Table Of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

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☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2016
☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from _______ to _______

 

Commission file number: 001-32418

 

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iShares® Gold Trust

(Exact name of registrant as specified in its charter)

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New York		81-6124036
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

c/o iShares Delaware Trust Sponsor LLC

400 Howard Street

San Francisco, California 94105

Attn: Product Management Team

iShares Product Research & Development

(Address of principal executive offices)

 

(415) 670-2000

(Registrant’s telephone number, including area code)

 

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N/A

(Former name, former address and former fiscal year, if changed since last report)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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Table of Contents

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Statements of Assets and Liabilities at June 30, 2016 and December 31, 2015	1
	Statements of Operations for the three and six months ended June 30, 2016 and 2015	2
	Statements of Changes in Net Assets for the six months ended June 30, 2016 and the year ended December 31, 2015	3
	Statements of Cash Flows for the six months ended June 30, 2016 and 2015	4
	Schedules of Investments at June 30, 2016 and December 31, 2015	5
	Notes to Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	11
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	12
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Mine Safety Disclosures	12
Item 5.	Other Information	12
Item 6.	Exhibits	13
SIGNATURES		14

 

 

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

iShares Gold Trust

Statements of Assets and Liabilities (Unaudited)

At June 30, 2016 and December 31, 2015

 

 

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(a)	Cost of investment in gold bullion: $8,091,223 and $5,910,176, respectively.
(b)	No par value, unlimited amount authorized.

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Operations (Unaudited)

For the three and six months ended June 30, 2016 and 2015

 

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Changes in Net Assets (Unaudited)

For the six months ended June 30, 2016 and the year ended December 31, 2015

 

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2016 and 2015

 

 

 

See notes to financial statements.

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Notes to Financial Statements (Unaudited)

June 30, 2016

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This information should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of Part I of this Form 10‑Q. The discussion and analysis that follows may contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified by terminology such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. Except as required by applicable disclosure laws, neither the Sponsor, nor any other person assumes responsibility for the accuracy or completeness of any forward-looking statements. Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in the Sponsor’s expectations or predictions.

 

Introduction

 

The iShares Gold Trust (the “Trust”) is a grantor trust formed under the laws of the State of New York. The Trust does not have any officers, directors, or employees, and is administered by The Bank of New York Mellon (the “Trustee”) acting as trustee pursuant to the Third Amended and Restated Depositary Trust Agreement (the “Trust Agreement”) between the Trustee and iShares Delaware Trust Sponsor LLC, the sponsor of the Trust (the “Sponsor”). The Trust issues units of beneficial interest (or “Shares”) representing fractional undivided beneficial interests in its net assets. The assets of the Trust consist primarily of gold bullion held by a custodian as an agent of the Trust responsible only to the Trustee.

 

The Trust is a passive investment vehicle and seeks to reflect generally the performance of the price of gold. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. The Trust does not engage in any activities designed to obtain a profit from, or ameliorate losses caused by, changes in the price of gold.

 

The Trust issues and redeems Shares only in exchange for gold, only in aggregations of 50,000 Shares or integral multiples thereof (each, a “Basket”), and only in transactions with registered broker-dealers that have previously entered into an agreement with the Trust governing the terms and conditions of such issuance (such broker-dealers, the “Authorized Participants”). A list of current Authorized Participants is available from the Sponsor or the Trustee.

 

Shares of the Trust trade on NYSE Arca, Inc. under the symbol “IAU.”

 

Valuation of Gold; Computation of Net Asset Value

 

On each business day, as soon as practicable after 4:00 p.m. (New York time), the Trustee evaluates the gold held by the Trust and determines the net asset value of the Trust and the net asset value per Share. The Trustee values the gold held by the Trust using the price determined in an auction hosted by ICE Benchmark Administration (the “IBA”) in the afternoon (London time) of the day the valuation takes place (such price, the “LBMA Gold Price PM”). If there is no announced LBMA Gold Price PM on a business day, the Trustee is authorized to use the most recently announced price of gold determined in an auction hosted by IBA in the morning (London time) of the day the valuation takes place (such price, the “LBMA Gold Price AM”). Having valued the gold held by the Trust, the Trustee then subtracts all accrued fees, expenses and other liabilities of the Trust from the fair value of the gold and other assets held by the Trust. The result is the net asset value of the Trust. The Trustee computes the net asset value per Share by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made. Prior to March 20, 2015, the Trustee valued the gold held by the Trust using the announced price of gold fixed in the afternoon of each working day (London time) by the London Gold Market Fixing Ltd. (such price, the “London PM Fix”). If there was no announced London PM Fix, the Trustee was authorized to use the most recently announced price fixed by the London Gold Market Fixing Ltd. in the morning (London time) of the day the valuation took place (such price, the “London AM Fix”).

 

Liquidity

 

The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s fee. The Trust’s only source of liquidity is its sales of gold.

 

Critical Accounting Policies

 

The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. Below, the Trust describes the valuation of gold bullion, a critical accounting policy that the Trust believes is important to understanding its results of operations and financial position. In addition, please refer to Note 2 to the financial statements for further discussion of the Trust’s accounting policies.

 

Valuation of Gold Bullion

 

There are other indicators of the value of gold bullion that are available that could be different than that chosen by the Trust. The LBMA Gold Price AM and LBMA Gold Price PM are used by the Trust because they are commonly used by the U.S. gold market as indicators of the value of gold, and are permitted to be used under the Trust Agreement. The use of indicators of the value of gold bullion other than the LBMA Gold Price AM and LBMA Gold Price PM could result in materially different fair value pricing of the gold held by the Trust.

 

 

Results of Operations

 

The Quarter Ended June 30, 2016

 

The Trust’s net asset value grew from $7,408,643,377 at March 31, 2016 to $8,838,060,245 at June 30, 2016, a 19.29% increase. The increase in the Trust’s net asset value resulted primarily from an increase in the number of outstanding Shares, which rose from 620,850,000 Shares at March 31, 2016 to 694,100,000 Shares at June 30, 2016, a consequence of 85,100,000 Shares (1,702 Baskets) being created and 11,850,000 Shares (237 Baskets) being redeemed during the quarter. The Trust’s net asset value also benefited from an increase in the LBMA Gold Price PM, which rose 6.77% from $1,237.00 at March 31, 2016 to $1,320.75 at June 30, 2016.

 

The 6.71% rise in the Trust’s net asset value per Share from $11.93 at March 31, 2016 to $12.73 at June 30, 2016 is directly related to the 6.77% increase in the price of gold.

 

The Trust’s net asset value per Share increased slightly less than the price of gold on a percentage basis due to the Sponsor’s fees, which were $4,892,237 for the quarter, or 0.06% of the Trust’s average weighted assets of $7,885,750,919 during the quarter. The net asset value per Share of $12.77 on June 27, 2016 was the highest during the quarter, compared with a low during the quarter of $11.69 on May 31, 2016.

 

Net increase in net assets from operations for the quarter ended June 30, 2016 was $510,236,028, resulting primarily from an unrealized gain on investment in gold bullion of $512,648,845, a net realized gain of $2,332,465 on gold distributed for the redemption of Shares, and a net realized gain of $146,955 from gold bullion sold to pay expenses during the quarter. These were offset by a net investment loss of $4,892,237. Other than the Sponsor’s fees of $4,892,237, the Trust had no expenses during the quarter.

 

The Six Months Ended June 30, 2016

 

The Trust’s net asset value grew from $5,209,802,846 at December 31, 2015 to $8,838,060,245 at June 30, 2016, a 69.64% increase. The increase in the Trust’s net asset value resulted primarily from an increase in the number of outstanding Shares, which rose from 508,100,000 Shares at December 31, 2015 to 694,100,000 Shares at June 30, 2016, a consequence of 226,050,000 Shares (4,521 Baskets) being created and 40,050,000 Shares (801 Baskets) being redeemed during the period. The Trust’s net asset value also benefited from an increase in the price of gold, which rose 24.34% from $1,062.25 (LBMA Gold Price AM) at December 31, 2015 to $1,320.75 (LBMA Gold Price PM) at June 30, 2016.

 

The 24.20% rise in the Trust’s net asset value per Share from $10.25 at December 31, 2015 to $12.73 at June 30, 2016 is directly related to the 24.34% increase in the price of gold.

 

The Trust’s net asset value per Share increased slightly less than the price of gold on a percentage basis due to the Sponsor’s fees, which were $9,074,743 for the period, or 0.12% of the Trust’s average weighted assets of $7,319,837,016 during the period. The net asset value per Share of $12.77 on June 27, 2016 was the highest during the period, compared with a low during the period of $10.40 on January 5, 2016.

 

Net increase in net assets from operations for the period ended June 30, 2016 was $1,448,156,413, resulting primarily from an unrealized gain on investment in gold bullion of $1,447,744,760 and a net realized gain of $9,497,303 on gold distributed for the redemption of Shares. These were offset by a net investment loss of $9,074,743 and a net realized loss of $10,907 from gold bullion sold to pay expenses during the period. Other than the Sponsor’s fees of $9,074,743, the Trust had no expenses during the period.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

 

Item 4. Controls and Procedures

 

The duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, with the participation of the Trustee, have evaluated the effectiveness of the Trust’s disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in the reports that the Trust files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, as appropriate to allow timely decisions regarding required disclosure.

 

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

 

There were no changes in the Trust’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

 

Item 1A. Risk Factors

 

There have been no material changes to the Risk Factors last reported under Part I, Item 1A of the registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on February 29, 2016, other than those contained in the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 6, 2016. 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

a) None.

 

b) Not applicable.

 

c) 11,850,000 Shares (237 Baskets) were redeemed during the quarter ended June 30, 2016.

 

Period		Total Number of Shares Redeemed				Average Ounces of Gold Per Share
04/01/16 to 04/30/16			2,550,000				0.0096
05/01/16 to 05/31/16			6,300,000				0.0096
06/01/16 to 06/30/16			3,000,000				0.0096
Total			11,850,000				0.0096

 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

Exhibit No.			Description
4.1			Third Amended and Restated Depositary Trust Agreement is incorporated by reference to Exhibit 4.1 filed with Annual Report on Form 10-K on February 28, 2013
4.2			Standard Terms for Authorized Participant Agreements is incorporated by reference to Exhibit 4.2 filed with Amendment No. 1 to Annual Report on Form 10-K on November 12, 2008
10.1			First Amended and Restated Custodian Agreement between The Bank of New York Mellon and JPMorgan Chase Bank N.A., London branch, is incorporated by reference to Exhibit 10.1 filed with Current Report on Form 8-K on September 2, 2010
10.2			Sub-license Agreement is incorporated by reference to Exhibit 10.2 filed with Amendment No. 1 to Annual Report on Form 10-K on November 12, 2008
10.3			First Amendment to First Amended and Restated Custodian Agreement between The Bank of New York Mellon and JPMorgan Chase Bank N.A., London branch, is incorporated by reference to Exhibit 10.1 filed with Current Report on Form 8-K on February 14, 2012
31.1			Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned in the capacities* indicated thereunto duly authorized.

 

iShares Delaware Trust Sponsor LLC,

Sponsor of the iShares Gold Trust (registrant)

 

/s/ Paul Lohrey
Paul Lohrey Director, President and Chief Executive Officer (Principal executive officer)

 

Date: August 8, 2016

 

 

/s/ Jack Gee
Jack Gee Director and Chief Financial Officer (Principal financial and accounting officer)

 

Date: August 8, 2016

 

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*	The registrant is a trust and the persons are signing in their respective capacities as officers of iShares Delaware Trust Sponsor LLC, the Sponsor of the registrant.

 

 

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