What is BMG BullionFund?

BMG BullionFund (formerly The Millennium BullionFund) is an open-end mutual fund trust designed to provide investors with a convenient method of obtaining the benefits associated with holding physical gold, silver and platinum in bullion form. The Fund’s fixed investment policy requires it to purchase equal dollar amounts of each metal and to hold minimum of 95 percent of its assets in bullion. No derivatives, futures contracts, options or certificates are used, and the Fund does not rebalance its holdings or attempt to time the market. As a result, the Fund's assets are not dependent on anyone's promise, representation or ability to perform. The Fund's assets are not someone else's liability.

Holding all three metals reduces volatility and provides internal diversification. While gold is valued primarily for its monetary value, platinum and silver are valued primarily for their commodity value. However, platinum and silver will tend to track gold in the event of a monetary increase in demand.

The Fund is designed to eliminate any risk associated with storage. The Fund’s assets are held under a custody agreement with the Bank of Nova Scotia, and are fully insured and completely segregated and allocated. The Fund's bullion holdings are secure from any claims by third parties and are not co-mingled with the Bank's holdings, or the holdings of the Bank's other clients. Bullion holdings are inspected annually by the Fund's officers and auditors.

The Fund offers both Canadian- and US-dollar denominated units, and offers a number of different classes to accommodate retail investors, high net-worth individuals, institutions and other mutual funds or hedge funds both in Canada and internationally.

Ownership of units in BMG BullionFund offers the same comfort and security as keeping precious metals in a safety deposit box. Liquidity is equal to that of a cash account. The only variables affecting the price of units in BMG BullionFund are the spot price of gold, silver, and platinum, the Canadian/US dollar exchange rate and the administration expenses of the Fund.

How is BMG BullionFund different from other precious metals mutual funds?

BMG BullionFund is the first open-end mutual fund trust to invest in physical bullion, rather than in shares of mining companies. As a mutual fund trust, the Fund qualifies for Canadian registered plans, and meets the investment guidelines for most institutional investors and hedge funds.

Because of legislative restrictions or internal investment guidelines, many investors could only participate in the precious metals market indirectly, through ownership of mining company shares or other closed-end precious metals mutual funds. Typically, most precious metals mutual funds hold mining company shares, and only a small portion of their assets (if any) are in actual bullion.

Although properly selected mining company shares can yield attractive returns in rising markets, investing in physical bullion involves less risk and volatility. The risk/reward relationship is totally different, and the two form completely different asset classes. The diversification benefits of bullion, courtesy of its negative correlation to financial assets, are not always realized in mining shares. For example, in the severe equity decline of 1987, mining shares declined sharply even though the gold price rose. During a mature bull market, such as the late 1970s, bullion outperformed mining equities. The risk exposure with shares of mining companies compares closely to the risk exposure in any equity investment. The overall stock market, political risk, management capability, financial strength, mine life, production costs and hedging policies all affect both the value of the stock, and the risk involved in owning it.

The performance of mining company shares can be significantly affected by hedging policies, regardless of the annual production or the amount of reserves the mine may have. In many cases, highly hedged miners have seen their shares decline on a surge in the gold price, and an extraordinary spike in the price of a metal may even cause a financial crisis.

From a portfolio diversification point of view, conventional precious metals mutual funds can form part of the equity portion of a portfolio. BMG BullionFund should form part of the cash component - the foundation of a portfolio.