01—Abstract
Summary
Summary of the 10-K filed February 29, 2012. Cited figures are marked; the original filing is the authoritative source.
The iShares Gold Trust (IAU) 2011 10-K report indicates significant growth in its Net Asset Value (NAV), rising from $5.32 billion in 2010 to $8.42 billiona by the end of 2011, a notable increase of over 58%.
This growth was driven by both an increase in outstanding Shares, which grew to 563.85 million, and a rise in the price of gold, as measured by the London PM Fix, which appreciated by 8.93%b during the year. The Trust operates as a passive investment vehicle, designed to track the price of physical gold, less expenses. The Trust's primary recurring expense is the Sponsor's fee, which was 0.25% of the adjusted NAV.
BlackRock Asset Management International Inc. serves as the Sponsor, with The Bank of New York Mellon as Trustee and JPMorgan Chase Bank, N.A., London branch as Custodian. While the Sponsor covers many administrative costs, the Trust must sell gold to cover its own expenses, leading to a gradual decrease in the amount of gold represented by each share over time. Investors should be aware that the value of their investment is directly tied to the volatile price of gold and the dilution effect of ongoing expenses.
02—Key points
Key Highlights
- The Trust's Net Asset Value (NAV) increased by 58.33% to $8.42 billion by year-end 2011, up from $5.32 billion in 2010.
- Outstanding Shares grew significantly from 386.95 million to 563.85 million during 2011.
- The price of gold, based on the London PM Fix, increased by 8.93% from $1,405.50 to $1,531.00 during the year.
- The Trust's primary expense is the Sponsor's fee, set at an annualized rate of 0.25% of the adjusted net asset value.
- The Trust operates as a passive investment vehicle, aiming to track the price of physical gold, less expenses.
- Gold is held by a custodian (JPMorgan Chase Bank, N.A., London branch) on behalf of the Trust.
- The Trust is structured as a grantor trust for U.S. federal income tax purposes, meaning income and expenses flow through to shareholders.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 29, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $277.48M— | — |
| Operating Expenses | $18.63M$11.11M | +67.6% |
| Net Income | $258.85M$32.30M | +701.5% |
| EPS (Basic) | $1.08$0.22 | +390.9% |
| Shares Outstanding (Basic) | 240.70M147.80M | +62.9% |
05—Questions
Frequently Asked Questions
How is the Net Asset Value (NAV) of iShares Gold Trust (IAU) determined?
The Net Asset Value (NAV) of IAU is determined daily by valuing the gold held by the Trust using the London PM Fix. From the total value of gold and other assets, all accrued fees, expenses, and liabilities of the Trust are subtracted. The resulting figure, divided by the number of outstanding Shares, gives the NAV per Share.
What are the main expenses of the iShares Gold Trust (IAU)?
The primary ongoing expense for the Trust is the Sponsor's fee, which is accrued daily at an annualized rate of 0.25% of the adjusted net asset value of the Trust. While the Sponsor covers many administrative and marketing expenses, the Trust must sell gold to cover any expenses not assumed by the Sponsor, such as potential excess legal fees or taxes.
How does the Trust's structure impact investors regarding gold price fluctuations and share value?
The Trust is designed to reflect the price of gold. Therefore, the value of IAU shares is subject to the same significant fluctuations as the price of gold. Additionally, because the Trust must periodically sell gold to cover its expenses (like the Sponsor's fee), the amount of gold backing each share gradually decreases. To maintain the share's value without dilution, the price of gold must increase sufficiently to offset this decrease.
Are there any risks associated with the trading price of IAU shares deviating from its Net Asset Value (NAV)?
Yes, shares of IAU may trade at, above, or below their NAV. The trading price can be influenced by market supply and demand, as well as the non-concurrent trading hours between major gold markets and the NYSE Arca. This can lead to wider trading spreads and premiums or discounts to NAV, especially when liquidity in gold markets is reduced.
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