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sub-custodian concerning its gold. The |
obligations of the Custodian under the Custody Agreements are, and the Authorized Participant Unallocated Bullion Account |
Agreements may be, governed by English law. The Custodian has entered into arrangements with the Zurich Sub-Custodian and may |
enter into arrangements with any other sub-custodians for the custody or temporary holding of the Trust’s gold, |
which arrangements may also be governed by English law. The Trust is a New York common law trust. Any United States, New York |
or other court situated in the United States may have difficulty interpreting English law (which, insofar as it relates to custody |
arrangements, is largely derived from court rulings rather than statute), LBMA rules or the customs and practices in the |
London custody market. It may be difficult or impossible for the Trust to sue the Zurich Sub-Custodian or any other sub-custodian |
in a United States, New York or other court situated in the United States. In addition, it may be difficult, time consuming and/or |
expensive for the Trust to enforce in a foreign court a judgment rendered by a United States, New York or other court situated |
in the United States. Although |
the relationship between the Custodian and the Zurich Sub-Custodian concerning the Trust’s allocated gold is expressly |
governed by English law, a court hearing any legal dispute concerning their arrangement may disregard that choice of law and apply |
Swiss law, in which case the ability of the Trust to seek legal redress against the Zurich Sub-Custodian may be frustrated. The |
obligations of the Zurich Sub-Custodian under its arrangement with the Custodian with respect to the Trust’s allocated gold |
is expressly governed by English law. Nevertheless, a court in the United States, England or Switzerland may determine that English |
law should not apply and, instead, apply Swiss law to that arrangement. Not only might it be difficult or impossible for a United |
States or English court to apply Swiss law to the Zurich Sub-Custodian's arrangement, but application of Swiss law may, among |
other things, alter the relative rights and obligations of the Custodian and the Zurich Sub-Custodian to the extent that a loss |
to the Trust’s gold may not have adequate or any legal redress. Further, the ability of the Trust to seek legal redress |
against the Zurich Sub-Custodian may be frustrated by application of Swiss law. 30 The |
Trust may not have adequate sources of recovery if its gold is lost, damaged, stolen or destroyed. If |
the Trust’s gold is lost, damaged, stolen or destroyed under circumstances rendering a party liable to the Trust, the |
responsible party may not have the financial resources sufficient to satisfy the Trust’s claim. For example, as to a particular |
event of loss, the only source of recovery for the Trust might be limited to the Custodian, the Zurich Sub-Custodian or any other |
sub-custodian or, to the extent identifiable, other responsible third parties (e.g., a thief or terrorist), any of which may not |
have the financial resources (including liability insurance coverage) to satisfy a valid claim of the Trust. Shareholders |
and Authorized Participants lack the right under the Custody Agreements to assert claims directly against the Custodian, the Zurich |
Sub-Custodian, and any other sub-custodian. Neither |
the Shareholders nor any Authorized Participant have a right under the Custody Agreements to assert a claim of the Trust against |
the Custodian, the Zurich Sub-Custodian, or any other sub-custodian. Claims under the Custody Agreements may only be asserted |
by the Trustee on behalf of the Trust. The |
Custodian may be reliant to use the Zurich Sub-Custodian for the safekeeping of all or a substantial portion of the Trust’s |
gold. Furthermore, the Custodian has limited obligations to oversee or monitor the Zurich Sub-Custodian. As a result, failure |
by any Zurich Sub-Custodian to exercise due care in the safekeeping of the Trust’s gold could result in a loss to the Trust. Gold |
generally trades on a loco London or loco Zurich basis whereby the physical gold is held in vaults located in London or Zurich |
or is transferred into accounts established in London or Zurich. The Custodian has a vault in Zurich and is able to use the Zurich |
Sub-Custodian for the safekeeping of all or a substantial portion of the Trust’s allocated gold. Other than obligations |
to (1) use reasonable care in appointing the Zurich Sub-Custodian, (2) require any Zurich Sub-Custodian to segregate the gold |
held by it for the Trust from any other gold held by it for the Custodian and any other customers of the Custodian by making appropriate |
entries in its books and records and (3) ensure that the Zurich Sub-Custodian provides confirmation to the Trustee that it has |
undertaken to segregate the gold held by it for the Trust, the Custodian is not liable for the acts or omissions of the Zurich |
Sub-Custodian. Other than as described above, the Custodian does not undertake to monitor the performance by the Zurich Sub-Custodian |
of its custody functions. The Trustee’s obligation to monitor the performance of the Custodian is limited to receiving and |
reviewing the reports of the Custodian. The Trustee does not monitor the performance of the Zurich Sub-Custodian or any other |
sub-custodian. In addition, the ability of the Trustee and the Sponsor to monitor the performance of the Custodian may be limited |
because under the Custody Agreements, the Trustee and the Sponsor have only limited rights to visit the premises of the Custodian |
or the Zurich Sub-Custodian for the purpose of examining the Trust’s gold and certain related records maintained by the |
Custodian or Zurich Sub-Custodian. As |
a result of the above, any failure by any Zurich Sub-Custodian to exercise due care in the safekeeping of the Trust’s gold |
may not be detectable or controllable by the Custodian or the Trustee and could result in a loss to the Trust. Because |
the Trustee does not, and the Custodian has limited obligations to, oversee and monitor the activities of sub-custodians who may |
hold the Trust’s gold, failure by the sub-custodians to exercise due care in the safekeeping of the Trust’s gold could |
result in a loss to the Trust. Under |
the Allocated Account Agreement, the Custodian may appoint from time to time one or more sub-custodians to hold the Trust’s |
gold on a temporary basis pending delivery to the Custodian. The custodian does not currently use a sub-custodian, but may use LBMA clearing members that provide bullion vaulting and clearing services to third parties. The Custodian has selected the Zurich |
Sub-Custodian, and the Zurich Sub-Custodian may maintain custody of all of the Trust’s allocated gold for the Custodian. The |
Custodian is required under the Allocated Account Agreement to use reasonable care in appointing the Zurich Sub-Custodian and any |
other sub-custodians, making the Custodian liable only for negligence or bad faith in the selection of such sub-custodians, and has |
an obligation to use commercially reasonable efforts to obtain delivery of the Trust’s gold from any sub-custodians |
appointed by the Custodian. Otherwise, the Custodian is not liable for the acts or omissions of its sub-custodians. |
These sub-custodians may in turn appoint further sub-custodians, but the Custodian is not responsible for the appointment |
of these further sub-custodians. The Custodian does not undertake to monitor the performance by sub-custodians of their |
custody functions or their selection of further sub-custodians. The Trustee does not monitor the performance of the Custodian |
other than to review the reports provided by the Custodian pursuant to the Custody Agreements and does not undertake to monitor the |
performance of any sub-custodian. Furthermore, except for the Zurich Sub-Custodian, the Trustee may have no right to visit |
the premises of any sub-custodian for the purposes of examining the Trust’s gold or any records maintained by |
the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct |
of the facilities, procedures, records or creditworthiness of such sub-custodian. In addition, the ability of the Trustee to |
monitor the performance of the Custodian may be limited because under the Allocated Account Agreement and the Unallocated Account |
Agreement the Trustee has only limited rights to visit the premises of the Custodian and the Zurich Sub-Custodian for the purpose of |
examining the Trust’s gold and certain related records maintained by the Custodian and the Zurich Sub-Custodian. See |
“Custody of the Trust’s Gold” for more information about sub-custodians that may hold the Trust’s |
gold. 31 The |
obligations of any sub-custodian of the Trust’s gold are not determined by contractual arrangements but by LBMA |
rules and London bullion market customs and practices, which may prevent the Trust’s recovery of damages for losses on its |
gold custodied with sub-custodians. Except |
for the Custodian’s arrangement with the Zurich Sub-Custodian, there are expected to be no written contractual arrangements |
between sub-custodians that hold the Trust’s gold and the Trustee or the Custodian because traditionally such arrangements |
are based on the LBMA’s rules and on the customs and practices of the London bullion market. In the event of a legal dispute |
with respect to or arising from such arrangements, it may be difficult to define such customs and practices. The LBMA’s |
rules may be subject to change outside the control of the Trust. Under English law, neither the Trustee nor the Custodian would |
have a supportable breach of contract claim against a sub-custodian for losses relating to the safekeeping of gold. |
If the Trust’s gold is lost or damaged while in the custody of a sub-custodian, the Trust may not be able to recover |
damages from the Custodian or the sub-custodian. Whether a sub-custodian will be liable for the failure of sub-custodians |
appointed by it to exercise due care in the safekeeping of the Trust’s gold will depend on the facts and circumstances of |
the particular situation. Shareholders cannot be assured that the Trustee will be able to recover damages from sub-custodians |
whether appointed by the Custodian or by another sub-custodian for any losses relating to the safekeeping of gold by |
such sub-custodians. Gold |
bullion allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, |
if a Basket is issued against such gold, the Trust may suffer a loss. Neither |
the Trustee nor the Custodian independently confirms the fineness of the gold allocated to the Trust in connection with the creation |
of a Basket. The gold bullion allocated to the Trust by the Custodian may be different from the reported fineness or weight required |
by the LBMA’s standards for gold bars delivered in settlement of a gold trade (London Good Delivery Standards), the standards |
required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its |
obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss. Gold |
held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account is not segregated |
from the Custodian’s assets. If the Custodian becomes insolvent, its assets may not be adequate to satisfy a claim by the |
Trust or any Authorized Participant. In addition, in the event of the Custodian’s insolvency, there may be a delay and costs |
incurred in identifying the bullion held in the Trust’s allocated gold account. Gold |
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