10-KPeriod: FY2008

ISHARES GOLD TRUST Annual Report, Year Ended Dec 31, 2008

Filed February 27, 2009For Securities:IAU

Summary

The iShares COMEX Gold Trust (IAU) 2008 annual report reveals a significant increase in the Trust's net assets and outstanding shares, reflecting investor interest in gold as an asset class during that period. The Trust's primary objective is to mirror the price of gold bullion held by the Trust, less expenses. During 2008, the Trust saw its net assets grow by 28.02% to $1.896 billion, with outstanding shares increasing to 21.8 million. Key operational aspects include the Trust's passive investment strategy, where gold is held by a custodian and shares are issued or redeemed in exchange for gold, primarily through Authorized Participants. The Trust's valuation is based on the COMEX spot settlement price for gold futures. While the Trust aims to track gold prices, it is subject to various risks, including gold price volatility, potential declines in gold value due to large sales or shifts in investor sentiment, and the inherent cost of expenses reducing the amount of gold per share over time.

Financial Highlights

4 data points
Beta

Net Income

$75.28M

Cash & Equivalents

$0.00

Financial Statements
Beta
Operating Expenses$6.96M
Net Income$75.28M

Key Highlights

  • 1The Trust's net assets grew by 28.02% in 2008, reaching $1.896 billion.
  • 2Outstanding shares increased from 17.95 million to 21.8 million by the end of 2008.
  • 3The Trust's net asset value per share increased by 5.42% in 2008, tracking the rise in the COMEX spot settlement price of gold.
  • 4The Sponsor's fee, amounting to $6.96 million in 2008, is the primary ordinary expense and is paid by selling Trust gold.
  • 5iShares (IAU) trade on NYSE Arca, offering investors a way to gain exposure to gold prices without direct physical ownership.
  • 6The Trust is structured as a grantor trust for tax purposes, meaning income and expenses flow through to shareholders.
  • 7Key risks include gold price volatility, potential for iShares to trade at a discount or premium to NAV, and the continuous reduction of gold per share due to expenses.

Frequently Asked Questions

The primary purpose of the iShares COMEX Gold Trust is for the value of its shares (iShares) to reflect, at any given time, the price of the gold bullion owned by the Trust, less the Trust's expenses and liabilities. It aims to provide investors with a cost-effective and accessible way to gain exposure to gold prices through the securities market.

The Net Asset Value (NAV) of iShares is determined daily by valuing the gold held by the Trust based on the COMEX settlement price for the spot month gold futures contract. All accrued fees, expenses, and liabilities are then subtracted from the total value of the gold and other assets. The resulting figure, divided by the number of outstanding shares, gives the NAV per share. However, iShares may trade on the NYSE Arca at prices above, below, or equal to their NAV due to market supply and demand.

The main ordinary recurring expense of the Trust is the Sponsor's fee, which was 0.40% of the Trust's net asset value. This fee, along with any other Trust expenses not assumed by the Sponsor (such as certain legal fees or taxes), is paid by selling portions of the gold held by the Trust. This means that even if the price of gold remains constant, the amount of gold represented by each share will decrease over time to cover these expenses.

Key risks include the inherent volatility of gold prices, which directly impacts the value of iShares. There's also the risk that iShares may trade at a discount or premium to their Net Asset Value, especially outside of major gold market trading hours. Furthermore, the ongoing expenses of the Trust reduce the amount of gold backing each share over time, meaning the price of gold needs to rise sufficiently to offset this dilution and maintain the share's value.