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, 2017

 

 

☐	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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

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, 2017 and December 31, 2016	1
	Statements of Operations for the three and six months ended June 30, 2017 and 2016	2
	Statements of Changes in Net Assets for the six months ended June 30, 2017 and the year ended December 31, 2016	3
	Statements of Cash Flows for the six months ended June 30, 2017 and 2016	4
	Schedules of Investments at June 30, 2017 and December 31, 2016	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, 2017 and December 31, 2016

 

   

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(a)	Cost of investment in gold bullion: $8,277,677,317 and $7,706,923,343, 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, 2017 and 2016 

 

  

 

See notes to financial statements.

 

 

 

iShares Gold Trust

Statements of Changes in Net Assets (Unaudited)

For the six months ended June 30, 2017 and the year ended December 31, 2016

 

     

 

See notes to financial statements.

 

  

iShares Gold Trust

Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2017 and 2016

 

    

 

See notes to financial statements.

 

 

 

See notes to financial statements.

 

 

 

iShares Gold Trust

Notes to Financial Statements (Unaudited)

June 30, 2017

 

 

 

 

 

 

 

 

 

  

 

 

  

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 Fourth 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 (“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 NAV. The Trustee values the gold held by the Trust using that day’s LBMA Gold Price PM. If there is no announced LBMA Gold Price PM on a business day, the Trustee is authorized to use that day’s 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 value of the gold and other assets of the Trust. The result is the net asset value of the Trust. The Trustee computes the NAV by dividing the net asset value of the Trust by the number of Shares outstanding on the date the computation is made.

 

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 included in this report for further discussion of the Trust’s accounting policies.

 

Valuation of Gold Bullion

 

Fair value of the gold bullion is based on 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 LBMA Gold Price AM.

 

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, 2017

 

The Trust’s net asset value grew from $7,997,068,858 at March 31, 2017 to $8,399,479,457 at June 30, 2017, a 5.03% increase. The increase in the Trust’s net asset value resulted primarily from an increase in the number of outstanding Shares, which rose from 667,600,000 Shares at March 31, 2017 to 703,100,000 Shares at June 30, 2017, a consequence of 46,800,000 Shares (936 Baskets) being created and 11,300,000 Shares (226 Baskets) being redeemed during the quarter. The increase in the Trust’s net assets was partially offset by a decrease in the price of gold, which fell 0.21% from $1,244.85 at March 31, 2017 to $1,242.25 at June 30, 2017.

 

The 0.25% decrease in the Trust’s NAV from $11.98 at March 31, 2017 to $11.95 at June 30, 2017 is directly related to the 0.21% decrease in the price of gold.

 

The Trust’s NAV decreased slightly more than the price of gold on a percentage basis due to the Sponsor’s fees, which were $5,140,279 for the quarter, or 0.06% of the Trust’s average weighted assets of $8,251,437,685 during the quarter. The NAV of $12.44 on June 6, 2017 was the highest during the quarter, compared with a low during the quarter of $11.74 on May 9, 2017.

 

Net decrease in net assets resulting from operations for the quarter ended June 30, 2017 was $30,357,030, resulting primarily from an unrealized loss on investment in gold bullion of $27,785,695 and a net investment loss of $5,140,279, partially offset by a realized gain of $2,432,470 on gold distributed for the redemption of Shares and a net realized gain of $136,474 from gold bullion sold to pay expenses during the quarter. Other than the Sponsor’s fees of $5,140,279, the Trust had no expenses during the quarter.

 

The Six Months Ended June 30, 2017

 

The Trust’s net asset value grew from $7,310,131,020 at December 31, 2016 to $8,399,479,457 at June 30, 2017, a 14.90% increase. The increase in the Trust’s net asset value resulted primarily from an increase in the number of outstanding Shares, which rose from 655,000,000 Shares at December 31, 2016 to 703,100,000 Shares at June 30, 2017, a consequence of 83,750,000 Shares (1,675 Baskets) being created and 35,650,000 Shares (713 Baskets) being redeemed during the period. The Trust’s net asset value also benefited from an increase in the price of gold, which rose 7.17% from $1,159.10 (LBMA Gold Price AM) at December 31, 2016 to $1,242.25 (LBMA Gold Price PM) at June 30, 2017.

 

The 7.08% increase in the Trust’s NAV from $11.16 at December 31, 2016 to $11.95 at June 30, 2017 is directly related to the 7.17% increase in the price of gold.

 

The Trust’s NAV increased slightly less than the price of gold on a percentage basis due to the Sponsor’s fees, which were $9,939,452 for the period, or 0.12% of the Trust’s average weighted assets of $8,023,502,975 during the period. The NAV of $12.44 on June 6, 2017 was the highest during the period, compared with a low during the period of $11.08 on January 3, 2017.

 

Net increase in net assets resulting from operations for the six months ended June 30, 2017 was $513,421,599, resulting primarily from an unrealized gain on investment in gold bullion of $518,773,856, a net realized gain of $4,544,623 on gold distributed for the redemption of Shares and a net realized gain of $42,572 from gold bullion sold to pay expenses during the period, offset by a net investment loss of $9,939,452. Other than the Sponsor’s fees of $9,939,452, 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, 2016, filed with the Securities and Exchange Commission on February 24, 2017.

 

 

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

 

a) None.

 

b) Not applicable.

 

c) 11,300,000 Shares (226 Baskets) were redeemed during the quarter ended June 30, 2017.

 

Period			Total Number of Shares Redeemed				Average Ounces of Gold Paid Per Share
04/01/17 to 04/30/17				1,800,000			$	0.0096
05/01/17 to 05/31/17				9,500,000				0.0096
06/01/17 to 06/30/17				—				—
Total				11,300,000			$	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		Fourth Amended and Restated Depositary Trust Agreement is incorporated by reference to Exhibit 4.1 filed with the Current Report on Form 8-K filed by the Registrant on December 22, 2016
4.2		Standard Terms for Authorized Participant Agreements is incorporated by reference to Exhibit 4.2 filed with the Current Report on Form 8‑K filed by the Registrant on December 22, 2016
10.1		Second 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 the Current Report on Form 8-K filed by the Registrant on December 22, 2016
10.2		Sub-license Agreement is incorporated by reference to Exhibit 10.2 filed with the Amendment No. 1 to Annual Report on Form 10‑K filed by the Registrant on November 12, 2008
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, 2017

 

 

/s/ Jack Gee

Jack Gee

Director and Chief Financial Officer

(Principal financial and accounting officer)

 

Date:

August 8, 2017

   

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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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