10-KPeriod: FY2005

ISHARES GOLD TRUST Annual Report, Year Ended Dec 31, 2005

Filed March 31, 2006For Securities:IAU

Summary

The iShares Gold Trust (IAU), as detailed in its March 31, 2006, 10-K filing, was established on January 21, 2005, to provide investors with a cost-effective and accessible way to invest in gold. The trust's primary objective is for the iShares' value to reflect the price of gold owned by the trust, less expenses and liabilities. Assets consist primarily of physical gold held by a custodian, with iShares representing a fractional beneficial interest. For the period ending December 31, 2005, the trust experienced significant growth, with net assets increasing from $6.4 million at inception to $368.3 million. Outstanding shares also grew substantially. The trust operates passively, meaning it does not actively manage its gold holdings to profit from market movements. Its activities are limited to issuing iShares for gold deposits, selling gold to cover expenses, and delivering gold for iShare redemptions. The sponsor, Barclays Global Investors, N.A., assumes most administrative and marketing expenses, offset by a sponsor's fee. Investors should be aware that iShares' value is directly tied to gold prices, which are inherently volatile, and that ongoing expenses will gradually decrease the amount of gold represented per share.

Key Highlights

  • 1The iShares Gold Trust (IAU) was formed to offer investors direct exposure to gold prices through tradable shares.
  • 2As of December 31, 2005, the trust's net assets grew to $368.3 million from $6.4 million at inception.
  • 3The trust is a passive investment vehicle, aiming to track the price of gold, less expenses.
  • 4iShares are backed by physical gold held by The Bank of Nova Scotia on behalf of the trust.
  • 5The sponsor, Barclays Global Investors, covers most trust expenses in exchange for a sponsor's fee (0.40% of NAV).
  • 6iShares are listed and trade on the AMEX under the symbol 'IAU'.
  • 7The trust's Net Asset Value (NAV) is calculated daily based on the COMEX spot settlement price of gold.

Frequently Asked Questions

The primary objective of the iShares Gold Trust is for the value of its shares (iShares) to reflect, at any given time, the price of gold owned by the trust, less the trust's expenses and liabilities. It aims to provide a simple and cost-effective way for investors to gain exposure to the price of gold.

The Net Asset Value (NAV) of the iShares Gold Trust is determined daily. The trustee values the trust's gold holdings based on the COMEX spot settlement price for the relevant gold futures contract. This value is then adjusted by subtracting accrued fees, expenses, and other liabilities to arrive at the NAV per share.

The primary recurring expense is the sponsor's fee, which is accrued daily at an annualized rate of 0.40% of the trust's net asset value. The sponsor also assumes other administrative and marketing expenses, such as trustee and custodian fees, listing fees, and audit expenses. However, the trust may incur other expenses not assumed by the sponsor, which would require selling gold to cover.

The iShares Gold Trust is a passive investment vehicle. It does not actively manage its gold holdings or employ hedging strategies. The value of the iShares is directly tied to the fluctuating price of gold, which carries inherent risks. Additionally, ongoing expenses will necessitate periodic sales of gold, gradually decreasing the amount of gold represented by each iShare, which could lead to value depreciation if gold prices do not sufficiently increase.