01—Abstract
Summary
Summary of the 10-K filed February 27, 2015. Cited figures are marked; the original filing is the authoritative source.
The iShares Gold Trust (IAU) 10-K for fiscal 2014 shows a largely flat year for the Trust's net asset value, which edged down 0.92% to $6.21 billiona at December 31, 2014, from $6.27 billion a year earlier.
The decline was driven mainly by a 1.1% fall in the London gold fix, which dropped from $1,201.50 to $1,199.25b, and by the Sponsor's fee, which reduced the gold held per Share. NAV per Share fell 0.43% to $11.61, and outstanding Shares declined from 538.0 million to 535.4 million as redemptions (50.7 million Shares) outpaced creations (48.1 million Shares). The Trust reported a net loss of $42.4 million, or $0.08 per Share, comprising a $16.6 million Sponsor's fee and $25.8 million of net realized and unrealized losses.
The filing marks an accounting transition. Effective January 1, 2014, the Trust adopted investment company accounting (ASU 2013-08), so gold is now carried at fair value rather than lower of cost or market. Because of this change, 2014 results are not directly comparable with 2013, which recorded a $750.6 millionc inventory write-down and a $628.1 million net loss.
The Trust remains a passive, grantor trust with no active management, and its only ordinary expense is the 0.25%d Sponsor's fee, which requires ongoing gold sales. Those sales steadily shrink the gold backing each Share unless gold prices rise enough to offset them. The main forward-looking risk flagged is the planned discontinuation of the London PM Fix, the benchmark used to value the Trust's gold.
The administrator change, announced in 2014 and due for completion in early 2015, is expected to move the Trust to an ICE Benchmark Administration price effective March 19, 2015. The Sponsor expects this successor price to fairly represent the gold's value, but the filing acknowledges that the transition could still affect Share prices.
02—Key points
Key Highlights
- NAV fell 0.92% to $6,213.4 million at December 31, 2014, while NAV per Share declined 0.43% to $11.61, closely tracking the 0.19% decline in the London gold fix to $1,199.25.
- Net loss of $42.4 million ($0.08 per Share) for 2014, driven by $16.6 million in Sponsor's fees and $25.8 million in net realized and unrealized losses, a sharp improvement on the $628.1 million loss in 2013.
- Adoption of investment company accounting effective January 1, 2014 moved gold to fair value (from lower of cost or market), so the 2013 $750.6 million write-down is not repeated and results are not directly comparable across years.
- Share count fell from 538.0 million to 535.4 million: 48.1 million Shares were created and 50.7 million redeemed, with 21.1 million redeemed in Q4 2014 alone.
- The Sponsor's fee of 0.25% annually is the Trust's only ordinary expense and is funded by selling gold, so each Share represents less gold over time unless gold prices rise to offset the reduction.
- The London PM Fix, the Trust's valuation benchmark, is being discontinued on March 19, 2015 and replaced by an ICE Benchmark Administration gold price that the Sponsor expects to fairly reflect value.
- Shareholders of record numbered approximately 286,246 as of January 31, 2015, and the Trust holds 5,182.2 ounces of gold at a fair value of $6.21 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 27, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Operating Expenses | $16.63M$21.74M | −23.5% |
| Operating Income | -$16.63M— | — |
| Net Income | -$42.42M-$628.07M | +93.2% |
| EPS (Basic) | $-0.16$-2.00 | +92.0% |
| Shares Outstanding (Basic) | 271.16M313.56M | −13.5% |
05—Questions
Frequently Asked Questions
Why did the Trust report a net loss in 2014 if gold was relatively stable?
The net loss of $42.4 million reflects the Sponsor's fee of $16.6 million and net realized and unrealized losses of $25.8 million, mainly a $40.2 million unrealized depreciation on gold bullion. The London fix fell about 0.19% over the year, and the Trust's NAV per Share declined 0.43%, slightly more than gold because of the fee.
How does the 0.25% Sponsor's fee affect my investment?
The fee accrues daily and is paid by selling gold, so each Share gradually represents less gold. For example, the Trust paid $16.6 million in 2014. Unless the price of gold rises enough to offset this steady reduction, the value of each Share declines over time. New creations do not reverse this effect.
What changed in the Trust's accounting for 2014?
Effective January 1, 2014, the Trust adopted investment company accounting under ASU 2013-08. Gold is now reported at fair value, with unrealized gains and losses flowing through the income statement. Shares are classified as shareholders' equity instead of redeemable capital shares. Prior-year results were not restated, so 2013 and 2014 figures are not directly comparable.
What is the London PM Fix change and why does it matter?
The London PM Fix, the benchmark the Trust uses to value its gold, is being discontinued on March 19, 2015. ICE Benchmark Administration will take over the gold price. The Sponsor expects the new price to fairly represent the gold's value, but the filing notes that the transition could still affect Share prices.
Can individual investors create or redeem Shares directly with the Trust?
No. Shares are created and redeemed only in Baskets of 50,000 Shares, and only through Authorized Participants, which are registered broker-dealers with agreements with the Sponsor and Trustee. Individual investors buy and sell Shares on NYSE Arca under the symbol IAU, where prices can trade at a premium or discount to NAV.
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