10-KPeriod: FY2016

ISHARES GOLD TRUST Annual Report, Year Ended Dec 31, 2016

Filed February 24, 2017For Securities:IAU

Summary

iShares Gold Trust (IAU) reported its annual results for the fiscal year ending December 31, 2016. The Trust's primary objective is to reflect the performance of the price of gold, holding physical gold bullion as its primary asset. During 2016, the Trust experienced significant growth in its net asset value, increasing by 40.31% from $5,209,802,846 to $7,310,131,020. This growth was driven by both an increase in the number of outstanding Shares and a rise in the price of gold. Key operational aspects include the Trust's passive investment strategy, which means it does not actively manage its gold holdings to profit from price changes. Expenses, primarily the Sponsor's fee (0.25% of net asset value), are covered by selling gold. Despite the overall positive net asset value growth, the report highlights various risks inherent in investing in gold, including price volatility, potential disruptions in gold pricing benchmarks, and operational risks associated with the custody and valuation of gold. The Trust's structure as a grantor trust means that income and expenses flow through to shareholders for tax purposes.

Financial Highlights

8 data points
Beta

Net Income

$308.74M

EPS (Diluted)

$0.92

Cash & Equivalents

$0.00

Free Cash Flow

$0.00

Financial Statements
Beta
Operating Expenses$20.31M
Operating Income-$20.31M
Net Income$308.74M
EPS (Basic)$0.92

Key Highlights

  • 1The Trust's net asset value (NAV) increased by 40.31% in 2016, reaching $7,310,131,020, up from $5,209,802,846 at the end of 2015.
  • 2The number of outstanding Shares grew significantly from 508,100,000 at the end of 2015 to 655,000,000 at the end of 2016, indicating increased investor demand.
  • 3The Trust aims to mirror the price of gold, and its NAV performance was closely aligned with the 9.12% increase in gold prices during 2016.
  • 4The primary recurring expense is the Sponsor's fee, which was $20,312,154 in 2016, representing an annualized rate of 0.25% of the Trust's average assets.
  • 5The Trust is a grantor trust for tax purposes, meaning its income and expenses are passed through to shareholders.
  • 6Significant risks are highlighted, including the potential for losses due to gold price volatility, reliance on the LBMA Gold Price PM benchmark, and the continuous decrease in the amount of gold represented by each share due to expense accrual.
  • 7The Trust experienced an inadvertent issuance of 'Excess Shares' in early 2016, which carried potential rescission rights for purchasers, although this was addressed by a subsequent registration statement.

Frequently Asked Questions

The primary objective of the iShares Gold Trust (IAU) is to reflect generally the performance of the price of gold before payment of the Trust's expenses and liabilities. It aims to provide a cost-effective and accessible way for investors to gain exposure to the price movements of physical gold.

The Trust's expenses, including the Sponsor's fee (0.25% of NAV annually), are paid by selling a portion of the gold held by the Trust. This means that over time, the amount of gold represented by each share decreases, necessitating an increase in the price of gold to maintain the share's value.

Key risks include the inherent volatility of gold prices, which can lead to significant investment losses. Additionally, the Trust relies on the LBMA Gold Price PM as a benchmark for gold valuation, and disruptions or lack of confidence in this benchmark could adversely affect the Share value. Another risk is the gradual decrease in the amount of gold backing each share due to ongoing expenses.

The Trust is treated as a grantor trust for U.S. federal income tax purposes. This means that shareholders are treated as directly owning a pro rata share of the gold. Shareholders will recognize gain or loss when the Trust sells gold to pay expenses, or when they sell their shares. Gains on gold held for more than one year by individual U.S. shareholders may be taxed at a maximum rate of 28% (as a collectible).