01—Abstract
Summary
Summary of the 10-K filed March 1, 2022. Cited figures are marked; the original filing is the authoritative source.
iShares Gold Trust (IAU) ended 2021 with net assets of $28.72 billiona, down 10.01% from $31.92 billion at December 31, 2020.
The decline was driven mainly by a fall in shares outstanding (from 885.2 million to 829.75 million after a one-for-two reverse split effective May 24, 2021) and a 3.75% drop in the LBMA Gold Price, which closed the year at $1,820.10b. NAV per share fell 3.99%, from $36.06 to $34.62, tracking gold closely. The Trust reported a net decrease in net assets from operations of $1.40 billion, reflecting a $1.90 billion unrealized loss on gold, partially offset by $578 million in net realized gains on gold distributed for redemptions and gold sold to pay expenses.
The Trust is a passive, grantor-trust vehicle with no income, no distributions, and no active management. Its only ordinary expense is the Sponsor's fee of 0.25% annually, which totaled $72.8 millionc in 2021, up from $65.4 million in 2020. Because the Trust must sell gold to pay this fee, each share's gold backing shrinks over time unless gold prices rise enough to offset it.
Shares are created and redeemed only in 50,000-share Baskets by Authorized Participants, which helps keep the market price close to NAV. Investors should note that secondary-market prices can trade at a premium or discount to NAV, particularly outside the hours when major gold markets are open. From a governance and operational standpoint, management concluded that internal control over financial reporting was effective as of December 31, 2021, and PricewaterhouseCoopers issued an unqualified opinion with no critical audit matters.
Legal proceedings were none. Effective January 31, 2022, the Sponsor agreed to cover up to $500,000d per year in legal fees (up from $100,000), and the Trust became perpetual rather than terminating in 2045. The filing also notes custody risks: the custodian's liability is limited, the Trust does not insure its gold, and the custody agreement is governed by English law.
02—Key points
Key Highlights
- Net assets fell 10.01% to $28.72 billion at year-end 2021, from $31.92 billion a year earlier, as gold prices declined and share count dropped.
- NAV per share declined 3.99% to $34.62, closely tracking the 3.75% decline in the LBMA Gold Price to $1,820.10.
- Shares outstanding fell to 829.75 million (post one-for-two reverse split), with 53.1 million shares created and 108.6 million redeemed during 2021.
- Net decrease in net assets from operations was $1.40 billion, driven by a $1.90 billion unrealized loss on gold, partly offset by $578 million in realized gains.
- The Sponsor's fee of 0.25% annually totaled $72.8 million in 2021, the Trust's only ordinary expense, and is paid by selling gold, which steadily reduces gold per share.
- The Trust is now designed to have perpetual existence, and the Sponsor agreed to cover up to $500,000 per year of legal fees effective January 31, 2022.
- Management and PwC both concluded internal control over financial reporting was effective, with no critical audit matters and no legal proceedings reported.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 1, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Operating Expenses | $72.77M$65.44M | +11.2% |
| Operating Income | -$72.77M-$65.44M | −11.2% |
| Net Income | -$1.40B$4.80B | −129.1% |
| EPS (Basic) | $-1.65$6.24 | −126.4% |
05—Questions
Frequently Asked Questions
How does IAU make money for investors?
IAU does not generate income or make distributions. Investors profit only if the price of gold rises above their purchase price, net of the Sponsor's 0.25% annual fee, which is funded by selling small amounts of gold over time.
Why does the gold per share decline over time?
The Trust sells gold to pay the Sponsor's fee and other expenses not assumed by the Sponsor. Each sale reduces the gold backing each share, so gold prices must rise enough to offset this erosion for the share price to hold its value.
Can IAU shares trade at a price different from NAV?
Yes. Shares can trade at a premium or discount to NAV, especially when the major gold markets are closed while NYSE Arca is open. Authorized Participants can create or redeem Baskets of 50,000 shares for gold, which arbitrage can use to narrow such gaps, but this mechanism is not guaranteed to work.
Who holds the gold and is it insured?
JPMorgan Chase Bank N.A. (London branch) acts as custodian and holds the gold in New York, London, and other authorized locations. The Trust does not insure its gold, and the custodian's liability is limited to negligence, fraud, or willful default, so investors bear meaningful custody risk.
Did IAU change its structure or fees in early 2022?
Yes. Effective January 31, 2022, the Trust became perpetual rather than terminating in 2045, and the Sponsor agreed to cover up to $500,000 per year in legal fees, up from $100,000. The Sponsor's management fee rate itself was unchanged at 0.25%.
06—Continue