01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
iShares Gold Trust (IAU) ended 2019 with net assets of $17.63 billiona, up from $11.54 billion a year earlier, a 52.7% increase.
The growth was driven mainly by net share creations (1,211,150,000 shares outstanding at year-end, up from 940,200,000) and a 18.83% rise in the LBMA Gold Price AM to $1,523.00b. NAV per share rose 18.57% to $14.56, closely tracking gold. The Trust reported net income of $2.28 billion for 2019, consisting almost entirely of an unrealized gain on gold bullion of $2.25 billion.
Its only ordinary expense was the Sponsor's fee of 0.25% annually, totaling $35.3 millionc for the year, which is paid by selling gold, so holders gradually own a smaller amount of gold per share over time. The Trust is a passive, unleveraged vehicle with no distributions, no hedging, and no active management. It holds only physical gold, which is custodied by JPMorgan Chase Bank N.A.
(London) and valued using the LBMA Gold Price PM. Key risks disclosed include the erosion of gold per share from fee-related sales, limited custodian liability and insurance recourse, a 75%d shareholder vote power to terminate the Trust, and the possibility that shares trade at a premium or discount to NAV. The Trust's ICFR was audited by PricewaterhouseCoopers and was deemed effective with no critical audit matters.
For investors, the 2019 results mostly reflect the rise in gold prices, with modest tracking differences caused by the fee. The Trust remains a simple vehicle for gold exposure, but it carries structural drag from its fee and limited legal protections compared with registered investment companies.
02—Key points
Key Highlights
- Net assets rose 52.7% to $17.63 billion at December 31, 2019, from $11.54 billion at year-end 2018, driven primarily by 270.95 million net new shares.
- NAV per share increased 18.57% to $14.56, closely tracking the 18.83% rise in the LBMA Gold Price AM to $1,523.00.
- Net income of $2.28 billion was almost entirely unrealized gain on gold bullion ($2.25 billion); net realized gains were $65.8 million.
- The Sponsor's fee of 0.25% per year totaled $35.3 million in 2019 and is funded by selling gold, reducing the gold backing each share over time.
- The Trust made no cash distributions in 2019 or 2018, and it has no obligation to make periodic distributions.
- Shareholders in the Trust have limited recourse: the Custodian is liable only for negligence, fraud, or willful default, and the Trust does not insure its gold.
- Holders of 75% of shares can vote to terminate the Trust, which is otherwise scheduled to end on January 19, 2045.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Operating Expenses | $35.32M$27.53M | +28.3% |
| Operating Income | -$35.32M-$27.53M | −28.3% |
| Net Income | $2.28B-$198.12M | +1248.8% |
| EPS (Basic) | $4.30$-0.44 | +1077.3% |
05—Questions
Frequently Asked Questions
How did IAU perform in 2019 and why?
NAV per share rose 18.57%, from $12.28 to $14.56, as gold prices increased 18.83%. Strong net share creations of 270.95 million shares also boosted total net assets. The Trust's NAV grew slightly less than gold's price because of the 0.25% Sponsor's fee.
Does IAU pay dividends or distributions?
No. The Trust did not declare any cash distributions in 2019 or 2018 and has no obligation to make periodic distributions. Returns come from changes in the price of gold.
What are the main costs of holding IAU?
The only ordinary recurring expense is the Sponsor's fee of 0.25% annually of NAV, which accrues daily and is paid monthly. This was $35.3 million in 2019. Investors also pay brokerage commissions and bid-ask spreads when buying or selling Shares. Certain costs such as taxes are not assumed by the Sponsor.
How is IAU's gold held and protected?
The gold is held by JPMorgan Chase Bank N.A., London branch, as Custodian, in New York, London, and other authorized locations. The Custodian is liable only for losses caused by its negligence, fraud, or willful default, and the Custodian's insurance is for its own benefit, not the Trust's. Inspectorate America and Inspectorate International inspected the warehouse premises twice in 2019.
What are the tax implications for U.S. investors?
The Trust is treated as a grantor trust, so shareholders are taxed as if they directly owned gold. Gains on gold held more than one year are generally taxed at a maximum rate of 28% for individuals, rather than the standard 20% long-term capital gains rate, and the 3.8% net investment income tax may also apply. Each sale of gold by the Trust to pay expenses is a taxable event for shareholders.
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