As filed with the Securities and Exchange Commission on July 11, 2018 

 

  

PROSPECTUS SUMMARY

 

The following is a summary of information pertaining to the Trust and does not contain all of the information about the Trust that may be important to you. Before making an investment decision about the Gold Deposit Receipts, you should read this entire prospectus carefully, including “Risk Factors” beginning on page 7 as well as our filings incorporated by reference herein to which we have referred you in the sections “Where You Can Find Additional Information” and “Information Incorporated by Reference.”

 

Overview

 

The Vaulted Gold Bullion Trust (the “Trust”) was initially formed on December 10, 2013.  The Trust is governed by the Second Amended and Restated Depositary Trust Agreement, dated May 11, 2017 by and among The Bank of New York Mellon, as trustee, BNY Trust of Delaware, as Delaware trustee, Bank of Montreal, as initial depositor, and BMO Capital Markets Corp., as underwriter, as amended from time to time (the “Depositary Trust Agreement”). The Trust has no assets or liabilities. The Trust is not a registered investment company under the 1940 Act.

 

At all times, the Trust holds a fixed quantity of unencumbered, allocated, physical gold bullion (“Gold Bullion”) that corresponds to the outstanding Gold Deposit Receipts. The Gold Bullion is held for the benefit of holders of Gold Deposit Receipts in an account operated by Bank of Montreal at the Royal Canadian Mint (the “Mint”). One troy ounce of Gold Bullion corresponds to each Gold Deposit Receipt as specified under “Summary of Gold Deposit Receipts — The Gold Deposit Receipts.”

 

The Trust issues Gold Deposit Receipts that represent your undivided beneficial ownership interest in Gold Bullion held by the Trust on your behalf.

 

Trust Objective

 

The objective of the Trust is to provide a secure and convenient way for investors to make an investment in unencumbered, allocated, physical Gold Bullion on a spot basis. As a result, at any given time, the value of the Gold Deposit Receipts is intended to reflect the spot price of gold held by the Trust for the holders of Gold Deposit Receipts.

 

The Trust is not actively managed and has no officers or employees. The Trust does not engage in any activities designed to obtain a profit from, or to prevent losses caused by, changes in the spot price of gold.

 

The Trust issues Gold Deposit Receipts upon the contribution by Bank of Montreal to the Trust of a fixed quantity of Gold Bullion purchased with the proceeds, less the deposit fee and any sales fee, from the sale of Gold Deposit Receipts. Bank of Montreal holds the Gold Bullion in an account that is operated by Bank of Montreal at the Mint in custody for the holders of Gold Deposit Receipts. BMO Capital Markets Corp. acts as the underwriter for the sale of Gold Deposit Receipts, pursuant to a distribution agreement among the Trust, Bank of Montreal and BMO Capital Markets Corp. (the “Distribution Agreement”). BMO Capital Markets Corp. has entered, and will continue to enter, into dealer agreements with certain third parties that are registered broker-dealers, or banks or trust companies regulated by the Office of the Comptroller of the Currency and/or one or more state banking regulators that are either direct or indirect DTC Participants. We refer to these third parties, as well as any other dealer that becomes a party to the distribution agreement, as Authorized Participants. Only Authorized Participants are involved in the distribution of Gold Deposit Receipts. Holders of Gold Deposit Receipts may elect to redeem their Gold Deposit Receipts for physical Gold Bullion or exchange their Gold Deposit Receipts for cash either through an Authorized Participant or through an approved registered broker-dealer or similar entity that is not an Authorized Participant.

 

The Trust may offer Gold Deposit Receipts from time to time as it receives Gold Bullion purchased on a daily basis for deposit in the Bank of Montreal account at the Mint, all as described more fully herein.

 

Gold Deposit Receipts are not, and will not be, listed or quoted on any national securities exchange.

 

Class A, Class F, Class F-1, Class F-2, Class F-3 and Class S Gold Deposit Receipts

 

The Trust is offering to the public six classes of Gold Deposit Receipts: Class A Gold Deposit Receipts; Class F Gold Deposit Receipts; Class F-1 Gold Deposit Receipts; Class F-2 Gold Deposit Receipts; Class F-3 Gold Deposit Receipts; and Class S Gold Deposit Receipts. The Institutional Gold Deposit Receipts will be offered and sold only to Institutional Accounts. Institutional Accounts will be offered the Institutional Gold Deposit Receipts on the basis shown on the prospectus cover page, which represents price breaks or accommodations for significant order sizes. The applicable deposit and sales fees differ among the six classes of Gold Deposit Receipts.

    

---

   

BMO Capital Markets Corp. uses the spot price of gold reflected on EBS as the source for the spot price of gold. BMO Capital Markets Corp. refers to this source without adjustment or modification. If, for any reason, EBS is not posting spot prices, BMO Capital Markets Corp. will use the spot price reflected by the LBMA (PM) Gold Price as its source for the spot price of gold. BMO Capital Markets Corp. will refer to this source without adjustment or modification. The public offering price for each Gold Deposit Receipt is the spot price at the time of sale for one troy ounce of Gold Bullion, determined by BMO Capital Markets Corp. using EBS as the source for the spot price of gold, without adjustment or modification, plus:

 

·

in the case of a Class A Gold Deposit Receipt, a deposit fee of 2.00%, payable to Bank of Montreal, plus a sales fee of 2.00% to any participating broker-dealer that sells Gold Deposit Receipts to an investor;

 

·

in the case of a Class F Gold Deposit Receipt, which is sold only through fee-based programs, a deposit fee of 2.00%, payable to Bank of Montreal, plus a sales fee of 0.25%;

 

·

in the case of a Class F-1 Gold Deposit Receipt, which is sold to trust or fiduciary accounts, a deposit fee of 2.00%, payable to Bank of Montreal, and no sales fee;

 

·

in the case of a Class F-2 Gold Deposit Receipt, which is sold solely to an Institutional Account, a deposit fee of 1.50%, payable to Bank of Montreal, and no sales fee;

 

·

in the case of a Class F-3 Gold Deposit Receipt, which is sold solely to an Institutional Account, a deposit fee of 1.00%, payable to Bank of Montreal, and no sales fee; and

 

·

in the case of a Class S Gold Deposit Receipt, which is sold solely to an Institutional Account, neither a deposit fee nor a sales fee.

 

The table below summarizes the fees payable with respect to the Class A and Class F and Class F-1 Gold Deposit Receipts.

 

 

 

Summary of Risks

 

The Gold Deposit Receipts are subject to certain risks, discussed in more detail in the section entitled “Risk Factors” below. Examples of these risks include:

 

•

Bank of Montreal has a limited history of operating investment vehicles similar to the Trust;

 

•

the value of Gold Bullion is not guaranteed, which may cause an investment in the Gold Deposit Receipts to be volatile;

 

•

future governmental decisions may have significant impact on the price of Gold Bullion, which will impact the price of the Gold Deposit Receipts;

 

•

the Trust is a passive investment vehicle, which means that the value of the Gold Deposit Receipts may be adversely affected by losses that, if the Trust had been actively managed, it might have been possible to avoid; and

 

•

because the Trust holds solely Gold Bullion, an investment in the Trust may be more volatile than an investment in a more broadly diversified portfolio.

   

---

   

Emerging Growth Company Status

 

The Trust is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as the Trust is an “emerging growth company,” the Trust may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes–Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in the Trust’s periodic reports, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

 

Under the JOBS Act, the Trust will remain an “emerging growth company” until the earliest of:

 

•

the last day of the fiscal year during which the Trust has total annual gross revenues of $1 billion or more;

 

•

October 31, 2021, which is the last day of the Trust’s fiscal year following the fifth anniversary after the completion of this offering;

 

•

the date on which the Trust has, during the previous three-year period, issued more than $1 billion in non-convertible debt; and

 

•

the date on which the Trust is deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (the Trust will qualify as a large accelerated filer as of the first day of the first fiscal year after the Trust has (i) more than $700 million in outstanding equity held by non-affiliates and (ii) been public for at least 12 months; the value of its outstanding equity will be measured each year on the last day of its second fiscal quarter).

 

The JOBS Act also provides that an “emerging growth company” can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. However, the Trust has chosen to “opt out” of such extended transition period, and, as a result, the Trust will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that the Trust’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

 

Trustees

 

The trustee of the Trust is The Bank of New York Mellon, a corporation organized under the laws of the State of New York authorized to conduct a banking business. The Delaware trustee of the Trust will be BNY Mellon Trust of Delaware, a Delaware banking corporation. The Trust’s website is www.BMOGOLD.com.

 

Principal Office

 

The address of the Trust is c/o BNY Mellon Trust of Delaware, 100 White Clay Center, Suite 10, Newark, DE 19711, and the telephone number is (302) 791-3610.

   

---

THE GOLD INDUSTRY

Introduction

The following section provides a brief overview 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. We derived all disclosures in this prospectus regarding the gold industry from publicly available documents. In connection with the offering of the Gold Deposit Receipts, none of us, or our respective affiliates have participated in the preparation of such documents or made any due diligence inquiry with respect to the information regarding the gold industry. None of us or any of our respective affiliates have independently investigated whether such publicly available documents or any other publicly available information regarding the gold industry is current, accurate or complete.

The participants in the gold industry may be classified in the following sectors: (1) mining and producer; (2) banking; (3) official; (4) investment; and (5) manufacturing. The following is a brief description of each of the sectors.

Mining and Producer Sector. This group includes mining companies that specialize in gold and silver production; mining companies that produce gold as a byproduct 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 industry 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. 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 Agreement on Gold.” The signatories included the European Central Bank (the “ECB”) and the central banks of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland, and England. The original agreement limited incremental sales by the 15 signatories to 400 tonnes per annum over the ensuing five-year period. The original Washington Agreement on Gold expired in September 2004, and was renewed by almost all of the original signatories for a second five-year period (England did not renew in 2004). The second Washington Accord Agreement expired in September 2009 and was renewed again by all signatories of the second agreement for a third agreement to last another five-year period. In addition, the central banks of Cyprus, Greece, Malta, Slovakia and Slovenia signed in 2009. The annum limit on gold sales under the third agreement was 400 tonnes, with total sales not to exceed 2,000 tonnes in the five-year period. In May 2014, before the third agreement was set to expire in September 2014, a fourth agreement was reached between the ECB and the central banks of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland, which will expire after a five-year period. The signatories have agreed to, among other things, continue to coordinate their gold transactions to avoid disturbances to the gold market and have acknowledged that they each do not have plans to sell significant amounts of gold.

The Investment Sector. This sector includes the investment and trading activities of both professional and 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.

 

 

WORLD GOLD SUPPLY AND DEMAND (2007-2017)

The following table sets forth a summary of the world gold supply and demand from 2007-2017:

Note: Totals may not add due to independent rounding. Net producer hedging is the change in the physical market impact of mining companies’ gold loans, forwards and options positions. Implied net investment is the residual from combining all other Thomson Reuters GFMS data on the gold supply/demand as shown in the Summary Table. As such, it captures the net physical impact of all transactions not covered by the other supply/demand variables.

(1)	“Tonne” refers to one metric ton. This is equal to 1,000 kilograms or 32,150.7465 troy ounces.

*	Source: Gold Survey 2018, Thomson Reuters GFMS

 

 

Historic Movements in the Price of Gold

As movements in the price of gold are expected to directly affect the price of the Gold Deposit Receipts, investors should understand what the recent movements in the price of gold have been. Investors, however, should also be aware that past movements in the gold price are not indicators of future movements.

The following chart provides historical background on the price of gold. The chart illustrates movements in the price of gold in U.S. dollars per ounce over the period from October 2007 to June 2018, and is based on the LBMA (PM) Gold Price.

 

 

Source: Bloomberg (accessed June 2018)

Throughout 2007, the price of gold steadily increased and then reached a new high of $1,011.25 on March 17, 2008.  By the end of December 2008, however, the price of gold had fallen to $869.75 per ounce. Gold prices were quite volatile between the March 2008 high and the end of December 2008 with run-ups and falls of over $150 in each direction. The significant price movements reflect the battles between inflationary and deflationary pressures, U.S. Dollar strengthening against many major currencies and global economic uncertainty going into 2009.

The price of gold continued its upward trend in 2009. After rallying to $1,212.50 per ounce in early December 2009, it fell back down to $1,087.50 per ounce to close the year following the collapse of Lehman Brothers. This still resulted in a gain of over 25 percent for 2009. Upward price movement for gold price continued in 2010, reaching a new pre-inflation adjusted record high of $1,421.00 per ounce on November 9, 2010 and closing at $1,405.50 per ounce on December 30, 2010. In August 2011, the price of gold experienced a notable increase partially due to the first U.S. downgrade by Standard & Poor’s, reaching a high of $1895.00 per ounce on September 5, 2011. By December 29, 2011, the price of gold had fallen to $1,531.00 per ounce. The annual average price of gold in 2012 was 6.2 percent higher than 2011, reaching a high of $1,791.75 on October 4, 2012. In particular, uncertainty over U.S. monetary policy became an increasingly significant driver of market appetite towards the end of 2012, and on December 28, 2012, the price of gold had fallen slightly to $1,657.50 per ounce.

In 2013, the twelve-year bull run of gold ended. 2013 opened near the annual high, and the price declined approximately 29 percent over the year to $1,204.50 per ounce on December 30, 2013. For 2013, the price of gold was impacted, in part, by improving sentiment towards the U.S. economy, which contributed to a strengthening of the U.S. dollar and equities, luring investors away from gold in the process. During 2014, the underlying driver behind investor sentiment of gold was global monetary policy. On one end, the improving economic conditions in the United States (along with the announcement of the Federal Reserve Board’s tapering measures at the end of 2013) diminished demand for gold for U.S. investors, while loosening of monetary policy in other advanced and emerging markets enhanced demand for gold globally, causing gold prices to fluctuate between a low of $1,132.00 and a high of $1,392.00 per ounce. Gold prices deteriorated throughout 2015, in part as a result of the Federal Reserve Board’s announcement that it would raise interest rates as well as a significant rally of the U.S. dollar index, falling to $1,060.00 per ounce on December 30, 2015. However, the price of gold rebounded during the first half of 2016. In July 2016, gold prices experienced a rapid increase following the United Kingdom’s referendum held on June 23, 2016 to leave the European Union (i.e., “Brexit”), reaching a 28-month high of $1,366.25 per ounce on July 6, 2016. The initial market volatility and negative sentiment in connection with Brexit has somewhat subsided and gold prices have receded from the high prices displayed during July 2016, leveling off at prices similarly exhibited during the beginning of 2016. In the first half of 2017, physical demand was up 17% compared to the same period a year earlier. In September of 2017, gold prices rose to their highest level for thirteen months, but then slipped to a near five-month low by mid-December. Gold started 2018 strongly, extending the rally that followed the Federal Reserve’s recent interest rate hike. This rally hit a barrier just below $1,360 in late January.

 

 

As of July 9, 2018, the price of gold was $1,260.12 per ounce.

Operation of the Gold Bullion Market

The global trade in gold consists of over-the-counter (“OTC”) transactions in spot gold bullion, as well as forwards, options and other derivatives, together with exchange-traded futures and options.

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, Zurich, and Tokyo.

Five 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. A London Gold Delivery Bar (as described below), which is acceptable for settlement of any OTC transaction will be acceptable for delivery to the Trust in connection with the issuance of Gold Deposit Receipts.

Futures Exchanges

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. 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

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. 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.

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 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.

Exchange Regulation

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. The CFTC oversees the operation of the U.S. commodity futures markets, including COMEX. One of the principal public policy objectives of the CEA is to insure the integrity of the markets it oversees and the reliability of the prices of trades on those markets. The CEA 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.

The London Bullion Market

Most trading in physical gold is conducted on the OTC market, predominantly in London. The LBMA coordinates various OTC-market activities, including clearing and vaulting, acts as the principal intermediary between physical gold market participants and the relevant regulators, promotes good trading practices and develops standard market documentation. In addition, the LBMA promotes refining standards for the gold market by maintaining the “London Good Delivery Lists,” which identify refiners of gold that have been approved by the LBMA.

In the OTC market, gold bars that meet the specifications for weight, dimensions, fineness (or purity), identifying marks (including the assay stamp of an LBMA-acceptable refiner) and appearance described in “The Good Delivery Rules for Gold and Silver Bars” published by the LBMA are referred to as “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 the refiners identified on the London Good Delivery List.

Prior to April 20, 2015, OTC market participants employed the morning or afternoon “London fix,” as quoted by various financial information sources, to determine gold prices. Formal participation in the London fix was traditionally limited to five members, each of which is a bullion dealer and a member of the LBMA.

Effective April 20, 2015, the London Fix pricing mechanism was replaced by a new electronic LBMA price-discovery process. The price continues to be set twice daily (at 10:30 and 15:00 London GMT) in U.S. dollars. The new LBMA (PM) Gold Price is operated and administered by an independent third-party provider, the IBA, which provides the price platform, methodology as well as the overall administration and governance for the LBMA (PM) Gold Price.

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 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 are subject to The London Code of Conduct for Non-Investment Products, which was established by market participants in conjunction with the Bank of England.

 

 

Other Methods of Investing in Gold

The Trust will compete with other financial vehicles, including traditional debt and equity securities issued by companies in the gold industry and other securities backed by or linked to gold, direct investments in gold and investment vehicles similar to the Trust.

 

 

DESCRIPTION OF GOLD DEPOSIT RECEIPTS

General

The Trust issues Gold Deposit Receipts pursuant to the Depositary Trust Agreement described in this prospectus under the heading “Description of the Depositary Trust Agreement” on a continuous basis.

The assets of the Trust consist of Gold Bullion, held through Bank of Montreal’s account with the Mint. Gold Deposit Receipts represents your individual and undivided beneficial ownership interest in the Gold Bullion.

Holders of Gold Deposit Receipts will receive no cash distributions whatsoever.

Subject to certain exceptions described herein, holders of Gold Deposit Receipts maintain the option to exchange their Gold Deposit Receipts for Gold Bullion (to be delivered directly to them by the Service Carrier) subject to payment of a Withdrawal and Delivery Fee, or exchange their Gold Deposit Receipts for cash as described below.

The Trust is not a registered investment company under the 1940 Act.

The Trust is an “emerging growth company” as defined in the JOBS Act and, as such, may elect to comply with certain reduced reporting requirements after this offering.

Trust Purchases of Gold Bullion

The Trust issues Gold Deposit Receipts upon contribution by Bank of Montreal to the Trust of Gold Bullion purchased with the proceeds, less the deposit fee and any sales fee, from the sale of the Gold Deposit Receipts. The Gold Bullion is purchased on a spot basis from Bank of Montreal. Bank of Montreal will set the purchase price at which it will offer Gold Bullion. This price is equal to the U.S. dollar spot price for gold reflected on EBS at the time of the purchase without adjustment or modification. If, for any reason, EBS is not posting spot prices, Bank of Montreal will use the spot price reflected by the LBMA (PM) Gold Price as its source for the spot price of gold, without adjustment or modification.

Bank of Montreal may earn revenues (or suffer losses) from the sale of Gold Bullion to the Trust.

An Authorized Participant wishing to acquire a Gold Deposit Receipt must place an order with BMO Capital Markets Corp. no later than 4:00 p.m. (New York time, or such other time as may be established by BMO Capital Markets Corp. and promptly notified to Bank of Montreal) on any Business Day in order for BMO Capital Markets Corp. to execute the purchase order on that Business Day. Any request received after such time on such Business Day will be deemed to be a request sent and received on the following Business Day. The settlement date will be no later than the second Business Day following the date of execution of the purchase order. A “Business Day” shall mean any day other than Saturday or Sunday or a day on which any of Bank of Montreal, BMO Capital Markets Corp., as the underwriter, or the trustee is authorized or required by law or regulation to remain closed.

Unless they contain a manifest error, all records relating to the Gold Bullion maintained by Bank of Montreal or its affiliates are final for all purposes and binding. Bank of Montreal or its affiliates shall not be responsible for errors made in good faith, except in the case of its gross negligence or willful misconduct.

Bank of Montreal reserves the right to reject or to discontinue accepting orders for the Gold Bullion at any time without notice. For example, such a rejection could occur if an order was incomplete or in some other way defective. Bank of Montreal may at any time prior to completion of a purchase of Gold Bullion, in its sole and absolute discretion and whether or not the purchase price has been paid, elect whether or not to proceed in whole or in part with the sale of the Gold Bullion.

If, for any reason, the Trust fails to settle a purchase order by the settlement date on which you receive your Gold Deposit Receipts, Bank of Montreal may, in its sole and absolute discretion, sell the purchased Gold Bullion, and this sale is deemed to be authorized by the Trust.

 

 

Custody of the Gold Bullion

Bank of Montreal has entered into a Gold Storage Agreement with the Mint. Pursuant to the terms and conditions of this Gold Storage Agreement, the Mint is responsible for and bears the risk of loss of and damage to, Gold Bullion in Bank of Montreal’s account at the Mint and, in such an event, would be liable to Bank of Montreal, subject to certain limitations provided for in the Gold Storage Agreement. Bank of Montreal has the right to audit the physical storage of the Trust’s Gold Bullion at the Mint, and Bank of Montreal intends to engage an external auditor to perform such audit annually. The Gold Storage Agreement provides that the Mint’s obligation with respect to Gold Bullion shall terminate upon termination of the Gold Storage Agreement for convenience, termination of the Gold Storage Agreement for default, or expiration of the Gold Storage Agreement. If termination occurs, Bank of Montreal will sell the Gold Bullion, and will deliver to you the resulting proceeds as promptly as practicable after the termination event occurs. The Gold Storage Agreement between Bank of Montreal and the Mint does not create a relationship between the parties of principal and agent, partnership or joint venture. The Gold Storage Agreement is governed by, and construed in accordance with, the laws of the Province of Ontario, Canada, and the laws of Canada applicable therein.

 

The Trust will not be charged a custody fee with respect to holding the Trust’s Gold Bullion at Bank of Montreal’s custodial account. Bank of Montreal has no intention of changing its policy with respect to custody fees in the foreseeable future unless it determines that it is necessary to do so (e.g., if the costs associated with operating the custodial account at the Mint increase dramatically). However, for the avoidance of doubt, Bank of Montreal reserves the right to charge a custody fee and if Bank of Montreal were to charge a fee, this would affect the Trust’s expenses and the price of the Gold Deposit Receipts. However, any custody fee will not exceed 0.50% per annum of the daily average closing price of Gold Bullion represented by the Gold Deposit Receipts, as calculated by Bank of Montreal acting in good faith.

In the unlikely event that Bank of Montreal determines that it is appropriate to impose a custody fee, Bank of Montreal will notify the Trust and the Authorized Participants, who will notify holders, and will also make available the amount of such custody fee on the Trust’s website. Notice of any such custody fee will be given at least 60 days prior to the fee taking effect. A holder could seek to sell its Gold Deposit Receipts for cash or redeem for Gold Bullion prior to the imposition of the custody fee.

Bank of Montreal reserves the right in its sole discretion to arrange for storage of the Gold Bullion in another storage facility in Canada that is an approved storage facility by the Investment Industry Regulatory Organization of Canada (“IIROC”).

Purchases and Sales of Gold Deposit Receipts

Gold Deposit Receipts represent an interest in Gold Bullion. An investment in the Gold Deposit Receipts, and in Gold Bullion, may not be appropriate for all investors. Purchases and sales of Gold Deposit Receipts will only be made through Authorized Participants.

In addition, you may only acquire, hold, trade and surrender whole Gold Deposit Receipts, with a minimum of one Gold Deposit Receipt per transaction.

The Gold Deposit Receipts are not, and will not be, listed or traded on any securities exchange. You may present your Gold Deposit Receipts to an Authorized Participant or other broker-dealer for redemption, as discussed below. Gold Deposit Receipts may also be transferred by gift or estate transfer.

Under no circumstances may any purchase of the Gold Deposit Receipts be made with borrowed or leveraged funds advanced by an Authorized Participant. No margin purchases of the Gold Deposit Receipts will be accepted.

Redemptions of Gold Deposit Receipts for Gold Bullion; Sales for Cash

As a holder of Gold Deposit Receipts you should be prepared to hold the Gold Deposit Receipts indefinitely.

You may, following the settlement date of a purchase of Gold Bullion, at any time and from time to time choose to redeem some or all of your Gold Deposit Receipts for physical gold or to sell for cash, subject to the terms and conditions described below.

Physical Delivery

At any time following the settlement date, a holder of Gold Deposit Receipts may direct an Authorized Participant or other broker-dealer to contact the Trust and arrange to redeem its Gold Deposit Receipts for physical gold. Bank of Montreal will arrange with the Authorized Participant or broker-dealer to have Gold Bullion physically delivered for your account through the Authorized Participant or broker-dealer or directly to you, subject to payment of a Withdrawal and Delivery Fee, plus applicable taxes, fines or penalties. Bank of Montreal has engaged a third-party service carrier (“Service Carrier”) to make deliveries of Gold Bullion. The engagement of the Service Carrier does not create a relationship between the parties of principal and agent, partnership or joint venture. The Gold Bullion placed with the Service Carrier will meet the same specifications as the Gold Bullion held at the Mint in the Bank of Montreal account for the Trust. Once Gold Bullion representing the redeemed Gold Deposit Receipts has been placed with the Service Carrier, the redeeming holder will bear the risk of loss from the moment the Service Carrier takes possession of Gold Bullion on behalf of such holder. To initiate this process a holder of Gold Deposit Receipts would have to furnish the Authorized Participant or broker-dealer with a delivery order in the required form.

 

 

The Trust will pass along to the redeeming holder the fees charged by Bank of Montreal in respect of physical delivery. Bank of Montreal will charge a per ounce fee in respect of the supply, processing, withdrawal and delivery of a specific quantity of fully fabricated Gold Bullion. Bank of Montreal will provide these fees for publication on the Trust’s website (which will be hosted by Bank of Montreal). Bank of Montreal will not publish a schedule of these fees in paper form. Bank of Montreal reserves the right to revise these fees. If Bank of Montreal does so, it will notify the trustee and the Authorized Participants and will also make available such changes to the Fee Schedule published on the Trust’s website for at least 30 days before the new Withdrawal and Delivery Fee goes into effect. You should check with the Authorized Participant or broker-dealer to ascertain the fees prior to requesting delivery.

The Withdrawal and Delivery Fee must be paid by you, through the Authorized Participant or broker-dealer, up front by wire transfer (or such other means as Bank of Montreal may approve). Upon receiving payment in full up front, Bank of Montreal may engage the Service Carrier to supply and deliver Gold Bullion for your account. Bank of Montreal will use its reasonable efforts to have Gold Bullion available for shipment to you or to the Authorized Participant or broker-dealer no later than ten (10) Business Days after payment in full is received. You or the Authorized Participant or broker-dealer (as applicable) may be required to execute a delivery receipt evidencing receipt of the Gold Bullion (the “Delivery Receipt”). Once your Gold Bullion has been delivered, neither the Trust, Bank of Montreal nor any of its affiliates will be under any obligation to repurchase that Gold Bullion.

Gold Bullion is delivered only to addresses within the United States which are within a state specifically approved by BMO Capital Markets Corp. for delivery (a “Delivery State”). A Delivery State is a state in which there are no excise or similar taxes or fees associated with the delivery of physical gold. Bank of Montreal will maintain a list of the states that qualify as Delivery States and will provide same to the Authorized Participants from time to time. BMO Capital Markets Corp. at its sole discretion will make updates and changes to this Delivery State listing. Bank of Montreal is under no obligation to deliver Gold Bullion to a state not included on the “Delivery State” listing. The Trust will not deliver Gold Bullion to a post office box.

Taxes for which the Trust or Bank of Montreal may be held responsible for the collection or payment of on its own behalf or on behalf of the purchaser shall be the purchaser’s sole responsibility and shall be paid exclusively by the Gold Bullion purchaser. For these purposes, taxes means any and all sales, use, value added, excise tax or similar transaction taxes or duties, together with any penalties, fines or interest thereon, imposed by any domestic or foreign taxing authority on or with respect to the purchase, delivery or supply of gold bullion.

The obligation of the Trust or Bank of Montreal to deliver Gold Bullion is subject to applicable laws. Neither the Trust nor Bank of Montreal shall be liable for any direct or indirect loss or damage incurred by you or the Authorized Participant or broker-dealer arising or resulting from any delay in the delivery of Gold Bullion including delays due to failure by you or the Authorized Participant to provide a duly completed Delivery Order, failure by you or the Authorized Participant or broker-dealer to remit the Withdrawal and Delivery Fee in full, or any other reason.

Bank of Montreal and The Bank of New York Mellon shall not be responsible for the storage and safekeeping of any Gold Bullion delivered to you or the Authorized Participant or broker-dealer in accordance with instructions contained in any Delivery Order, and Bank of Montreal’s undertaking to deliver Gold Bullion will be discharged upon the execution of the Delivery Receipt, and it shall have no liability for any loss or damage of Gold Bullion arising after delivery.

For the avoidance of doubt, Gold Bullion will not be delivered to you through the facilities of The Bank of New York Mellon or through the facilities of DTC or by the Authorized Participant or broker-dealer, and will only be delivered to you at an address within a Delivery State.

 

The following is a list of current Delivery States:

 

 

Redemption for Cash

A holder also may elect to redeem its Gold Deposit Receipts for cash. Under no circumstance may a purchaser of Gold Bullion redeem his or her Gold Bullion for cash prior to the settlement date of the purchase.

A holder that elects to redeem for cash must instruct an Authorized Participant or broker-dealer to tender its Gold Deposit Receipts through BMO Capital Markets Corp., which will withdraw and sell a proportionate interest in Gold Bullion for cash to Bank of Montreal for further delivery to the Authorized Participant or broker-dealer through the facilities of the Trust, if Bank of Montreal chooses to purchase the Gold Bullion at that time. There are no fees payable to Bank of Montreal upon a redemption for cash. Holders who redeem their Gold Deposit Receipts for cash using the services of an Authorized Participant or other broker-dealer (for example, the holder’s broker) may be charged additional fees or commissions by that Authorized Participant or other broker-dealer.

Bank of Montreal currently intends to repurchase Gold Bullion upon the request of holders of Gold Deposit Receipts based on the market price of the Gold Bullion, but is under no obligation to do so, and may cease such repurchases at any time.

The Authorized Participant or broker-dealer must transmit your redemption order request no later than 4:00 PM (New York time, or after such other time as may hereafter be established by Bank of Montreal) on a Business Day in order for Bank of Montreal to execute the redemption order on such Business Day. Any request received after this time on such Business Day will be treated as a request sent and received on the following Business Day. The settlement date for the redemption will be no later than the second Business Day following the date of execution of the redemption order.

The bid price represents the price at which a client can sell Gold Bullion to Bank of Montreal and is calculated using the U.S. dollar spot prices. BMO Capital Markets Corp. will use the spot price of gold reflected on EBS as the source for the spot price of gold. BMO Capital Markets Corp. will refer to this source without adjustment or modification. If, for any reason, EBS is not posting spot prices, BMO Capital Markets Corp. will use the spot price reflected by the LBMA (PM) Gold Price as its source for the spot price of gold. BMO Capital Markets Corp. will refer to this source without adjustment or modification. The bid price represents the price at which Bank of Montreal will buy Gold Bullion.

Withdrawal or redemption of Gold Bullion back to Bank of Montreal can only be facilitated through the Authorized Participant or other broker-dealer.

How to Obtain Pricing Information

An investor considering a purchase or redemption of Gold Deposit Receipts may obtain end of day indicative pricing from the Trust’s website. Real-time indicative quotations are available from Bloomberg using <BMOEGLDR Index Go> and these quotations also are available (on a delayed basis) at Bloomberg.com. An investor may also contact his broker or BMO Capital Markets Corp. to obtain a price quote at any time during a trading day. The price to public for one Gold Deposit Receipt is calculated using the spot price for one troy ounce of gold bullion at the time the Gold Deposit Receipt is purchased. The spot price of gold fluctuates. Given that the spot price fluctuates, the price at which your order for Gold Deposit Receipts is filled may differ from the quoted price. You may obtain historical pricing information on the gold spot price to form an understanding of fluctuations in price.

In connection with a purchase of Gold Deposit Receipts, your broker may ask you to place a limit order, which may be executed at the limit price or lower. Limit orders will be executed promptly. Your broker will advise you of the price at which the order was filled. Alternatively, your broker may obtain from you a conditional order to purchase Gold Deposit Receipts subject to confirmation of the execution price. In this case, your broker will obtain an execution price from BMO Capital Markets Corp. that is subject to your confirmation within the time period specified to you by your broker.

 

 

Determinations; Trust Website

All determinations relating to the spot price, or otherwise herein, is made by Bank of Montreal through its subsidiary, BMO Capital Markets Corp., using the spot prices reflected on EBS, without adjustment or modification, is published on the Trust’s website, http://www.BMOGOLD.com, managed by Bank of Montreal or BMO Capital Markets Corp. and, absent manifest error, is final and binding on holders of the Gold Deposit Receipts. In addition, Bank of Montreal also maintains a page on Bloomberg <BMOEGLDR Index Go> that provides intra-day bid and offer indications on the current price per Gold Deposit Receipt. Bank of Montreal is not responsible for its errors and omissions if made in good faith, except in the case of its gross negligence or willful misconduct. Bank of Montreal has not, and will not, retain an independent person to make or confirm calculations and determinations relating to the Gold Deposit Receipts.

Suspensions of Redemptions and/or Purchases

You should also be aware that, from time to time, this mechanism to redeem Gold Deposit Receipts may be suspended due to the occurrence of a market disruption event or a force majeure event that prevents the initial depositor for reasons beyond its control from delivering the Gold Bullion. Such suspension shall last as long as the initial depositor continues to be so prevented from delivering the Gold Bullion. Such suspension may effectively prevent you from redeeming Gold Deposit Receipts or selling Gold Bullion to Bank of Montreal. Bank of Montreal will be under no obligation to repurchase Gold Bullion from you at any time.

You should also be aware that from time to time, the mechanisms to withdraw and sell Gold Bullion may be suspended due to the occurrence of a market disruption event of force majeure, thus effectively preventing you from selling Gold Bullion to Bank of Montreal.

For these purposes, a “market disruption event” means any of the following events, as determined by BMO Capital Markets Corp.: (A) the suspension of or material limitation on trading in gold, or futures contracts or options related to gold, on the Relevant Market (as defined below); (B) the failure of trading to commence, or permanent discontinuance of trading, in gold, or futures contracts or options related to gold, on the Relevant Market; (C) the failure of the LBMA to calculate or publish the fix of gold for that day (or the information necessary for determining the fix); or (D) any other event, if BMO Capital Markets Corp., as underwriter, determines in its sole discretion that the event materially interferes with the its ability to redeem the Gold Deposit Receipts, repurchase Gold Bullion, or determine the spot price. For the purpose of determining whether a market disruption event has occurred: (A) a limitation on the hours in a trading day and/or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular trading hours of the Relevant Market; and (B) a suspension of or material limitation on trading in the Relevant Market will not include any time when trading is not conducted or prices are not quoted by the LBMA in the Relevant Market under ordinary circumstances. “Relevant Market” means the market in London on which members of the LBMA, or any successor thereto, quote prices for the buying and selling of gold, or if such market is no longer the principal trading market for gold or options or futures contracts for gold, such other exchange or principal trading market for gold as determined by the calculation agent which serves as the source of prices for gold, and any principal exchanges where options or futures contracts on gold are traded.

“Force majeure” means any bona fide event beyond the control of BMO Capital Markets Corp., (other than as a result of financial incapacity of Bank of Montreal) and not caused by an act or omission of Bank of Montreal, in the nature of any government act, restriction, act of God, fire, war, terrorism, earthquake, regulation or control, inability to obtain labor or materials, lack or shortage of Gold Bullion, inability to obtain Gold Bullion due to market demand or market shortage, flood, embargo, sabotage, explosion, bank failure, insurrection, civil commotion, riot, general internet or wireless communication or power failure, or labor shortage or dispute that, in any case, causes such party to be unable to fulfill or to be delayed or restricted in the fulfillment of any duty or obligation arising in connection with the offering of Gold Deposit Receipts for sale for cash.

Certificates Evidencing the Gold Deposit Receipts

The Gold Deposit Receipts are evidenced by global certificates executed and delivered by the trustee on behalf of the Trust. DTC has accepted the Gold Deposit Receipts for settlement through its book-entry settlement system. So long as the Gold Deposit Receipts are eligible for DTC settlement, there will be only one certificate evidencing Gold Deposit Receipts that will be registered in the name of a nominee of DTC. Investors will be able to own Gold Deposit Receipts only in the form of book-entry security entitlements with DTC, or direct participants (“DTC Participants”) or indirect participants (“Indirect Participants”) in DTC. No investor will be entitled to receive a separate certificate evidencing Gold Deposit Receipts. Because Gold Deposit Receipts 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 Gold Deposit Receipts 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.

 

 

Voting Rights

Gold Deposit Receipts do not have any voting rights. However, holders of at least 75% of the Gold Deposit Receipts acting through an Authorized Participant have the right to require the trustee to terminate the Trust as described below.

Trust Expenses

Bank of Montreal bears all expenses of the Trust, including, but not limited to, the following:

•

any expenses or liabilities of the Trust;

•

any taxes and other governmental charges that may fall on the Trust or its property; and

•

fees and expenses of The Bank of New York Mellon and BNY Mellon Trust of Delaware and any indemnification of The Bank of New York Mellon and/or BNY Mellon Trust of Delaware, as described below.

 

 

THE SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM; GLOBAL SECURITY

DTC acts as securities depository for the Gold Deposit Receipts. 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 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 are not issued for the Gold Deposit Receipts. Instead, a global certificate has been 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 represents all of the Gold Deposit Receipts outstanding at any time.

Upon the settlement date of any transfer or exchange of Gold Deposit Receipts, DTC will credit or debit, on its book-entry registration and transfer system, the amount of the Gold Deposit Receipts so transferred or exchanged to the accounts of the appropriate DTC Participants. The trustee and the DTC Participants will designate the accounts to be credited/charged in the case of exchanges of Gold Deposit Receipts.

Beneficial ownership of the Gold Deposit Receipts is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Owners of beneficial interests in the Gold Deposit Receipts 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 Gold Deposit Receipts.

Investors may transfer the Gold Deposit Receipts through DTC by instructing the DTC Participant or Indirect Participant through which the holders hold their Gold Deposit Receipts to transfer the Gold Deposit Receipts. Transfers are made in accordance with standard securities industry practice.

DTC may decide to discontinue providing its service for the Gold Deposit Receipts by giving notice to the trustee and the initial depositor or BMO Capital Markets Corp. Under such circumstances, the trustee and the initial depositor 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 Gold Deposit Receipts to the DTC Participants having Gold Deposit Receipts credited to their accounts.

The rights of the holders of Gold Deposit Receipts generally must be exercised by DTC Participants acting on their behalf in accordance with the rules and procedures of DTC.

The Depositary Trust Agreement provides that, as long as the Gold Deposit Receipts 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 Gold Deposit Receipts.

 

 

DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT

General. The Depositary Trust Agreement provides that Gold Deposit Receipts will represent an owner’s undivided beneficial ownership interest in the Trust assets.

The trustee. The Bank of New York Mellon serves as trustee. The Bank of New York Mellon, which was founded in 1784, was New York’s first bank and is the oldest bank in the country still operating under its original name. The Bank of New York Mellon is organized under the law of the State of New York authorized to conduct a banking business and a member of the Federal Reserve System. The Bank of New York Mellon conducts a national and international wholesale banking business and a retail banking business in the New York City, New Jersey and Connecticut areas, and provides a comprehensive range of corporate and personal trust, securities processing and investment services.

Termination of the Trust. The Trust will terminate if the trustee resigns and no successor trustee is appointed by Bank of Montreal, as initial depositor, within 60 days from the date the trustee provides notice to Bank of Montreal, as initial depositor, and BMO Capital Markets Corp., as underwriter, of its intent to resign. Upon termination, the beneficial owners of Gold Deposit Receipts will surrender their Gold Deposit Receipts as provided in the Depositary Trust Agreement, including payment of any fees of the trustee or applicable taxes or governmental charges due. The Trust will terminate if the owners of 75% of the outstanding Gold Deposit Receipts (other than those held by Bank of Montreal for its own account) acting through an Authorized Participant vote to dissolve and liquidate the Trust, an event of liquidation or dissolution occurs as to Bank of Montreal, if Bank of Montreal ceases to store Gold Bullion at the Mint and does not make alternative arrangements that it deems appropriate, or if the Trust fails to qualify for treatment, or ceases to be treated, for U.S. federal income tax purposes, as a grantor trust.

If a termination event occurs, the initial depositor will sell the Gold Bullion and the trustee will deliver to you the resulting proceeds as promptly as practicable after the termination event occurs.

Amendment of the Depositary Trust Agreement. The trustee and Bank of Montreal, as initial depositor, may amend any provisions of the Depositary Trust Agreement without the consent of any of the owners of the Gold Deposit Receipts. Promptly after the execution of any amendment to the agreement, Bank of Montreal, as initial depositor, must furnish or cause to be furnished written notification of the substance of the amendment to each owner of Gold Deposit Receipts.

Any amendment that imposes or increases any fees or charges, subject to exceptions, or that otherwise prejudices any substantial existing right of the owners of Gold Deposit Receipts will not become effective until 30 days after notice of the amendment is given to the owners of Gold Deposit Receipts.

Trustee fees. The Bank of New York Mellon, as trustee, charges a fee, which is borne by Bank of Montreal.

Address of the trustee. The Bank of New York Mellon, Corporate Trust Department, 101 Barclay Street, Floor 7 East, New York, New York 10286.

Governing law. The Depositary Trust Agreement and Gold Deposit Receipts are governed by the laws of the State of Delaware. The trustee will provide the Depositary Trust Agreement to any owner designated by DTC free of charge upon written request.

Duties and immunities of the trustee. Neither the trustee nor the Delaware trustee assumes any responsibility or liability for, and neither makes any representations as to, the validity or sufficiency, or the accuracy of the Gold Deposit Receipts, the Registration Statement or the Depositary Trust Agreement.

Neither the trustee nor the Delaware trustee is a fiduciary or an agent of the holders of the Gold Deposit Receipts and neither shall owe any holder or owner any duty, whether of trust or fiduciary. Each of the trustee and the Delaware trustee undertakes to perform only those duties as are specifically set forth in the Depositary Trust Agreement. No implicit duties and obligations shall be read into the Depository Trust Agreement. Subject to the preceding sentence and the Depositary Trust Agreement, each of the trustee and the Delaware trustee will be liable for its own gross negligence or bad faith except for good faith errors in judgment so long as the trustee or the Delaware trustee, as applicable, was not negligent in ascertaining the relevant facts.

Neither the Trust nor the trustee shall be liable for any fees, expenses, damages, penalties or other liabilities, except for, in the case of the trustee, its own gross negligence or willful misconduct.

 

 

U.S. FEDERAL INCOME TAX CONSEQUENCES

The following description is a general summary of certain U.S. federal income tax considerations applicable to an investment in the Gold Deposit Receipts, which represent an investment in Gold Bullion. The Trust intends to be treated as a “grantor trust” for U.S. federal income tax purposes and the following discussion assumes that such treatment will be respected. As a grantor trust, investors in Gold Deposit Receipts generally will be treated as if they directly owned a pro rata share of the underlying Gold Bullion. This discussion therefore describes the tax consequences applicable to holding the Gold Bullion.

This summary applies to an investor only if such investor holds the Gold Bullion as a capital asset for U.S. federal income tax purposes. This summary does not purport to be a complete description of the tax considerations applicable to such an investment. For example, this summary does not describe any tax consequences that may be relevant to certain types of investors subject to special treatment under U.S. federal income tax laws, including a dealer in commodities, a trader in commodities, a bank, a life insurance company, a tax-exempt organization, a subchapter S corporation, a regulated investment company, a real estate investment trust, investors that hold Gold Deposit Receipts as part of a hedge, investors liable for alternative minimum tax, investors subject to special tax accounting rules under Section 451(b) of the Code, investors that hold the Gold Deposit Receipts in tax-deferred or tax-advantaged accounts, or investors whose functional currency for tax purposes is not the U.S. dollar. Moreover, this summary does not take into account state, local or foreign tax considerations which may be applicable to an investor. Investors may be subject to various state and local taxes, including income, estate, inheritance, property, sales, use, excise or transfer taxes and should consult their own tax advisors regarding their particular circumstances.

The discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, and administrative and judicial interpretations, each as of the date of this prospectus and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion.

Assuming that the Trust is treated as a “grantor trust” for U.S. federal income tax purposes, in the opinion of Mayer Brown LLP, the Trust itself will not pay U.S. federal income tax. Instead, the Trust’s income and expenses “flow through” to the investors, and the trustee will report the Trust’s income, gains, losses and deductions to the Internal Revenue Service (“IRS”) on that basis.

The following discussion only applies to an investor that is a beneficial owner of Gold Deposit Receipts and that is (i) a citizen or resident of the United States or (ii) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia. An investor that is not a U.S. individual or corporate taxpayer should consult its own tax advisor regarding the tax considerations applicable to an investment in Gold Deposit Receipts.

Capital gains recognized by a U.S. individual taxpayer from the sale of Gold Deposit Receipts held for more than one year are taxed at a maximum U.S. federal income tax rate of 28%, rather than the lower maximum rate applicable to most other long-term capital gains. The tax rates for capital gains recognized by a U.S. individual taxpayer upon the sale of Gold Bullion held for one year or less are generally the same as those at which ordinary income is taxed. Capital gains of U.S. corporate taxpayers are taxed at the regular corporate rate, irrespective of the holding period for the Gold Deposit Receipts.

The receipt of Gold Bullion through physical delivery generally should not be a taxable event to a U.S. individual or corporate taxpayer.

The tax basis for the Gold Bullion received in an exchange for Gold Deposit Receipts generally should be the same as the investor’s tax basis for the portion of its pro rata share of the Gold Bullion held in the Trust immediately prior to the exchange that is attributable to the Gold Deposit Receipts exchanged. The holding period with respect to the Gold Bullion should include the period during which the investor held the Gold Deposit Receipts exchanged. A subsequent sale of the Gold Bullion received by the investor will be a taxable event.

A U.S. individual taxpayer is generally subject to a 3.8% Medicare tax on the lesser of (1) the taxpayer’s “net investment income” for the relevant taxable year and (2) the excess of the taxpayer’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A U.S. individual taxpayer’s net investment income generally includes its net gains from the disposition of property, unless such net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). U.S. individual taxpayers are urged to consult their own tax advisors regarding the applicability of this tax to their income and gains in respect of investing in Gold Bullion.

 

 

Commissions paid to Bank of Montreal or any participating broker-dealer, as well as the Deposit Fee paid in connection with any purchase or sale of Gold Deposit Receipts, should generally be added to the purchase price and included in tax basis or, in the case of selling expenses, subtracted from the amount realized on a sale.

Fees associated with Gold Bullion Services (including the Withdrawal and Delivery Fee) will generally be classified as “miscellaneous itemized deductions,” which are not deductible by a U.S. individual taxpayer for taxable years beginning after December 31, 2017, and before January 1, 2026. Thereafter, miscellaneous itemized deductions are only deductible to the extent such deductions exceed two percent of the U.S. individual taxpayer’s adjusted gross income. In addition, such deductions may be subject to phase-outs and other limitations. Moreover, miscellaneous itemized deductions are not deductible by a U.S. individual taxpayer in calculating its alternative minimum tax liability. The IRS may argue that all or a portion of the commissions paid to Bank of Montreal or any participating broker-dealer (including the Deposit Fee) should be treated as miscellaneous itemized deductions instead of included in tax basis (or subtracted from the amount realized) as described above.

In general, backup withholding may apply in respect of amounts paid to an investor, unless such investor provides proof of an applicable exemption or a correct taxpayer identification number, or otherwise complies with applicable requirements of the backup withholding rules. In addition, account information (including IRS Form 1099-B) will be reported to the IRS to the extent required by applicable law.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against an investor’s U.S. federal income tax liability provided the required information is furnished to the IRS.

Individual holders that own “specified foreign financial assets” may be required to include certain information with respect to such assets with their U.S. federal income tax return. You are urged to consult your own tax advisor regarding such requirements with respect to investing in Gold Deposit Receipts.

To the extent provided in Treasury regulations, a domestic trust shall be treated as a foreign trust for purposes of certain information reporting provisions if the trust has substantial activities or holds substantial property outside the United States. No Treasury regulations have yet been issued. The IRS has, however, issued a notice in which it stated that the IRS and the Treasury Department are studying the appropriate scope of any reporting requirements and that, until further guidance is issued, domestic trusts would not be treated as foreign trusts for these purposes. It is not possible to determine what guidance the IRS and the Treasury Department will ultimately issue, if any. Any such future guidance may cause the Trust to be treated as a foreign trust, in which case the Trust and beneficial owners of Gold Deposit Receipts may become subject to information reporting obligations with respect to their investment in the Gold Deposit Receipts.

Section 408(m) of the Code provides that the purchase of a “collectible” as an investment for an individual retirement account (“IRA”), or for a participant-directed account maintained under any plan that is tax-qualified under section 401(a) of the Code, 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. Therefore, anyone purchasing Gold Deposit Receipts on behalf of an IRA or a participant-directed plan that is tax-qualified under Section 401(a) of the Code must consider whether such purchase would constitute the acquisition of a collectible to the extent provided under Section 408(m) of the Code. See also “ERISA Considerations.”

The foregoing is a summary only. You should consult with your own tax advisor regarding the U.S. federal income tax consequences and the consequences under any other taxing jurisdiction of investing in Gold Deposit Receipts.

 

 

ERISA CONSIDERATIONS

Any fiduciary of a Plan (as defined below) which proposes to have such Plan acquire Gold Deposit Receipts should consult with its counsel with respect to the potential applicability of ERISA and the Code to this investment and whether any exemption would be applicable and determine on its own whether all conditions have been satisfied. The U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain requirements on “employee benefit plans” (as defined in Section 3(3) of ERISA) subject to ERISA, including entities such as collective investment funds and separate accounts whose underlying assets include the assets of such plans (collectively, “ERISA Plans”) and on those persons who are fiduciaries with respect to ERISA Plans. Each fiduciary of an ERISA Plan should also consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the Gold Deposit Receipts. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the plan.

Section 406 of ERISA and Section 4975 of the Code, which are among the ERISA and Code fiduciary provisions governing plans, prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, “Plans”)) and certain persons (referred to as “parties in interest” or “disqualified persons”) having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if any Gold Deposit Receipts are acquired by a Plan with respect to which any of Bank of Montreal, the Trust, the trustee, or any of their respective affiliates are a party in interest or a disqualified person. A violation of these prohibited transaction rules could result in excise taxes or other liabilities under ERISA and/or Section 4975 for such persons.

Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, however, depending in part on the type of Plan fiduciary making the decision to acquire Gold Deposit Receipts and the circumstances under which such decision is made. Those exemptions include but may not be limited to prohibited transaction exemption (“PTCE”) 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts), PTCE 84-14 (for certain transactions determined by independent qualified asset managers).

In addition, there are statutory exemptions that may apply to the purchase or sale of Gold Deposit Receipts. Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide statutory exceptive relief for certain arm’s-length transactions with a person that is a party in interest solely by reason of providing services to Plans or being an affiliate of such a service provider (the “Service Provider Exemption”). The Service Provider Exemption is generally applicable for certain otherwise-prohibited transactions, such as sales between a Plan and a person or entity that is a party in interest or disqualified person with respect to such Plan solely by reason of providing services to the Plan (other than a party in interest that is a fiduciary, or its affiliate, that has or exercises discretionary authority or control or renders investment advice with respect to the assets of the Plan involved in the transaction), provided, that there is “adequate consideration” for the transaction. Additionally, Section 408(b)(8) of ERISA and Section 4975(d)(8) of the Code exempt certain transactions between a plan and a common or collective investment fund of a bank if the bank receives no more than reasonable compensation and other requirements are met.

There can be no assurance that any exemption will be available with respect to any particular transaction involving the Gold Deposit Receipts, or that, if an exemption is available, it will cover all aspects of any particular transaction.

Section 408(m) of the Code provides that the purchase of a “collectible” as an investment for an individual retirement account (“IRA”), or for a participant-directed account maintained under any plan that is tax-qualified under Section 401(a) of the Code, 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. Therefore, anyone purchasing Gold Deposit Receipts on behalf of an IRA or a participant-directed plan that is tax-qualified under Section 401(a) of the Code must consider whether such purchase would constitute the acquisition of a collectible to the extent provided under section 408(m) of the Code.

 

 

Governmental plans and certain church and other U.S. plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or other federal laws that are substantially similar to ERISA and the Code (“Similar Laws”). Fiduciaries of any such plans should consult with their counsel before purchasing any Gold Deposit Receipts.

Because Bank of Montreal, the Trust, the trustee, or any of their respective affiliates may be considered a party in interest with respect to many Plans, the Gold Deposit Receipts may not be purchased, held or disposed of by any Plan, unless such purchase, holding or disposition is eligible for exemptive relief, or such purchase, holding or disposition is otherwise not prohibited. Accordingly, by its purchase of any Gold Deposit Receipts (or any interest in Gold Deposit Receipts), each purchaser (whether in the case of the initial purchase or in the case of a subsequent transferee) will be deemed to have represented and agreed that either (i) it is not and for so long as it holds Gold Deposit Receipts (or any interest therein) will not be a Plan, or a governmental or other employee benefit plan which is subject to any Similar Laws, or (ii) its purchase and holding of the Gold Deposit Receipts will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or, in the case of such a governmental or other employee benefit plan, any Similar Laws, for which an exemption is not available.

In addition, any purchaser, that is a Plan or that is acquiring Gold Deposit Receipts on behalf of a Plan, including any fiduciary purchasing on behalf of a Plan, will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of Gold Deposit Receipts that (a) none of Bank of Montreal, the Trust, the trustee, or any of their respective affiliates (the “Affiliated Parties”) is a “fiduciary” (under Section 3(21) of ERISA, or under any final or proposed regulations thereunder, or with respect to a governmental, church, or foreign plan under any Similar Laws) with respect to the acquisition, holding or disposition of Gold Deposit Receipts, or as a result of any exercise by us or our affiliates of any rights in connection with Gold Deposit Receipts, (b) no advice provided by any of the Affiliated Parties has formed a primary basis for any investment decision by or on behalf of such purchaser in connection with Gold Deposit Receipts and the transactions contemplated with respect to Gold Deposit Receipts, and (c) such purchaser recognizes and agrees that any communication from any of the Affiliated Parties to the purchaser with respect to Gold Deposit Receipts is not intended by the Affiliated Parties to be impartial investment advice and is rendered in its capacity as a seller of such Gold Deposit Receipts and not a fiduciary to such purchaser.

The foregoing discussion is general in nature and not intended to be all-inclusive. Any Plan fiduciary who proposes to cause a Plan to purchase any Gold Deposit Receipts should consult with its counsel and other advisers regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such an investment, and to confirm that such investment will not constitute or result in a prohibited transaction or any other violation of an applicable requirement of ERISA.

The sale of Gold Deposit Receipts to a Plan is in no respect a representation by Bank of Montreal, the Trust, the trustee, or any of their respective affiliates that such an investment meets all relevant requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan.

 

 

PLAN OF DISTRIBUTION

In accordance with the Depositary Trust Agreement, the Trust will issue to BMO Capital Markets Corp. and BMO Capital Markets Corp. will deposit on behalf of Bank of Montreal an interest in the Gold Bullion to receive the Gold Deposit Receipts.

The Trust is offering the Gold Deposit Receipts for sale through BMO Capital Markets Corp., the underwriter. The applicable supplement will set forth the initial price for the Gold Deposit Receipts.

As of the date of this prospectus, the Trust, Bank of Montreal and BMO Capital Markets Corp. have entered into a distribution agreement. Pursuant to the distribution agreement, Bank of Montreal and the Trust have engaged BMO Capital Markets Corp. as underwriter. From time to time, other dealers may become parties to the distribution agreement and participate in the distribution of Gold Deposit Receipts as underwriters. The form of distribution agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part. BMO Capital Markets Corp. has entered, and will continue to enter, into arrangements with certain broker-dealers, referred to as Authorized Participants. Authorized Participants may act as selling agents and participate in the offer and sale of the Gold Deposit Receipts. Each of the Trust and Bank of Montreal has agreed to indemnify BMO Capital Markets Corp., the underwriter, and certain other persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriter may be required to make.

Bank of Montreal estimates the total expenses of this offering, which is payable by Bank of Montreal, will be approximately $1,550,000. The Trust expects to receive, from the sale of the full amount of Gold Deposit Receipts to be sold in this offering (net of any deposit fees payable to Bank of Montreal or any sales fees payable to any broker-dealer) net proceeds in the amount of $750 million.

We have the right to withdraw, cancel, or modify the offer made by this prospectus supplement without notice. We will have the sole right to accept offers to purchase Gold Deposit Receipts, and we, in our absolute discretion, may reject any proposed purchase of Gold Deposit Receipts in whole or in part.

Classes of Gold Deposit Receipts

Unless otherwise agreed and specified in the applicable supplement, in the continuous offering, the Trust issues and sells to BMO Capital Markets Corp., the underwriter, Gold Deposit Receipts. BMO Capital Markets Corp. purchases the offered Gold Deposit Receipts on a principal basis for resale to one or more investors or other purchasers, including Authorized Participants. Any Gold Deposit Receipts so sold are purchased at a price equal to the then spot price plus:

·

in the case of a Class A Gold Deposit Receipt, a deposit fee of 2.00%, payable to Bank of Montreal, plus a sales fee of 2.00% to any participating broker-dealer that sells Gold Deposit Receipts to an investor;

·

in the case of a Class F Gold Deposit Receipt, which is sold only through fee-based programs, a deposit fee of 2.00%, payable to Bank of Montreal, plus a sales fee of 0.25%;

·

in the case of a Class F-1 Gold Deposit Receipt, which is sold to trust or fiduciary accounts, a deposit fee of 2.00%, payable to Bank of Montreal, and no sales fee;

·

in the case of a Class F-2 Gold Deposit Receipt, which is sold solely to an Institutional Account, a deposit fee of 1.50%, payable to Bank of Montreal, and no sales fee;

·

in the case of a Class F-3 Gold Deposit Receipt, which is sold solely to an Institutional Account, a deposit fee of 1.00%, payable to Bank of Montreal, and no sales fee; and

·

in the case of a Class S Gold Deposit Receipt, which is sold solely to an Institutional Account, neither a deposit fee nor a sales fee.

Institutional Accounts will be offered the Institutional Gold Deposit Receipts on the basis shown on the prospectus cover page, which represents price breaks or accommodations for significant order sizes. BMO Capital Markets Corp. does not receive a fee in connection with the offering. Any applicable deposit fee is paid through BMO Capital Markets Corp. and remitted to Bank of Montreal.

 

 

Bank of Montreal may provide, at its own expense and out of its own profits from the deposit fee, additional compensation and benefits to firms who sell Gold Deposit Receipts. This compensation is intended to result in additional sales of Gold Deposit Receipts and/or compensate firms for past sales. A number of factors are considered in determining whether to pay these additional amounts. Such factors may include, but are not limited to, the level or type of services provided by the intermediary, the level or expected level of sales of Gold Deposit Receipts by the intermediary or its agents, the placing of the Gold Deposit Receipts on a preferred or recommended product list and access to an intermediary’s personnel. We may make these payments for marketing, promotional or related expenses, including, but not limited to, expenses of entertaining retail customers and financial advisors, advertising, sponsorship of events or seminars, obtaining information about the breakdown of sales among an intermediary’s representations or offices, obtaining shelf space in broker-dealer firms and similar activities designed to promote the sale of Gold Deposit Receipts. Payments of such additional compensation described in this paragraph, some of which may be characterized as “revenue sharing,” may create an incentive for financial intermediaries and their agents to sell or recommend the Gold Deposit Receipts over other products. These arrangements will not change the price you pay for your Gold Deposit Receipts.

Public Offering Price and Settlement

BMO Capital Markets Corp. uses the spot price of gold reflected on EBS as the source for the spot price of gold. BMO Capital Markets Corp. refers to this source without adjustment or modification. If, for any reason, EBS is not posting spot prices, BMO Capital Markets Corp. will use the spot price reflected by the LBMA (PM) Gold Price as its source for the spot price of gold. BMO Capital Markets Corp. will refer to this source without adjustment or modification.

The price to public for one Gold Deposit Receipt is calculated using the spot price at the time of sale for one troy ounce of Gold Bullion. In connection with a purchase of Gold Deposit Receipts, your broker may ask you to place a limit order, which will be executed at the limit price or lower. Limit orders will be executed promptly. Your broker will advise you of the price at which the order was filled. Alternatively, your broker may obtain from you a conditional order to purchase Gold Deposit Receipts subject to confirmation of the execution price. In this case, your broker will obtain an execution price from BMO Capital Markets Corp. that is subject to your confirmation within the time period specified to you by your broker.

Settlement for any purchase of Gold Deposit Receipts occurs no later than the second Business Day following the date of execution of the purchase order.

Secondary Market, Redemptions

The Gold Deposit Receipts do not have an established trading market, and we have not, and will not, list the Gold Deposit Receipts on any securities exchange. Although an Authorized Participant may purchase and sell Gold Deposit Receipts in the secondary market from time to time, we do not anticipate that a secondary market will develop.

BMO Capital Markets Corp., the underwriter and one of our affiliates, is a broker-dealer and member of FINRA. BMO Capital Markets Corp. does not intend to engage in market-making transactions in the Gold Deposit Receipts.

Generally, Rules 101 and 102 of Regulation M prohibit any “distribution participant” and its “affiliated purchasers” from bidding for, purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of a distribution until after the applicable restricted period, except as specifically permitted by Regulation M. The provisions of the rules apply to underwriters, prospective underwriters, brokers, dealers, and other persons who have agreed to participate or are participating in a distribution of securities.

 

 

We have requested, and received, exemptive relief from Rule 101 under Regulation M to permit persons participating in a distribution of Gold Deposit Receipts to also engage in periodic redemption transactions in such Gold Deposit Receipts, which may occur during their participation in such a distribution. We have also requested, and received, an exemption pursuant to paragraph (e) of Rule 102 under Regulation M to allow the redemption of Gold Deposit Receipts during the continuous offering of Gold Deposit Receipts.

Each of Bank of Montreal and BMO Capital Markets Corp. has agreed to indemnify the trustee against civil liabilities related to acts performed or not performed by the trustee in accordance with the Depositary Trust Agreement or periodic reports filed or not filed with the SEC with respect to the Gold Deposit Receipts. Should a court determine not to enforce the indemnification provision, Bank of Montreal and BMO Capital Markets Corp. also agree to contribute to payments the trustee may be required to make with respect to these liabilities.

 

 

LEGAL MATTERS

Legal matters, including the validity of the Gold Deposit Receipts and the availability of protection for Gold Deposit Receipt holders by the Securities Investor Protection Corporation, will be passed upon for Bank of Montreal, the initial depositor and the underwriters, by Mayer Brown LLP, New York, New York. Mayer Brown LLP, as special U.S. tax counsel to the Trust, also will render an opinion regarding the material federal income tax consequences relating to the Gold Deposit Receipts.

WHERE YOU CAN FIND MORE INFORMATION

Bank of Montreal, as initial depositor of the Trust, has filed a registration statement on Form S-1 with the SEC covering the Gold Deposit Receipts. While this prospectus is a part of the registration statement, it does not contain all the exhibits filed as part of the registration statement. You should consider reviewing the full text of those exhibits.

The Trust files annual, quarterly and current reports, along with other information with the SEC. The Trust’s SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.

The Trust’s fiscal year ends October 31 of each year. The Trust’s website is www.BMOGOLD.com. The information on, or that can be accessed through, our website is not part of and should not be incorporated by reference in this prospectus. The website address is included as an inactive textual reference only.

INFORMATION INCORPORATED BY REFERENCE

SEC rules permit the Trust to “incorporate by reference” into this prospectus much of the information the Trust files with the SEC, which means that the Trust can disclose important information to you by referring you to those publicly available documents. The information that the Trust incorporates by reference into this prospectus is considered to be part of this prospectus. You should read the information incorporated by reference because it is an important part of this prospectus.

This prospectus incorporates by reference the documents listed below, other than those documents or the portions of those documents deemed to be furnished and not filed in accordance with SEC rules:

·

the Trust’s Annual Report on Form 10-K for the fiscal year ended October 31, 2017, including all exhibits thereto;

·

the Trust’s Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended October 31, 2017, including all exhibits thereto; and

·

the Trust’s Quarterly Reports on Form 10-Q for the quarterly period ended January 31, 2018 and quarterly period ended April 30, 2018.

Any statement contained in any document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any prospectus modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

EXPERTS

The financial statements appearing in the Trust’s Annual Report (Form 10-K) for the year ended October 31, 2017 have been audited by KPMG LLP, independent registered public accounting firm, as set forth in their report thereon, incorporated by reference therein, and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

 

 

 

 

$750,000,000 of Gold Deposit Receipts
Vaulted Gold Bullion Trust

 

 

 

P R O S P E C T U S

 
 

 

BMO Capital Markets

 

 

 

, 2018

Until          , 2018 (25 days after the date of this prospectus), all dealers effecting transactions in the offered Gold Deposit Receipts, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.

 

 

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The expenses expected to be incurred in connection with the issuance and distribution of the securities being registered, other than underwriting compensation, are as set forth below. Except for the registration fee payable to the Commission, all such expenses are estimated:

Item 14. Indemnification of Directors and Officers.

Under the Bank Act, a bank may not, by contract, resolution or by-law, limit the liability of its directors for breaches of the Act, including their fiduciary duties imposed under the Act. However, a bank may indemnify a director or officer, a former director or officer or a person who acts or acted, at the bank’s request, as a director or officer of or in a similar capacity for another entity, and his or her heirs and personal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her because of any civil, criminal, administrative, investigative or other proceeding in which he or she is involved because of that association and may advance funds to him or her for the costs, charges or expenses of such a proceeding, provided however, that a bank may not indemnify such a person unless:

(1)

that person acted honestly and in good faith with a view to the best interests of, as the case may be, the bank or the other entity for which he or she acted at the bank’s request as a director or officer or in a similar capacity; and

 

(2)

in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, that person had reasonable grounds for believing that his or her conduct was lawful.

Under the Bank Act, these individuals are entitled to be indemnified by the bank in respect of all costs, charges and expenses reasonably incurred by them in connection with the defense of any civil, criminal, administrative, investigative or other proceeding in which he or she is involved because of an association referred to above with the bank or other entity if the person was not judged by the courts or other competent authority to have committed any fault or omitted to do anything that they ought to have done and fulfilled the conditions set out in (1) and (2) above. A bank may, with the approval of a court, also indemnify these individuals in respect of, or advance amounts to him or her for the costs, charges and expenses of, a proceeding referred to above, in respect of an action by or on behalf of the bank or other entity to procure a judgment in its favor, to which the person is made a party because of an association referred to above with the bank or other entity, if he or she fulfills the conditions set out in (1) and (2) above.

The Bank’s by-laws provide that the Bank shall indemnify a director or officer, a former director or officer, or a person who acts or acted at the Bank’s request as a director or officer of or in a similar capacity for another entity, and such person’s heirs and personal representatives, to the maximum extent permitted by the Bank Act.

The Bank has purchased, at its expense, a Directors’ and Officers’ Liability Insurance Policy that provides protection for individual directors and officers of Bank of Montreal and its subsidiaries in circumstances where Bank of Montreal cannot or will not indemnify its directors or officers for acts and omissions. The Insurance Policy provides for a limit of CAD$300 million per policy year with no deductible. The policy is in effect until September 30, 2018.

Insofar as indemnification for liabilities arising from the Securities Act may be permitted to directors, officers or persons controlling the Bank pursuant to the foregoing provisions, the Bank has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

 

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16. Exhibits.

See Exhibit Index.

Item 17. Undertakings.

The 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;

 

(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 Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 per cent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

 

(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;

 

(A)

Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by each of the registrant pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in the registration statement; and

 

(B)

Paragraphs (a)(1)(i), (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by each of the registrant pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)9 that is part of the registration statement.

(2)

That, for the purpose of determining any liability under the Securities Act, 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 bona fide offering thereof.

 

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

 

(4)

That, for the purpose of determining liability under the Securities to any purchaser:

 

(i)

If the registrant is relying on Rule 430B:

(A)

Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(B)

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance or Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of an included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability proposes of the issuer and any person that is at that date an underwriter such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchase with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

(ii)

If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale to such first use, superseded or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5)

That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the distribution of the securities:

 

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

 

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(6)

Insofar as indemnification for liabilities arising under the Securities Act 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 Commission such indemnification is against public policy as expressed in the Act 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 Act and will be governed by the final adjudication of such issue.

 

 

 

 

 

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints the Treasurer of BMO Financial Group, and any successor thereof in office or in title, or the Deputy Treasurer of BMO Financial Group, and any successor thereof in office or in title, with full power to act without the other, his or her true and lawful attorney-in-fact and agent with full and several power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, and supplements to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying the confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

 

† Principal accounting officer

 

 

INDEX TO EXHIBITS

Exhibits

 

1.1	Second Amended and Restated Distribution Agreement by and among Bank of Montreal, the Trust and BMO Capital Markets Corp.
4.1*	Second Amended and Restated Depositary Trust Agreement by and among Bank of Montreal, BMO Capital Markets Corp., The Bank of New York Mellon, as Trustee and BNY Mellon Trust of Delaware, as Delaware Trustee, and included as an exhibit thereto, form of Gold Deposit Receipt.
5.1	Opinion of Mayer Brown LLP regarding the validity of the Gold Deposit Receipts.
8.1	Opinion of Mayer Brown LLP, as special U.S. tax counsel regarding the material federal income tax consequences.
10.1*	Form of Gold Carrier Agreement by and between Bank of Montreal and carrier.
10.2*	Gold Storage Agreement between Royal Canadian Mint and Bank of Montreal dated October 9, 2015.
23.1	Consent of Independent Registered Public Accounting Firm.
24.1	Power of Attorney (included in Part II of Registration Statement).

 

 

* Previously filed