asx gold etf and leasing gold, page-15

DC, the response:

"Hi Steve,

Apologies for the delay - been flat chat with meetings the last two days.

I have answered the query you raised below:

"You should have asked how much of the ETF is back by 100% owned, stored and not available to any other party, gold bullion? I think you would find that the answer would be closer to 0 than 100%. ETF's are only profitable if they do not have to buy outright the product they supposed cover. Think about it, purchase costs, storage costs, office costs, and if prices fall, how does an ETF company cover itself? Shorting perhaps. No, they do it just by selling pieces of paper. Try and collect the gold you believe you own based on your ETF purchases and see how far you get."

All the ETCs tracking the spot Gold price are 100% backed by physical 'Good Delivery' Gold bullion. Furthermore, all bullion used to back the Physical Gold ETCs are using 100% 'Allocated' bullion, which means the metal is never ever leant out and sits in the vault for the entire duration of the investors investment in any of the Physical Metal ETCs. This is the major reason why there is zero credit / counterparty risk assocaited with the Precious Metal ETCs. All metal is allocated to the holders of the ETCs i.e. they own the metal, and not the custodian (HCBC) and the issuer (ETF Securities).

The cost (MER) of 40bps covers all custody, insurance, management, and issuance fees associated with the ETC. Irrespective of what assets in our ETCs, the only cost to the issuer is the initial cost of listing the security of the exhange.

If you need further clarification on the above please let me know.

Best,



Nigel Phelan

Head of Sales - Australia & New Zealand



phone:(mobile): +61 417 060 030

email: [email protected]

website: www.etfsecurities.com"