txt FORM OF CUSTODIAL AGREEMENT EXHIBIT 10.1 CUSTODIAN AGREEMENT CUSTODIAN AGREEMENT dated as of ____________, 2004 (this "Agreement"), by and between THE BANK OF NEW YORK, a banking corporation organized under the laws of the State of New York and having an office at 101 Barclay Street, New York, New York 10286, in its capacity as trustee ("Trustee") of the iShares COMEX Gold Trust (the "Trust"), and THE BANK OF NOVA SCOTIA, a bank organized under the laws of Canada, and having an office at One Liberty Plaza, New York, New York 10006, as agent for Trustee ("Custodian"). WHEREAS, Trustee wishes to establish an account with Custodian to hold and maintain certain property which Trustee holds in its capacity as Trustee; and WHEREAS, Custodian agrees to establish such custody account and to hold and maintain the property in such account on the terms and conditions herein set forth. NOW, THEREFORE, in consideration of the premises and of the agreements hereinafter set forth, Trustee and Custodian agree as follows: 1. Establishment of Account. (a) Custodian shall establish and maintain one or more custodial accounts entitled "The Bank of New York, as trustee of the iShares COMEX Gold Trust" (collectively, the "Account") for the receipt and maintenance of: (i) Gold bars delivered to Custodian as contemplated in the Creation and Redemption Procedures attached hereto as Annex 1 (the "Procedures"); (ii) Gold received by the Custodian on an Unallocated Basis, as contemplated by the Procedures; and (iii) cash or other assets of the Trustee which may come under the possession of the Custodian (all assets held in the Account are collectively referred to as the "Property"). (b) For purposes of this Agreement: "Gold" means (1) gold that (i) would be eligible for delivery in settlement of a COMEX gold futures contract in accordance with COMEX Rules ("COMEX Gold") or (ii) meets the requirements of "good delivery" under the rules of the London Bullion Market Association ("LBMA Gold") and (2) credit to an account on an Unallocated Basis. "Unallocated Basis" means that the person in whose name gold is so held is entitled to receive delivery of gold in the amount standing to the credit of that person's account, but that person has no ownership interest in any particular gold that the custodian maintaining that account owns or holds. (c) The ownership of Property in the Account, whether any such Property is held by Custodian or by a Sub-Custodian (as defined in Section 5) shall be clearly recorded on Custodian's books as belonging to Trustee. To the extent Property is physically held in the Account, such Property shall also be physically segregated from the general assets of Custodian, the assets of Trustee in its individual capacity and the assets of Custodian's other customers, except in the case of Gold held on an Unallocated Basis. (d) Custodian will at all times take reasonable action to minimize the amount of Gold in the Account that is on an Unallocated Basis. Custodian shall allocate Gold bars to the Account so that no more than 430 Ounces of Gold is held in the Account on an Unallocated Basis at the close of each business day of the Custodian. 2. Representations and Warranties of Custodian. Custodian hereby represents and warrants that, as of the date of this Agreement and as of any date on which Gold is credited to, debited from, or substituted in, the Account: (a) it is a bank, duly organized under the laws of its country of organization as set forth above, and it is regulated as such by that country's government or an agency thereof; (b) it has and shall maintain during the term of this Agreement at least the minimum amount of capital required to be an approved depository in respect of gold futures traded on COMEX; (c) this Agreement has been duly authorized, executed and delivered on its behalf and constitutes the legal, valid and binding obligation of Custodian; (d) the execution, delivery and performance of this Agreement by Custodian do not and will not violate any applicable law or regulation and do not require the consent of any governmental or other regulatory body except for such consents and approvals as have been obtained, which are identified on Schedule A hereto and which are in full force and effect; and (e) Gold substituted by it for other Gold previously held in the Account meets part (1) of the definition of "Gold" in this Agreement and has a fine weight at least equal to the fine weight of the Gold for which it was substituted. 3. Undertakings and Agreements of Custodian. Custodian hereby undertakes and agrees that, so long as any Property is held in the Account: 2 (a) Insurance. Custodian shall maintain adequate insurance in support of the indemnification provided for in Section 11 hereof, and otherwise covering any loss of Property. Custodian shall provide Trustee with evidence of such insurance coverage as of the date of this Agreement and thereafter upon Trustee's request. Such insurance coverage will not be reduced without 30 days' prior written notice to Trustee. Upon reasonable prior written notice, in connection with the preparation of the initial registration statement under the Securities Act of 1933 for shares of the Trust or any amendment to that registration statement or any subsequent registration statement for those shares, Custodian will allow its insurance to be reviewed by Trustee, the Sponsor, any underwriter mentioned in that registration statement or amendment and their respective counsel. However, Custodian may require any party seeking to review its insurance under the preceding sentence, as a condition of making that review, to execute a reasonable confidentiality agreement in a form determined by Custodian in its reasonable discretion covering that review. (b) Charges; Liens. The Property shall not be subject to any right, charge, security interest, lien or claim of any kind in favor of Custodian, any Sub-Custodian or any creditor of any of them, except a claim of payment for the safe custody and administration of the Property or, in the case of cash deposits, liens or rights in favor of creditors of the Custodian arising under bankruptcy, insolvency, or similar laws. Custodian shall not loan, hypothecate, pledge or otherwise encumber any Property in the Account absent Trustee's written instructions. (c) Transferability. Beneficial ownership of the Property shall be freely transferable without the payment of money or value other than for safe custody or administration. (d) Records. Adequate records will be maintained by Custodian identifying the Property as belonging to Trustee. Such records shall include, with respect to the Account, (i) journals or other records of original entry containing an itemized daily record in detail of all receipts and deliveries of Property (including adequate information to uniquely identify each bar of Gold received in or delivered from the Account, except for Gold held on an Unallocated Basis) and all receipts and disbursements of cash; (ii) ledgers (or other records) reflecting (A) Property in physical possession and (B) Gold held on an Unallocated Basis, and allocations made daily in respect thereof, as provided in Section 17; and (iii) such other books and records as Trustee may reasonably request. (e) Reports. For each business day, not later than 9:00 a.m., New York time on the following business day, Custodian shall transmit to Trustee by facsimile message signed by an Authorized Person of the Custodian set forth on Schedule B-2 and by e-mail information showing the movement of Gold into and out of the Account, identifying separately each transaction and any substitution or 3 relocation of Gold made under Section 4(e). Custodian shall supply to Trustee at least monthly, within ten business days following the end of each calendar month, by facsimile message signed by an Authorized Person of the Custodian a written statement which (i) lists all Property held in the Account including a weight list for the Gold in the Account (other than Gold held on an Unallocated Basis) containing information sufficient to uniquely identify each bar of Gold; (ii) identifies the entity having physical possession of such Property; and (iii) details all transactions involving the Account, including daily balances held on an Unallocated Basis and all transfers to or from the Account or any account with a Sub-Custodian containing Property held for the benefit of Trustee and Account and any substitutions or relocations of Gold held in the Account. Such reports shall also include any other information that Trustee may reasonably request. Custodian shall provide additional weight lists to the Trustee upon request from the Trustee. For each business day, not later than 9:00 a.m., New York time on the following business day, Custodian shall transmit to COMEX by facsimile message signed by an Authorized Person of Custodian set forth on Schedule B-2 a report showing the total number of fine ounces of Gold held in the Account in each of (1) New York, (2) London and (3) any other location, and showing in each case the amount of Gold that in the form of (i) 400 ounce bars and (ii) 100 ounce or 1 kilogram bars. The parties understand and agree that Custodian (x) will not know, (y) will not have any duty to determine, and (z) except as provided in Section 2, in making any report required under this Agreement will not be considered to be making any representation or warranty as to, whether in fact the Gold deposited with it contains the amount of pure gold indicated on the bars. Except for Gold deposited by it in substitution for other Gold held in the Account, CUSTODIAN DISCLAIMS ALL LIABILITY FOR THE GENUINENESS AND FINENESS OF GOLD DEPOSITED WITH IT UNDER THIS AGREEMENT. (f) Notice of Changes. Custodian shall notify Trustee immediately in writing if (i) Custodian receives notice of any claim against the Property other than a claim for payment of safe custody or administration permitted by this Agreement; (ii) Custodian shall otherwise fail to comply with any of the provisions of this Agreement; or (iii) any of the representations and warranties in Section 2 shall cease to be true and correct. (g) Location of Gold. Gold in the Account shall be held by the Custodian (or a Sub-Custodian pursuant to Section 5) at (i) in the case of COMEX Gold, at premises located in The City of New York that are licensed or designated for the storage of gold by COMEX or, if agreed in writing between the parties with the Sponsor's approval, at premises in another location that are licensed by COMEX or (ii) in the case of LBMA Gold, premises located in The City of New York or London, England or in another location agreed in writing between the parties with the Sponsor's approval. 4 (h) Capacity. Custodian will have no obligation to accept a deposit of Gold under this Agreement if it lacks Capacity. Custodian lacks "Capacity" to accept a proposed deposit of Gold if and to the extent that (i) there is not enough physical space in vaults available to the Custodian in the relevant city to store that Gold, (ii) vault facilities available to Custodian in the relevant city cannot accept that Gold on the proposed date of deposit or (iii) after giving effect to the proposed deposit, the value of all Gold held in the Account would exceed $2 billion. 4. Powers and Duties of Custodian. (a) Delivery, Receipt and Maintenance of Property. Custodian shall receive, hold, release and deliver Property from the Account only in accordance with this Agreement and the Procedures. (b) Release of Property. No Property held in the Account shall be released in any manner whatsoever except upon written instructions of Trustee. Custodian will deliver Gold by making Gold bars available for collection at its office or at the office of a Sub-Custodian at which the Gold is held. However, Custodian will, upon the order of the Trustee, deliver amounts of up to 430 troy ounces of gold on an Unallocated Basis. (c) Payment of Taxes. Unless Trustee otherwise instructs Custodian, Custodian shall pay or cause to be paid from the Account any and all taxes and levies in the nature of taxes imposed on the Property by any governmental authority and shall use its best efforts to secure relief from taxation and other privileges and benefits with respect to the Property; provided that Custodian shall provide to Trustee an advice or notification as to any such payments, and provided further that Custodian shall not liquidate any Gold in order to make such payments without the prior written consent of Trustee. Custodian will furnish Trustee with written explanations of its efforts to secure such relief. Trustee shall promptly reimburse Custodian for the amount of any taxes or levies paid by the Custodian under this Section 4(c). (d) Other Information. Custodian shall provide to Trustee (i) its most recent audited financial statements promptly after such statements are prepared; (ii) a copy of any reports obtained by Custodian on the accounting system and internal accounting controls and procedures used by any Sub-Custodian at which any Property is held; (iii) information regarding Custodian's policies and procedures, the local law applicable to its activities, and the overall regulatory and economic environment in which it operates; and (iv) the names and addresses of the governmental agencies or regulatory authorities which supervise or regulate Custodian and any Sub-Custodian with which Property has been deposited pursuant to this Agreement. 5 (e) Substitution and Relocation of Gold. With the prior approval of Trustee (in consultation with the Sponsor), Custodian may (i) substitute other Gold for Gold held in the Account, provided that there is no change in the total number of fine troy ounces of Gold held in the Account and (ii) at its own risk and expense, move Gold held in the Account from one location to another location otherwise permitted under this Agreement. (f) Purchases of Gold by Custodian. When requested by Trustee with at least 7 days' advance notice, Custodian will purchase from Trustee for cash the amounts of Gold that the Trustee determines are necessary to pay the expenses of the Trust at a price per ounce at least equal to the settlement price for the expiring COMEX gold futures contract as most recently announced by COMEX. 5. Use of Subcustodians. (a) Qualifications. Custodian may, with the prior written consent of Trustee, entrust Gold held in the Account to a specified subcustodian that is eligible to act as a custodian of Gold under applicable laws and regulations (a "Sub-Custodian") selected by Custodian with due care. (b) Separate Account; Bookkeeping; Instructions. Gold held by a Sub-Custodian shall be kept in an account of Custodian at such Sub-Custodian that contains only Gold held by Custodian for its customers, and Custodian shall separately identify on its books Gold that is so held on behalf of Trustee. The account of Custodian with each such Sub-Custodian shall be subject only to the instructions of Custodian. (c) Monitoring. Custodian shall monitor the conduct of each Sub-Custodian, and promptly advise Trustee of any difficulties or problems (financial, operational or otherwise) existing with respect to such Sub-Custodian of which Custodian is aware and shall take appropriate and lawful action to protect and safekeep Trustee's Property deposited with such Sub-Custodian, including to the extent feasible, the withdrawal of such Property from such Sub-Custodian. (d) Access and Inspection. Custodian shall not entrust Gold held in the Account to any Sub-Custodian other than The Bank of England unless that Sub-Custodian grants rights of access and inspection to records and Gold that are similar to those granted by Custodian in Section 7. 6. Use of Agents. Custodian is authorized in its discretion to use agents in connection with Custodian's handling of transactions hereunder, provided that any such use shall not relieve Custodian of any of its responsibilities or liabilities hereunder. 7. Access to Records; Inspection Rights. Custodian shall permit officers and properly designated representatives of Trustee and independent public accountants for the 6 Trust identified by Trustee reasonable access to the records of the Account for the purpose of confirming the content of those records. Upon at least ten days' prior notice, during Custodian's regular banking hours, any officer or properly designated representative of Trustee, any independent public accountants for the Trust identified by Trustee and any person designated by any regulatory authority having jurisdiction over Trustee or the Trust shall be entitled to examine on Custodian's premises the Property held by Custodian on its premises pursuant to this Agreement and Custodian's records regarding the Property held hereunder at a Sub-Custodian in accordance with Section 5 hereof, but only upon receipt from Trustee of properly authorized instructions to that effect. In addition, Custodian shall cooperate with Trustee in providing to Trustee's external auditors and the Trust's external auditors such reports (or portions thereof) of the external auditors of Custodian as relate directly to Custodian's system of internal accounting controls and procedures applicable to its duties under this Agreement. 8. Instructions from Trustee; Other Notices; Addresses. (a) Instructions from Trustee. Whenever in this Agreement it is provided that Custodian is authorized to act or refrain from acting on instructions, approval or consent of, or notice from, the Trustee, Custodian is so authorized to act or refrain from acting only on instructions, approval, consent or notice given in accordance with this Section 8(a). As used in this Section 8(a), the term "instructions" shall be deemed to include approvals, consents or notices. Custodian is authorized to rely and act upon written instructions signed by an authorized person designated in the schedule attached hereto as Schedule B-1 ("Authorized Persons"), as such Schedule may be changed from time to time by written notice to Custodian from Trustee. Instructions in writing shall include (i) instructions in writing (including facsimile transmissions) signed by an Authorized Person; (ii) telex or tested telex instructions of Trustee and S.W.I.F.T. messages; and (iii) such other forms of communication as may be agreed upon from time to time by Trustee and Custodian. Except where otherwise provided in this Agreement, Custodian is further authorized to rely upon instructions received orally or by any other means which are identified as having been given by an Authorized Person and which conform to any agreement which might be entered between Trustee and Custodian regarding the method of identification or the means of transmission of such instructions. Any oral instructions shall be promptly confirmed in writing. (b) Other Notices; Addresses. Except as otherwise specifically provided herein, all notices contemplated by this Agreement shall be in writing signed by an Authorized Person listed on Schedule B-1 or Schedule B-2, as applicable, and, except as otherwise agreed in writing from time to time by the parties, shall be given by facsimile transmission, telex or tested telex, courier, or first-class mail, postage prepaid. Such notices shall be given, and shall be deemed given when received, at the addresses set forth in Schedule C hereto, as such 7 Schedule may be amended from time to time upon prior written notice from the Trustee to the Custodian or from the Custodian to the Trustee, as the case may be. 9. Subrogation. Trustee and the Trust shall be subrogated to the rights of Custodian with respect to any claim against a Sub-Custodian or any other person for any loss or damage suffered by Trustee or the Trust if and to the extent that Trustee and the Trust have not been made whole for such loss or damage, and Custodian hereby assigns all such rights to Trustee. The exercise by Trustee of the rights granted in this Section 9 shall not affect Custodian's liabilities under Section 11 of this Agreement. 10. Annual Certificate. Custodian shall deliver annually to Trustee and more frequently if requested by Trustee, a certificate dated the date of delivery, certifying that Custodian has, since the date of this Agreement or the date of the preceding such certificate, complied with the terms and conditions of this Agreement and that Custodian's representations and warranties in Section 2 of this Agreement continue to be true and correct. 11. Liability of Custodian; Indemnification. (a) Custodian shall be liable for and shall indemnify Trustee for, and hold Trustee harmless from, any loss, damage, cost, judgment, expense or any other liability (including, but not limited to legal fees and expenses) ("Losses") incurred by Trustee (individually or in its capacity as Trustee) relating to or arising from, directly or indirectly, any breach of the representations and warranties of Custodian contained in this Agreement or any act or omission of Custodian under this Agreement, including, without limiting the generality of the foregoing, (i) any failure by Custodian to act or refrain from acting in accordance with instructions under Section 8(a) from Trustee; and (ii) any physical loss, destruction or damage to the Property, except, in each case, for Losses arising from nuclear fission or fusion, radioactivity, war, terrorist event, invasion, insurrection, civil commotion, riot, strike, act of government or public authority, act of God or a similar cause that is beyond the control of Custodian. Trustee shall notify Custodian promptly of any proceeding or claim for which Trustee may seek indemnity, and the Custodian shall cooperate fully with the Trustee with respect to any such proceeding or claim. Custodian's deposit of Gold held in the Account with a Sub-Custodian pursuant to Section 5 hereof shall not affect Custodian's responsibilities or liabilities or in any way limit or relieve Custodian of its responsibilities or liabilities under this Section 11, and Custodian shall remain fully liable with respect to such Property as if it had itself retained physical possession of it. (b) Trustee shall indemnify Custodian for and hold Custodian harmless against any loss or claim, including reasonable fees of counsel, resulting from acts of omissions by Custodian in compliance with instructions from Trustee in accordance with Section 8(a) that Custodian reasonably believes were given by an 8 Authorized Person of Trustee, including instructions to release Property from the Account to a person designated by Trustee. 12. Fees and Expenses. Fees and expenses for the services rendered by Custodian under this Agreement shall be payable in accordance with the fee agreement which has been executed by the parties hereto and Barclays Global Investors, N.A. (the "Sponsor"), as that agreement may be amended from time to time by the parties to it in accordance with its terms. 13. Termination. This Agreement may be terminated (a) by Trustee immediately without prior notice to Custodian upon the occurrence of any event specified in clauses (i), (ii) and (iii) of Section 3(f); or (b) by either party upon sixty (60) days' prior written notice to the other, sent by certified or registered mail, express courier, facsimile, telex or telegram; provided, that the provisions of Sections 9, 11 and 15 hereof shall survive the termination of this Agreement. Upon the termination date, Custodian shall deliver all Property held in the Account to Trustee (or to such successor custodian as Trustee may specify before the termination date). 14. Confidentiality. Subject to the foregoing provisions of this Agreement and subject to any applicable law, Custodian shall use its best efforts to maintain the confidentiality of matters concerning the Property in the Account. 15. Choice of Law; Submission to Jurisdiction. (a) This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of New York, without giving effect to conflict of laws principles. All actions and proceedings relating to or arising from, directly or indirectly, this Agreement may be brought by Trustee in courts located within the State of New York, and shall be litigated only in courts located within the State of New York if brought by Custodian against Trustee. The parties hereto hereby waive the right to a trial by jury in any such action or proceeding brought by Trustee or Custodian, and Custodian hereby submits to the personal jurisdiction of such courts and to the personal jurisdiction of any court or administrative agency in which any action or proceeding is brought by any person (other than Custodian) against Trustee, relating to or arising from, directly or indirectly, any act or omission of Custodian under this Agreement. If the Custodian does not maintain an office in The City of New York, the Custodian shall appoint and maintain an agent located in The City of New York upon whom process may be served in any action or proceeding which may be instituted by the Trustee or by any other person in any court or administrative agency relating to or arising from, directly or indirectly, any act or omission of Custodian under this Agreement. If the Custodian is required to maintain an agent for service of process under the preceding sentence, the Custodian shall notify the Trustee of the appointment of that agent and provide Trustee with evidence of acceptance by that agent of that appointment. Service 9 of process upon such agent at the office of such agent for service of process shall be deemed in every respect effective service of process upon the Custodian in any such action or proceeding. The Custodian further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue in force such designation and appointment of such agent or its successor. 16. Legal Opinion. Custodian will furnish to Trustee an opinion of counsel acceptable to Trustee addressed to Trustee and dated the date hereof to the effect that: (a) the execution, delivery and performance by Custodian of this Agreement have been duly authorized by Custodian and do not and will not violate any applicable law or regulation and do not require the consent of any governmental or other regulatory body except for such consents and approvals as have been obtained and set forth on Schedule A hereto; and (b) this Agreement has been duly executed and delivered by Custodian and constitutes the legal, valid and binding obligation of Custodian, enforceable in accordance with its terms. 17. Procedures. Trustee and Custodian agree that the provisions of the Procedures are hereby incorporated into and made a part of this Agreement and Custodian agrees to comply with the Procedures. Trustee, with the prior written consent of Sponsor, may modify the Procedures from time to time upon reasonable advance notice and, if the modifications relate to the duties of Custodian, after consultation with Custodian. 18. Miscellaneous. Except as otherwise specifically provided in this Agreement, this Agreement may not be amended nor may any provision hereof be waived except by writing signed by the party against whom enforcement is sought. Any provisions of this Agreement that require the consent of, or consultation with, the Sponsor are intended for the benefit of the Sponsor and may not be amended or modified without the Sponsor's written consent. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which constitute one and the same instrument. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns; provided, that this Agreement shall not be assignable by either party without the prior written consent of the other. This Agreement contains the entire agreement between Custodian and Trustee relating to custody of Property held by Custodian on behalf of Trustee and supersedes all prior agreements and understandings relating to such subject matter. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision; and if any provision is held to be unenforceable as a matter of law, the other provisions shall not be affected thereby and shall remain in full force and effect. The captions included in this Agreement are included only for the convenience of the parties and in no way define or limit any of the 10 provisions hereof or otherwise affect their construction or effect. Capitalized terms used in this Agreement (including its attachments) that are defined in the Depositary Trust Agreement dated as of the date of this Agreement between the Sponsor and Trustee and not otherwise defined in this Agreement shall have the meanings given them in that agreement. 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and sealed by their respective officers thereunto duly authorized. THE BANK OF NOVA SCOTIA THE BANK OF NEW YORK, as Trustee of the iShares COMEX Gold Trust By: By: ------------------------ -------------------------- Name: Name: Title: Title: 12 SCHEDULE A NECESSARY CONSENTS Dated _______________, 2004 SCHEDULE B-1 AUTHORIZED PERSONS OF TRUSTEE Dated __________________, 2004 The names, titles and specimen signatures of the "Authorized Persons" of Trustee are as follows: Name Title Signature - ---- ----- --------- 14 SCHEDULE B-2 AUTHORIZED PERSONS OF CUSTODIAN Dated __________________, 2004 The names, titles and specimen signatures of the "Authorized Persons" of Custodian are as follows: Name Title Signature - ---- ----- --------- 15 SCHEDULE C NOTICES Dated ___________________, 2004 If to Trustee: Exchange Traded Funds Division The Bank of New York 101 Barclay Street - Floor 6E New York, New York 10286 U.S.A. Attention: Alfred Irving or Jarvis Joseph Telephone: (212) 815-6250 Facsimile: (212) 815-6218 e-mail: airving@bankofny.com If to Custodian: ScotiaMocatta Division The Bank of Novia Scotia One Liberty Plaza New York, New York 10006 Attention: _____________________ Telephone: _____________________ Facsimile: _____________________ e-mail: _____________________ If to COMEX: Commodity Exchange, Inc. One North End Avenue New York, New York 10282 Attention: _____________________ Telephone: _____________________ Facsimile: _____________________ e-mail: _____________________ 16 ANNEX 1 PROCEDURES 17 -----END PRIVACY-ENHANCED MESSAGE-----