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 September 30, 2018

or

 

☐	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) (Zip Code)

 

(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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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  ☐

 

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 September 30, 2018 and December 31, 2017	1
	Statements of Operations for the three and nine months ended September 30, 2018 and 2017	2
	Statements of Changes in Net Assets for the nine months ended September 30, 2018 and the year ended December 31, 2017	3
	Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	4
	Schedules of Investments at September 30, 2018 and December 31, 2017	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 I – FINANCIAL INFORMATION

Item 1. Financial Statements

iShares Gold Trust

Statements of Assets and Liabilities (Unaudited)

At September 30, 2018 and December 31, 2017

 

 

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(a)	Cost of investment in gold bullion: $10,751,660,254 and $9,663,574,842, respectively.
(b)	No par value, unlimited amount authorized.

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Operations (Unaudited)

For the three and nine months ended September 30, 2018 and 2017

 

 

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(a)	Net increase (decrease) in net assets per Share based on average shares outstanding during the period.

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Changes in Net Assets (Unaudited)

For the nine months ended September 30, 2018 and the year ended December 31, 2017

 

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Statements of Cash Flows (Unaudited)

For the nine months ended September 30, 2018 and 2017

 

 

 

See notes to financial statements.

 

 

See notes to financial statements.

 

 

iShares Gold Trust

Notes to Financial Statements (Unaudited)

September 30, 2018

 

 

 

 

 

 

 

 

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 (a “Basket”) or integral multiples thereof, and only in transactions with registered broker-dealers that have previously entered into an agreement with the Sponsor and the Trustee governing the terms and conditions of such issuance (such broker-dealers, the “Authorized Participants”). A list of the current Authorized Participants is available from the Sponsor or the Trustee.

 

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

 

Valuation of Gold Bullion; 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 and the net asset value per Share (“NAV”) of the Trust. The Trustee values the gold held by the Trust using the price per fine troy ounce of gold determined in an electronic auction hosted by ICE Benchmark Administration (“IBA”) that begins at 3:00 p.m. (London time) and published shortly thereafter, on the day the valuation takes place (such price, the “LBMA Gold Price PM”). If there is no announced LBMA Gold Price PM on any day, the Trustee is authorized to use the most recently announced price of gold determined in an electronic auction hosted by IBA that begins at 10:30 a.m. (London time) (such price, the “LBMA Gold Price AM”), unless the Trustee, in consultation with the Sponsor, determines that such price is inappropriate as a basis for evaluation. 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, and as such, could result in different cost or market adjustments or in different redemption value adjustments of the outstanding redeemable capital Shares. 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 generally accepted accounting principles 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. A description of the valuation of gold bullion, a critical accounting policy that the Trust believes is important to understanding its results of operations and financial position, is provided in the section entitled “Valuation of Gold Bullion; Computation of Net Asset Value” above. In addition, please refer to Note 2 to the financial statements included in this report for further discussion of the Trust’s accounting policies.

 

 

Results of Operations

 

The Quarter Ended September 30, 2018

 

The Trust’s net asset value fell from $10,798,666,536 at June 30, 2018 to $10,212,197,022 at September 30, 2018, a 5.43% decrease. The decrease in the Trust’s net asset value resulted primarily from a decline in the price of gold, which fell 5.05% from $1,250.45 at June 30, 2018 to $1,187.25 at September 30, 2018. The Trust’s net asset value was also affected by a decrease in the number of outstanding Shares, which fell from 900,250,000 Shares at June 30, 2018 to 897,250,000 Shares at September 30, 2018, a consequence of 28,150,000 Shares (563 Baskets) being created and 31,150,000 Shares (623 Baskets) being redeemed during the quarter.

 

The 5.17% decrease in the Trust’s NAV from $12.00 at June 30, 2018 to $11.38 at September 30, 2018 is directly related to the 5.05% 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 $6,488,704 for the quarter, or 0.06% of the Trust’s average weighted assets of $10,290,968,970 during the quarter. The NAV of $12.11 on July 9, 2018 was the highest during the quarter, compared with a low during the quarter of $11.30 on August 17, 2018.

 

Net decrease in net assets resulting from operations for the quarter was $542,716,180, resulting from an unrealized loss on investment in gold bullion of $532,059,056, a net investment loss of $6,488,704, a net realized loss of $3,995,892 on gold distributed for the redemption of Shares, and a net realized loss of $172,528 from gold bullion sold to pay expenses during the quarter. Other than the Sponsor’s fees of $6,488,704, the Trust had no expenses during the quarter.

 

The Nine-Month Period Ended September 30, 2018

 

The Trust’s net asset value grew from $10,147,507,137 at December 31, 2017 to $10,212,197,022 at September 30, 2018, a 0.64% increase. The increase in the Trust’s net asset value resulted primarily from an increase in the number of outstanding Shares, which rose from 814,900,000 Shares at December 31, 2017 to 897,250,000 Shares at September 30, 2018, a consequence of 196,850,000 Shares (3,937 Baskets) being created and 114,500,000 Shares (2,290 Baskets) being redeemed during the period. The increase in the Trust’s net asset value was partially offset by a decrease in the price of gold, which fell 8.43% from $1,296.50 (LBMA Gold Price AM) at December 31, 2017 to $1,187.25 (LBMA Gold Price PM) at September 30, 2018.

 

The 8.59% decline in the Trust’s NAV from $12.45 at December 31, 2017 to $11.38 at September 30, 2018 is directly related to the 8.43% 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 $20,757,047 for the period, or 0.19% of the Trust’s average weighted assets of $11,101,129,839 during the period. The NAV of $13.01 on January 25, 2018 was the highest during the period, compared with a low during the period of $11.30 on August 17, 2018.

 

Net decrease in net assets resulting from operations for the period was $1,016,894,888, resulting from an unrealized loss on investment in gold bullion of $1,023,390,704 and a net investment loss of $20,757,047, partially offset by a net realized gain of $26,670,585 on gold distributed for the redemption of Shares and a net realized gain of $582,278 from gold bullion sold to pay expenses during the period. Other than the Sponsor’s fees of $20,757,047, 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, 2017, filed with the Securities and Exchange Commission on February 28, 2018.

 

 

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

 

a) None.

 

b) Not applicable.

 

c) 31,150,000 Shares (623 Baskets) were redeemed during the quarter ended September 30, 2018.

 

Period		Total Number of Shares Redeemed				Average Ounces of Gold Paid Per Share
07/01/18 to 07/31/18			25,000,000			$	0.0096
08/01/18 to 08/31/18			2,650,000				0.0096
09/01/18 to 09/30/18			3,500,000				0.0096
Total			31,150,000			$	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 of 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 of 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 of 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 of 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:

November 6, 2018

 

 

/s/ Jack Gee

Jack Gee

Director and Chief Financial Officer

(Principal financial and accounting officer)

     

Date:

November 6, 2018

 

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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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