e10vk
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended September 30,
2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 001-32356
SPDR®
GOLD TRUST
SPONSORED BY WORLD GOLD TRUST
SERVICES, LLC
(Exact name of registrant as
specified in its charter)
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New York
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81-6124035
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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c/o World
Gold Trust Services, LLC
510 Madison Avenue, 9th Floor
New York, New York 10022
(212) 317-3800
(Address of principal executive offices, telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Name of each exchange
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(Title of each class)
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on which registered
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SPDR®
GOLD Shares
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NYSE Arca, Inc.
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Securities registered pursuant
to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes x No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes x No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation
S-T during
the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files). Yes x No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer x
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Accelerated
filer o
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Non-Accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No x
Aggregate market value of registrants common stock held by
non-affiliates of the registrant, based upon the closing price
of a share of the registrants common stock on
March 31, 2011 as reported by the NYSE Arca, Inc. on that
date: $139.86
Number of shares of the registrants common stock
outstanding as of November 18, 2011: 427,300,000
DOCUMENTS INCORPORATED BY REFERENCE: None
FORWARD
LOOKING STATEMENTS
This Annual Report on
Form 10-K
contains various forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and within the Private Securities
Litigation Reform Act of 1995, as amended. Forward-looking
statements usually include the verbs, anticipates,
believes, estimates,
expects, intends, plans,
projects, understands and other verbs
suggesting uncertainty. We remind readers that forward-looking
statements are merely predictions and therefore inherently
subject to uncertainties and other factors and involve known and
unknown risks that could cause the actual results, performance,
levels of activity, or our achievements, or industry results, to
be materially different from any future results, performance,
levels of activity, or our achievements expressed or implied by
such forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Trust undertakes no
obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of
unanticipated events.
Additional significant uncertainties and other factors affecting
forward-looking statements are presented in the Risk Factors
section which appears in Item 7Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
SPDR is a trademark of Standard & Poors
Financial Services, LLC (S&P) and has been
licensed for use by the Sponsor. The SPDR trademark
is used under license from S&P and the
SPDR®
Gold Trust is permitted to use the SPDR trademark
pursuant to a sublicense from the Marketing Agent. No financial
product offered by
SPDR®
Gold Trust, or its affiliates, is sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or
warranty, express or implied, to the owners of any financial
product or any member of the public regarding the advisability
of investing in securities generally or in financial products
particularly or the ability of the index on which financial
products are based to track general stock market performance.
S&P is not responsible for and has not participated in any
determination or calculation made with respect to issuance or
redemption of financial products. S&P has no obligation or
liability in connection with the administration, marketing or
trading of financial products.
WITHOUT LIMITING ANY OF THE FOREGOING IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
i
PART I
SPDR®
Gold Trust, or the Trust, is an investment trust, formed on
November 12, 2004 under New York law pursuant to a trust
indenture, or the Trust Indenture. The Trust holds gold and
from time to time issues
SPDR®
Gold Shares, or Shares, in Baskets in exchange for deposits of
gold and distributes gold in connection with redemptions of
Baskets. A Basket equals a block of 100,000 Shares. The
investment objective of the Trust is for the Shares to reflect
the performance of the price of gold bullion, less the
Trusts expenses. World Gold Trust Services, LLC, or
WGTS, is the sponsor of the Trust, or the Sponsor. BNY Mellon
Asset Servicing, a division of The Bank of New York Mellon,
or BNYM, is the trustee of the Trust, or the Trustee. State
Street Global Markets, LLC, or SSGM, is the marketing agent of
the Trust, or the Marketing Agent.
The Sponsor of the registrant maintains an Internet website at
www.spdrgoldshares.com, through which the registrants
annual reports on Form 10-K, quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, or the Exchange Act, are made available free
of charge after they have been filed or furnished to the
Securities and Exchange Commission (the SEC).
Additional information regarding the Trust may also be found on
the SECs EDGAR database at www.sec.gov.
Investment
Objective
The Shares are intended to offer investors an opportunity to
participate in the gold market through an investment in
securities. Historically, the logistics of buying, storing and
insuring gold have constituted a barrier to entry for some
institutional and retail investors. The ownership of the Shares
is intended to overcome these barriers to entry. The logistics
of storing and insuring gold are dealt with by HSBC Bank USA,
N.A., or HSBC, as custodian of the Trust, or the Custodian, and
the related expenses are built into the price of the Shares.
Therefore, the investor does not have any additional tasks or
costs over and above those associated with investing in any
other publicly traded security.
The Shares are intended to provide institutional and retail
investors with a simple and cost-efficient means of gaining
investment benefits similar to those of holding allocated gold
bullion. The Shares offer an investment that is:
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Easily Accessible. Investors can access the
gold market through a traditional brokerage account. The Sponsor
believes that investors will be able to more effectively
implement strategic and tactical asset allocation strategies
that use gold by using the Shares instead of using the
traditional means of purchasing, trading and holding gold.
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Relatively Cost Efficient. The Sponsor
believes that, for many investors, transaction costs related to
the Shares will be lower than those associated with the
purchase, storage and insurance of allocated gold.
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Exchange Traded. The Shares trade on NYSE
Arca, Inc., or NYSE Arca, providing investors with an efficient
means to buy, sell, or sell short in order to implement a
variety of investment strategies. The Shares are eligible for
margin accounts. The Shares are also listed on the Mexican Stock
Exchange (Bolsa Mexicana de Valores), the Singapore Exchange
Securities Trading Limited, the Stock Exchange of Hong Kong
Limited and the Tokyo Stock Exchange.
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Backed by Gold Held by the Custodian on Behalf of the
Trust. The Shares are backed by the assets of the
Trust and the Trust does not hold or employ any derivative
securities. Further, the Trusts holdings and their value
based on current market prices are reported on the Trusts
website each business day.
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1
Overview
The Shares represent units of fractional undivided beneficial
interest in and ownership of the Trust. The Trust is not managed
like a corporation or an active investment vehicle. The gold
held by the Trust will only be sold: (1) on an as-needed
basis to pay Trust expenses, (2) in the event the Trust
terminates and liquidates its assets, or (3) as otherwise
required by law or regulation. The sale of gold by the Trust is
a taxable event to shareholders of the Trust, or Shareholders.
See United States Federal Tax ConsequencesTaxation
of U.S. Shareholders.
The Trust is not registered as an investment company under the
Investment Company Act of 1940 and is not required to register
under such act. The Trust will not hold or trade in commodity
futures contracts regulated by the Commodity Exchange Act of
1936, or the CEA, as administered by the Commodity Futures
Trading Commission, or the CFTC. The Trust is not a commodity
pool for purposes of the CEA, and none of the Sponsor, the
Trustee or the Marketing Agent is subject to regulation as a
commodity pool operator or a commodity trading advisor in
connection with the Shares.
The Trust creates and redeems Shares from time to time, but only
in Baskets. The number of outstanding Shares changes from time
to time as a result of the creation and redemption of Baskets.
The creation and redemption of Baskets requires the delivery to
the Trust or the distribution by the Trust of the amount of gold
and any cash represented by the Baskets being created or
redeemed. The total amount of gold and any cash required for the
creation of Baskets is based on the combined net asset value, or
NAV, of the number of Baskets being created or redeemed. The
number of ounces of gold required to create a Basket or to be
delivered upon the redemption of a Basket will continue to
gradually decrease over time. This is because the Shares
comprising a Basket will represent a decreasing amount of gold
due to the sale of the Trusts gold to pay the Trusts
expenses.
Baskets may be created or redeemed only by Authorized
Participants. An Authorized Participant is a person who
(1) is a registered broker-dealer or other securities
market participant such as a bank or other financial institution
which is not required to register as a broker-dealer to engage
in securities transactions, (2) is a participant in the
Depository Trust Company system, or DTC, (3) has
entered into an agreement with the Sponsor and the Trustee which
provides the procedures for the creation and redemption of
Baskets and for the delivery of the gold and any cash required
for such creations and redemptions, or a Participant Agreement,
and (4) has established an unallocated gold account with
the Custodian, or an Authorized Participant Unallocated Account.
Authorized Participants pay a transaction fee of $2,000 for each
order to create or redeem Baskets. Authorized Participants may
sell to other investors all or part of the Shares included in
the Baskets they purchase from the Trust.
As of the London PM fix on each day that NYSE Arca is open for
regular trading or, if there is no London PM fix on such day or
the London PM fix has not been announced by 12:00 PM New
York time on such day, as of 12:00 PM New York time on such
day, or Valuation Time, the Trustee values the gold held by the
Trust and determines both the Adjusted Net Asset Value, or ANAV,
and the NAV of the Trust. Once the value of the gold has been
determined, the Trustee subtracts all estimated accrued fees
(other than the fees accruing for the evaluation day which are
computed by reference to the ANAV of the Trust or the custody
fees accruing for the evaluation day which are based on the
value of the gold held by the Trust), expenses and other
liabilities of the Trust from the total value of the gold and
all other assets of the Trust (other than any amounts credited
to the Trusts reserve account, if established). The
resulting figure is the ANAV of the Trust, which is used to
compute the fees of the Sponsor, the Trustee and the Marketing
Agent.
To determine the Trusts NAV, the Trustee subtracts the
amount of estimated accrued fees accruing for the evaluation day
which are computed by reference to the ANAV of the Trust and to
the value of the gold held by the Trust from the ANAV of the
Trust. The resulting figure is the NAV of the Trust. The Trustee
also determines the NAV per Share by dividing the NAV of the
Trust by the number of the Shares outstanding as of the close of
trading on NYSE Arca (which includes the net number of any
Shares created or redeemed on such evaluation day).
2
The Trusts assets only consist of allocated gold bullion
and gold receivable when recorded; representing gold covered by
contractually binding orders for the creation of Shares where
the gold has not yet been transferred to the Trusts
account and, from time to time, cash, which will be used to pay
expenses. Cash held by the Trust will not generate any income.
The Trust does not hold any derivative instruments. Each Share
represents a proportional interest, based on the total number of
Shares outstanding, in the gold and any cash held by the Trust,
less the Trusts liabilities (which include accrued
expenses). The secondary market trading price of the Shares has
fluctuated in response to the price of gold and the Sponsor
believes that the trading price of the Shares reflects the
estimated accrued expenses of the Trust.
Sales of
Gold
The Trustee, at the direction of the Sponsor or in its own
discretion, sells the Trusts gold as necessary to pay the
Trusts expenses. As a result, the amount of gold sold will
vary from time to time depending on the level of the
Trusts expenses and the market price of gold. Unless
otherwise directed by the Sponsor, when selling gold, the
Trustee endeavors to sell at the price established by the London
PM fix. The Trustee places orders with dealers (which may be the
Custodian) through which the Trustee expects to receive the most
favorable price and execution of orders. The Custodian may be
the purchaser of such gold only if the sale transaction is made
at the next London gold price fix (either AM or PM) following
the sale order. Neither the Trustee nor the Sponsor is liable
for depreciation or loss incurred by reason of any sale. See
United States Federal Tax ConsequencesTaxation of
U.S. Shareholders for information on the tax treatment of
gold sales.
The Trustee may also sell the Trusts gold if the Sponsor
notifies the Trustee that the sale of gold is required by
applicable law or regulation or in connection with the
termination and liquidation of the Trust. The Trustee will not
be liable or responsible in any way for depreciation or loss
incurred by reason of any sale of gold directed by the Sponsor.
Any property received by the Trust other than gold, cash or an
amount receivable in cash (such as, for example, an insurance
claim) will be promptly sold or otherwise disposed of by the
Trustee.
Gold
Price Information
Investors may obtain on a
24-hour
basis gold pricing information based on the spot price for an
ounce of gold from various financial information service
providers. Current spot prices are also generally available with
bid/ask spreads from gold bullion dealers. In addition, the
Trusts website provides ongoing pricing information for
gold spot prices and the Shares. Market prices for the Shares
are available from a variety of sources including brokerage
firms, information websites and other information service
providers. The NAV of the Trust is published by the Sponsor on
each day that NYSE Arca is open for regular trading and is
posted on the Trusts website at
www.spdrgoldshares.com.
The Gold
Industry
Gold
Supply and Demand
Gold is a physical asset that is accumulated, rather than
consumed. As a result, virtually all the gold that has ever been
mined still exists today in one form or another. Gold Survey
2011, a publication of Thompson Reuters GFMS Limited, or
GFMS, an independent precious metals research organization based
in London, estimates that existing above-ground stocks of gold
amounted to 166,600 tonnes (approximately 5.4 billion
ounces) at the end of 2010. These stocks have increased by
approximately 2.0% per year on average for the 10 years
ended December 2010. When used in this annual report
tonne refers to one metric tonne, which is
equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
3
World
Gold Supply and Demand (2001 2010)
The following table sets forth a summary of the world gold
supply and demand for the last 10 years. It is based on
information reported in the GFMS Gold Survey 2011.
World
Gold Supply and Demand, 2001-2010
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2001
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2002
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2003
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2004
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2005
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2006
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2007
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2008
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2009
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2010
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Mine production
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2,646
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2,619
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2,624
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2,496
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2,550
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2,482
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2,476
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2,408
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2,589
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2,689
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Official sector sales
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520
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547
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620
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479
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663
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365
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484
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235
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34
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Recycled gold
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749
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874
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991
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881
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902
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1,133
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982
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1,316
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1,695
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1,645
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Net producer hedging
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(151
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(379
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(289
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(438
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(92
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(434
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(440
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(350
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(236
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(103
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Total reported supply
1
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3,764
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3,661
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3,946
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3,418
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4,023
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3,546
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3,502
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3,609
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4,082
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4,231
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Gold fabrication in carat jewelry
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3,009
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2,662
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2,484
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2,616
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2,719
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2,300
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2,423
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2,304
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1,814
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2,017
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Gold fabrication in electronics
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197
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206
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237
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266
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286
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316
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322
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311
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275
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327
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Gold fabrication in other industrial & decorative
applications
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97
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83
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82
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85
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90
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92
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96
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95
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82
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91
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Gold fabrication in dentistry
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69
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69
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67
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68
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62
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61
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58
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56
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53
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49
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Official sector purchases
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0
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0
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0
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0
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0
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0
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0
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0
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0
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73
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Bar and coin retail investment
2
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371
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363
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316
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366
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406
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425
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447
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902
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819
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1,175
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Investment in Exchange Traded Funds and related products
3
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0
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3
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39
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133
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208
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260
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253
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321
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617
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338
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Total identifiable demand
1
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3,743
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3,386
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3,225
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3,533
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3,771
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3,454
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3,599
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3,989
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3,660
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4,070
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Supply less demand
4
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21
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275
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721
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(115
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252
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92
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(97
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(380
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)
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422
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161
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(1) |
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Figures may not add due to
independent rounding. |
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(2) |
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Bar and coin retail
investment include physical bars, official coins, imitation
coins and medals. |
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(3) |
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Including Gold Bullion
Securities (LSE and ASX), SPDR Gold Shares, NewGold Gold
Debentures, Central Fund of Canada and Central Gold Trust,
iShares Comex Gold Trust, ZKB Gold, Golddist, ETFS Physical
Gold, Xetra-Gold, Julius Baer Physical Gold Fund, Claymore Gold
Bullion ETF, Swiss Gold, ETFS (Tokyo and New York), Sprott
Physical Gold Trust, Dubai Gold Securities, ETFS Physical
Precious Metals Basket Shares (GLTR) and Mistubishi Physical
Gold ETF. |
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(4) |
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This is the residual from
combining all the other data in the table. The residual results
from the fact that there is no reliable methodology for
measuring all elements of gold supply and demand. It includes
net institutional investment other than that in Exchange Traded
Funds and similar products, movements in stocks and other
elements together with any residual error. |
Source:
Thompson Reuters GFMS Gold Survey 2011
Sources
of Gold Supply
Sources of gold supply include both mine production and the
recycling or mobilizing of existing above-ground stocks. The
largest portion of gold supplied into the market annually is
from gold mine production. The second largest source of annual
gold supply is from recycled gold, which is gold that has been
recovered from jewelry and other fabricated products and
converted back into marketable gold.
Official sector sales outstripped purchases in the period from
1989 to 2009, creating additional net supply of gold into the
marketplace, with annual net sales between 2001 and 2010
averaging 387 tonnes. In recent years, however, the pace of net
sales has slowed sharply and since the second quarter of 2009,
the official sector has been a small net buyer of gold on a
quarterly basis. The year 2010 marked the first year in more
than two decades that the official sector has become a net
buyer, where purchases totaled 73 tonnes. The prominence given
by market commentators to this activity and the size of official
sector gold holdings, has resulted in this area being one of the
more visible sectors of the gold market.
Sources
of Gold Demand
Based on the GFMS Gold Survey 2011 published statistics, the
demand for gold amounted to 2.4% of total above ground stocks in
2010. Gold demand has traditionally come from three sources:
jewelry, industry (including medical applications), and
investment. The primary source of demand comes from jewelry,
which accounts for 58% of the identifiable demand over the past
five years, followed by investment demand which accounts for a
further 30% and industry which accounts for the remaining
4
12%. While jewelry remains by far the largest component of
demand, its share has decreased over the past two years in favor
of investment demand, as a by-product of the financial crisis.
Additionally, in 2010, the official sector became a net
purchaser of gold for the first time in over two decades.
Gold demand is widely dispersed throughout the world. While
there are seasonal fluctuations in the levels of demand for gold
(especially jewelry) in many countries, variations in the timing
of such fluctuations in different countries mean that seasonal
changes in demand do not have a significant impact on the global
gold price.
Operation
of the Gold Bullion Market
The global trade in gold consists of over-the-counter, or OTC,
transactions in spot, forwards, and options and other
derivatives, together with exchange-traded futures and options.
Global
Over-The-Counter Market
The OTC market trades on a
24-hour per
day continuous basis and accounts for most global gold trading.
Market makers, as well as others in the OTC market, trade with
each other and with their clients on a principal-to-principal
basis. All risks and issues of credit are between the parties
directly involved in the transaction. Market makers include the
eleven market-making members of the London Bullion Market
Association, or LBMA, a trade association that acts as the
coordinator for activities conducted on behalf of its members
and other participants in the London bullion market. The eleven
market-making members of the LBMA are: the Bank of Nova
ScotiaScotiaMocatta, Barclays Bank PLC, Credit Suisse,
Deutsche Bank AG, Goldman Sachs International, HSBC Bank USA,
N.A. JPMorgan Chase Bank, Mitsui & Co Precious Metals
Inc., Merrill Lynch International Bank Limited,
Société Générale and UBS AG. The OTC market
provides a relatively flexible market in terms of quotes, price,
size, destinations for delivery and other factors. Bullion
dealers customize transactions to meet clients
requirements. The OTC market has no formal structure and no
open-outcry meeting place.
The main centers of the OTC market are London, New York and
Zurich. Mining companies, central banks, manufacturers of
jewelry and industrial products, together with investors and
speculators, tend to transact their business through one of
these market centers. Centers such as Dubai and several cities
in the Far East also transact substantial OTC market business,
typically involving jewelry and small bars of 1 kilogram or
less. Bullion dealers have offices around the world and most of
the worlds major bullion dealers are either members or
associate members of the LBMA. Of the eleven market-making
members of the LBMA, six offer clearing services. There are 60
full members, including the
market-making
members, plus a number of associate members around the world.
The information about LBMA members in this report is as of
October 27, 2011. These numbers may change from time to
time as new members are added and existing members drop out.
In the OTC market, the standard size of gold trades between
market makers ranges between 5,000 and 10,000 ounces. Bid-offer
spreads are typically $0.50 per ounce. Certain dealers are
willing to offer clients competitive prices for much larger
volumes, including trades over 100,000 ounces, although this
will vary according to the dealer, the client and market
conditions, as transaction costs in the OTC market are
negotiable between the parties and therefore vary widely. Cost
indicators can be obtained from various information service
providers as well as dealers.
Liquidity in the OTC market can vary from time to time during
the course of the
24-hour
trading day. Fluctuations in liquidity are reflected in
adjustments to dealing spreadsthe differential between a
dealers buy and sell prices. The
period of greatest liquidity in the gold market generally occurs
at the time of day when trading in the European time zones
overlaps with trading in the United States, which is when OTC
market trading in London, New York and other centers coincides
with futures and options trading on the COMEX division of the
New York Mercantile Exchange, or the COMEX. This period lasts
for approximately four hours each New York business day morning.
5
The
London Bullion Market
Although the market for physical gold is global, most OTC market
trades are cleared through London. In addition to coordinating
market activities, the LBMA acts as the principal point of
contact between the market and its regulators. A primary
function of the LBMA is its involvement in the promotion of
refining standards by maintenance of the London Good
Delivery Lists, which are the lists of LBMA accredited
melters and assayers of gold. The LBMA also coordinates market
clearing and vaulting, promotes good trading practices and
develops standard documentation.
The term loco London gold refers to gold physically
held in London that meets the specifications for weight,
dimensions, fineness (or purity), identifying marks (including
the assay stamp of a LBMA acceptable refiner) and appearance set
forth in The Good Delivery Rules for Gold and Silver
Bars published by the LBMA. Gold bars meeting these
requirements are described in this report from time to time as
London Good Delivery Bars. The unit of trade in
London is the troy ounce, whose conversion between grams is:
1,000 grams = 32.1507465 troy ounces and 1 troy ounce =
31.1034768 grams. A London Good Delivery Bar is acceptable for
delivery in settlement of a transaction on the OTC market.
Typically referred to as 400-ounce bars, a London Good Delivery
Bar must contain between 350 and 430 fine troy ounces of gold,
with a minimum fineness (or purity) of 995 parts per 1,000
(99.5%), be of good appearance and be easy to handle and stack.
The fine gold content of a gold bar is calculated by multiplying
the gross weight of the bar (expressed in units of 0.025 troy
ounces) by the fineness of the bar. A London Good Delivery Bar
must also bear the stamp of one of the melters and assayers who
are on the LBMA approved list. Unless otherwise specified, the
gold spot price always refers to that of a London Good Delivery
Bar. Business is generally conducted over the phone and through
electronic dealing systems.
Twice daily during London trading hours there is a fix which
provides reference gold prices for that days trading. Many
long-term contracts will be priced on the basis of either the
morning (AM) or afternoon (PM) London fix, and market
participants will usually refer to one or the other of these
prices when looking for a basis for valuations. The London fix
is the most widely used benchmark for daily gold prices and is
quoted by various financial information sources.
Formal participation in the London fix is traditionally limited
to five members, each of which is a bullion dealer and a member
of the LBMA. The chairmanship rotates annually among the five
member firms. The fix takes place by telephone and the five
member firms no longer meet face-to-face as was previously the
case. The morning session of the fix starts at 10:30 AM
London time and the afternoon session starts at 3:00 PM
London time. The current members of the gold fixing are Bank of
Nova Scotia ScotiaMocatta, Barclays Bank plc,
Deutsche Bank AG, HSBC Bank USA, N.A., and Société
Générale. Any other market participant wishing to
participate in the trading on the fix is required to do so
through one of the five gold fixing members.
Orders are placed either with one of the five fixing members or
with another bullion dealer who will then be in contact with a
fixing member during the fixing. The fixing members net-off all
orders when communicating their net interest at the fixing. The
fix begins with the fixing chairman suggesting a trying
price, reflecting the market price prevailing at the
opening of the fix. This is relayed by the fixing members to
their dealing rooms which have direct communication with all
interested parties. Any market participant may enter the fixing
process at any time, or adjust or withdraw his order. The gold
price is adjusted up or down until all the buy and sell orders
are matched, at which time the price is declared fixed. All
fixing orders are transacted on the basis of this fixed price,
which is instantly relayed to the market through various media.
The London fix is widely viewed as a full and fair
representation of all market interest at the time of the fix.
Futures
Exchanges
The most significant gold futures exchanges are the COMEX, the
Chicago Board of Trade, or CBOT, and the Tokyo Commodity
Exchange, or TOCOM. The COMEX and the CBOT both began to offer
trading in gold futures contracts in 1974. For most of the
period since that date, the COMEX has been the largest
6
exchange in the world for trading precious metals futures and
options. Trading volumes in gold futures on the CBOT have,
however, sometimes exceeded those on the COMEX. In July 2007,
the Chicago Mercantile Exchange, or CME, merged with the CBOT to
form the CME Group. On August 22, 2008, the CME Group
acquired NYMEX Holdings, Inc., including the COMEX. The TOCOM
has been trading gold since 1982. Trading on these exchanges is
based on fixed delivery dates and transaction sizes for the
futures and options contracts traded. Trading costs are
negotiable. As a matter of practice, only a small percentage of
the futures market turnover ever comes to physical delivery of
the gold represented by the contracts traded. Both exchanges
permit trading on margin. Margin trading can add to the
speculative risk involved given the potential for margin calls
if the price moves against the contract holder. The COMEX
operates through a central clearance system. On June 6,
2003, TOCOM adopted a similar clearance system. In each case,
the exchange acts as a counterparty for each member for clearing
purposes.
Other
Exchanges
There are other gold exchange markets, such as the Istanbul Gold
Exchange (trading gold since 1995), the Shanghai Gold Exchange
(trading gold since October 2002) and the Hong Kong Chinese
Gold & Silver Exchange Society (trading gold since
1918).
Market
Regulation
The global gold markets are overseen and regulated by both
governmental and self-regulatory organizations. In addition,
certain trade associations have established rules and protocols
for market practices and participants.
Movements
in the Price of Gold Since the Inception of the Trust
As movements in the price of gold are expected to directly
affect the price of the Shares, investors should understand what
the recent movements in the price of gold have been. Investors,
however, should also be aware that past movements in the gold
price are not indicators of future movements.
7
The following chart provides historical background on the price
of gold. The chart illustrates movements in the price of gold in
U.S. dollars per ounce over the period from the day the Shares
began trading on the NYSE on November 18, 2004 to
September 30, 2011, and is based on the London PM fix.
Daily gold price
- November 18, 2004 to September 30, 2011
Business
of the Trust
The investment objective of the Trust is for the Shares to
reflect the performance of the price of gold bullion, less the
Trusts expenses. The Sponsor believes that, for many
investors, the Shares represent a cost-effective investment
relative to traditional means of investing in gold. The Trust
has no fixed termination date and will terminate upon the
occurence of a termination event listed in the
Trust Indenture.
Creation
and Redemption of Shares
The Trust creates and redeems Shares from time to time, but only
in one or more Baskets (a Basket equals a block of
100,000 Shares). The creation and redemption of Baskets is
only made in exchange for the delivery to the Trust or the
distribution by the Trust of the amount of gold and any cash
represented by the Baskets being created or redeemed, the amount
of which is based on the combined NAV of the number of Shares
included in the Baskets being created or redeemed determined on
the day the order to create or redeem Baskets is properly
received.
Authorized Participants are the only persons that may place
orders to create and redeem Baskets. To become an Authorized
Participant, a person must enter into a Participant Agreement
with the Sponsor and the Trustee. The Participant Agreement and
the related procedures attached thereto may be amended by the
Trustee and the Sponsor without the consent of any Shareholder
or Authorized Participant. Authorized Participants who make
deposits with the Trust in exchange for Baskets receive no fees,
commissions or other form of compensation or inducement of any
kind from either the Sponsor or the Trust, and no such person
has any obligation or responsibility to the Sponsor or the Trust
to effect any sale or resale of Shares.
8
Some of the activities of Authorized Participants will result in
their being deemed participants in a distribution in a manner
which would render them statutory underwriters and subject them
to the prospectus-delivery and liability provisions of the
Securities Act. A current list of the Authorized Participants is
available from the Trustee and the Sponsor.
Prior to initiating any creation or redemption order, an
Authorized Participant must have entered into an agreement with
the Custodian to establish an Authorized Participant Unallocated
Account in London, or a Participant Unallocated Bullion Account
Agreement. Authorized Participant Unallocated Accounts may only
be used for transactions with the Trust. An unallocated account
is an account with a bullion dealer, which may also be a bank,
to which a fine weight amount of gold is credited. Transfers to
or from an unallocated account are made by crediting or debiting
the number of ounces of gold being deposited or withdrawn. The
account holder is entitled to direct the bullion dealer to
deliver an amount of physical gold equal to the amount of gold
standing to the credit of the account holder. Gold held in an
unallocated account is not segregated from the Custodians
assets. The account holder therefore has no ownership interest
in any specific bars of gold that the bullion dealer holds or
owns. The account holder is an unsecured creditor of the bullion
dealer, and credits to an unallocated account are at risk of the
bullion dealers insolvency, in which event it may not be
possible for a liquidator to identify any gold held in an
unallocated account as belonging to the account holder rather
than to the bullion dealer.
Certain Authorized Participants are able to participate directly
in the gold bullion market and the gold futures market. In some
cases, an Authorized Participant may from time to time acquire
gold from or sell gold to its affiliated gold trading desk,
which may profit in these instances. The Sponsor believes that
the size and operation of the gold bullion market make it
unlikely that an Authorized Participants direct activities
in the gold or securities markets will impact the price of gold
or the price of the Shares. Authorized Participants must be a
DTC Participant and must be registered as a broker-dealer under
the Exchange Act, and regulated by FINRA, or will be exempt from
being or otherwise will not be required to be so regulated or
registered, and will be qualified to act as a broker or dealer
in the states or other jurisdictions where the nature of its
business so requires. Each Authorized Participant will have its
own set of rules and procedures, internal controls and
information barriers as it determines is appropriate in light of
its own regulatory regime.
Authorized Participants may act for their own accounts or as
agents for broker-dealers, custodians and other securities
market participants that wish to create or redeem Baskets. An
order for one or more Baskets may be placed by an Authorized
Participant on behalf of multiple clients. Persons interested in
purchasing Baskets should contact the Sponsor or the Trustee to
obtain the contact information for the Authorized Participants.
Shareholders who are not Authorized Participants will only be
able to redeem their Shares through an Authorized Participant.
All gold bullion must be delivered to the Trust and distributed
by the Trust in unallocated form through credits and debits
between Authorized Participant Unallocated Accounts and the
Trust Unallocated Account.
All gold bullion must be of at least a minimum fineness (or
purity) of 995 parts per 1,000 (99.5%) and otherwise conform to
the rules, regulations practices and customs of the LBMA,
including the specifications for a London Good Delivery Bar.
Under the Participant Agreement, the Sponsor has agreed to
indemnify the Authorized Participants against certain
liabilities, including liabilities under the Securities Act, and
to contribute to the payments the Authorized Participants may be
required to make in respect of those liabilities. The Trustee
has agreed to reimburse the Authorized Participants, solely from
and to the extent of the Trusts assets, for
indemnification and contribution amounts due from the Sponsor to
the extent the Sponsor has not paid such amounts when due.
The following description of the procedures for the creation and
redemption of Baskets is only a summary and investors should
review the description of the procedures for the creation and
9
redemption of Baskets set forth in the Trust Indenture, the
form of Participant Agreement and the form of Participant
Unallocated Bullion Account Agreement, each of which have been
filed as exhibits.
Creation
Procedures
On any business day, an Authorized Participant may place an
order with the Trustee to create one or more Baskets. Purchase
orders must be placed by 4:00 PM or the close of regular
trading on NYSE Arca, whichever is earlier. The day on which the
Trustee receives a valid purchase order is the purchase order
date.
By placing a purchase order, an Authorized Participant agrees to
deposit gold with the Trust, or a combination of gold and cash,
as described below. Prior to the delivery of Baskets for a
purchase order, the Authorized Participant must also have wired
to the Trustee the non-refundable transaction fee due for the
purchase order.
Determination
of Required Deposits
The total deposit required to create each Basket, or a Creation
Basket Deposit, is an amount of gold and cash, if any, that is
in the same proportion to the total assets of the Trust (net of
estimated accrued expenses and other liabilities) on the date
the order to purchase is properly received as the number of
Shares to be created under the purchase order is in proportion
to the total number of Shares outstanding on the date the order
is received.
Delivery
of Required Deposits
An Authorized Participant who places a purchase order is
responsible for crediting its Authorized Participant Unallocated
Account with the required gold deposit amount by the end of the
second business day in London following the purchase order date.
Upon receipt of the gold deposit amount, the Custodian, after
receiving appropriate instructions from the Authorized
Participant and the Trustee, will transfer on the third business
day following the purchase order date the gold deposit amount
from the Authorized Participant Unallocated Account to the
Trust Unallocated Account and the Trustee will direct DTC
to credit the number of Baskets ordered to the Authorized
Participants DTC account. The expense and risk of
delivery, ownership and safekeeping of gold until such gold has
been received by the Trust shall be borne solely by the
Authorized Participant. If gold is to be delivered other than as
described above, the Sponsor is authorized to establish such
procedures and to appoint such custodians and establish such
custody accounts as the Sponsor determines to be desirable.
Acting on standing instructions given by the Trustee, the
Custodian will transfer the gold deposit amount from the
Trust Unallocated Account to the Trust Allocated
Account by allocating to the Trust Allocated Account
specific bars of gold from unallocated bars which the Custodian
holds or instructing a subcustodian to allocate specific bars of
gold from unallocated bars held by or for the subcustodian. The
gold bars in an allocated gold account are specific to that
account and are identified by a list which shows, for each gold
bar, the refiner, assay or fineness, serial number and gross and
fine weight. Gold held in the Trusts allocated account is
the property of the Trust and is not traded, leased or loaned
under any circumstances.
The Custodian will use commercially reasonable efforts to
complete the transfer of gold to the Trust Allocated
Account prior to the time by which the Trustee is to credit the
Basket to the Authorized Participants DTC account; if,
however, such transfers have not been completed by such time,
the number of Baskets ordered will be delivered against receipt
of the gold deposit amount in the Trust Unallocated
Account, and all Shareholders will be exposed to the risks of
unallocated gold to the extent of that gold deposit amount until
the Custodian completes the allocation process. See Risk
FactorsGold held in the Trusts unallocated gold
account and any Authorized Participants unallocated gold
account will not be segregated from the Custodians
assets...
10
Redemption Procedures
The procedures by which an Authorized Participant can redeem one
or more Baskets mirror the procedures for the creation of
Baskets. On any business day, an Authorized Participant may
place an order with the Trustee to redeem one or more Baskets.
Redemption orders must be placed by 4:00 PM or the close of
regular trading on NYSE Arca, whichever is earlier. A redemption
order so received is effective on the date it is received in
satisfactory form by the Trustee.
Determination
of Redemption Distribution
The redemption distribution from the Trust consists of a credit
to the redeeming Authorized Participants Authorized
Participant Unallocated Account representing the amount of the
gold held by the Trust evidenced by the Shares being redeemed
plus, or minus, the cash redemption amount. The cash redemption
amount is equal to the value of all assets of the Trust other
than gold less all estimated accrued expenses and other
liabilities, divided by the number of Baskets outstanding and
multiplied by the number of Baskets included in the Authorized
Participants redemption order. The Sponsor anticipates
that in the ordinary course of the Trusts operations there
will be no cash distributions made to Authorized Participants
upon redemptions. Fractions of a fine ounce of gold included in
the redemption distribution smaller than 0.001 of a fine ounce
are disregarded. Redemption distributions are subject to the
deduction of any applicable tax or other governmental charges
which may be due.
Delivery
of Redemption Distribution
The redemption distribution due from the Trust is delivered to
the Authorized Participant on the third business day following
the redemption order date if, by 9:00 AM New York time on
such third business day, the Trustees DTC account has been
credited with the Baskets to be redeemed. If the Trustees
DTC account has not been credited with all of the Baskets to be
redeemed by such time, the redemption distribution is delivered
to the extent of whole Baskets received. Any remainder of the
redemption distribution is delivered on the next business day to
the extent of remaining whole Baskets received if the Trustee
receives the fee applicable to the extension of the redemption
distribution date which the Trustee may, from time to time,
determine and the remaining Baskets to be redeemed are credited
to the Trustees DTC account by 9:00 AM New York time
on such next business day. Any further outstanding amount of the
redemption order shall be cancelled. The Trustee is also
authorized to deliver the redemption distribution
notwithstanding that the Baskets to be redeemed are not credited
to the Trustees DTC account by 9:00 AM New York time
on the third business day following the redemption order date if
the Authorized Participant has collateralized its obligation to
deliver the Baskets through DTCs book entry system on such
terms as the Sponsor and the Trustee may from time to time agree
upon.
The Custodian transfers the redemption gold amount from the
Trust Allocated Account to the Trust Unallocated
Account and, thereafter, to the redeeming Authorized
Participants Authorized Participant Unallocated Account.
The Authorized Participant and the Trust are each at risk in
respect of gold credited to their respective unallocated
accounts in the event of the Custodians insolvency. See
Risk FactorsGold held in the Trusts
unallocated gold account and any Authorized Participants
unallocated gold account will not be segregated from the
Custodians assets...
Suspension
or Rejection of Redemption Orders
The Trustee may, in its discretion, and will when directed by
the Sponsor, suspend the right of redemption, or postpone the
redemption settlement date for: (1) any period during which
NYSE Arca is closed other than customary weekend or holiday
closings, or trading on NYSE Arca is suspended or restricted;
(2) any period during which an emergency exists as a result
of which delivery, disposal or evaluation of gold is not
reasonably practicable; or (3) such other period as the
Sponsor determines to be necessary for the protection of the
Shareholders.
11
The Trustee will reject a redemption order if (i) the order is
not in proper form as described in the Participant Agreement,
(ii) the fulfillment of the order, in the opinion of its
counsel, might be unlawful, (iii) the order would have adverse
tax consequences to the Trust or its Shareholders or
(iv) circumstances outside the control of the Trustee, the
Sponsor or the Custodian make the redemption, for all practical
purposes, not feasible to process.
None of the Sponsor, the Trustee or the Custodian will be liable
to any person or in any way for any loss or damages that may
result from any such suspension, postponement or rejection.
Creation
and Redemption Transaction Fee
An Authorized Participant is required to pay a transaction fee
to the Trustee of $2,000 per order to create or redeem Baskets.
An order may include multiple Baskets. The transaction fee may
be changed by the Trustee with the consent of the Sponsor. The
Trustee shall notify DTC of any agreement to change the
transaction fee and will not implement any increase in the fee
for the redemption of Baskets until 30 days after the date
of the notice. A transaction fee may not exceed 0.10% of the
value of a Basket at the time the creation and redemption order
is accepted.
Tax
Responsibility
Authorized Participants are responsible for any transfer tax,
sales or use tax, recording tax, value added tax or similar tax
or governmental charge applicable to the creation or redemption
of Baskets, regardless of whether or not such tax or charge is
imposed directly on the Authorized Participant, and agree to
indemnify the Sponsor, the Trustee and the Trust if they are
required by law to pay any such tax, together with any
applicable penalties, additions to tax or interest thereon.
Trust Expenses
The Trustee sells gold as needed to pay the expenses of the
Trust. As a result, the amount of gold sold will vary from time
to time depending on the level of the Trusts expenses and
the market price of gold. Cash held by the Trustee does not bear
any interest.
The Trusts estimated ordinary operating expenses are
accrued daily and reflected in the NAV of the Trust. The
ordinary operating expenses of the Trust include: (1) fees
paid to the Sponsor, (2) fees paid to the Trustee,
(3) fees paid to the Custodian, (4) fees paid to the
Marketing Agent and other marketing costs and (5) various
Trust administration fees, including printing and mailing costs,
legal and audit fees, registration fees and listing fees.
Fees are paid to the Sponsor as compensation for services
performed under the Trust Indenture and for services
performed in connection with maintaining the Trusts
website and marketing the Shares. The Sponsors fee is
payable monthly in arrears and is accrued daily at an annual
rate equal to 0.15% of the ANAV, subject to reduction as
described below. The Sponsor will receive reimbursement from the
Trust for all of its disbursements and expenses incurred in
connection with the Trust. The Sponsor was paid $89,517,491 for
its services during the year ended September 30, 2011.
Fees are paid to the Trustee as compensation for services
performed under the Trust Indenture. The Trustees fee
is payable monthly in arrears and is accrued daily at an annual
rate equal to 0.02% of the ANAV of the Trust, subject to a
minimum fee of $500,000 and a maximum fee of $2,000,000 per
year. The Trustees fee is subject to modification as
determined by the Trustee and the Sponsor in good faith to
account for significant changes in the Trusts
administration or the Trustees duties. The Trustee charges
the Trust for its expenses and disbursements incurred in
connection with the Trust (including the expenses of the
Custodian paid by the Trustee), exclusive of fees of agents for
services to be performed by the Trustee, and for any
extraordinary services performed by the Trustee for the Trust.
The Trustee was paid $2,000,000 for its services during the year
ended September 30, 2011.
Fees are paid to the Custodian as compensation for its custody
services in connection with the Trust Allocated Account and
the Trust Unallocated Account. Under the Allocated Bullion
Account
12
Agreement, as amended, or the Allocated Bullion Account
Agreement, the Custodians fee is computed at an annual
rate equal to 0.10% of the average daily aggregate value of the
first 4.5 million ounces of gold held in the
Trust Allocated Account and the Trust Unallocated
Account and 0.06% of the average daily aggregate value of all
gold held in the Trust Allocated Account and the
Trust Unallocated Account in excess of 4.5 million
ounces. The Custodian does not receive a fee under the
Unallocated Bullion Account Agreement. The Custodian was paid
$39,053,700 for its services during the year ended
September 30, 2011.
Fees are paid to the Marketing Agent by the Trustee from the
assets of the Trust as compensation for services performed
pursuant to the Marketing Agent Agreement. The Marketing
Agents fee is payable monthly in arrears and is accrued
daily at an annual rate equal to 0.15% of the ANAV of the Trust,
subject to reduction as described below. The Marketing Agent was
paid $89,517,491 for its services during the year ended
September 30, 2011. Other marketing costs in the year ended
September 30, 2011 were $16,027,664.
Under the Marketing Agent Agreement, as amended, if at the end
of any month, the estimated ordinary expenses of the Trust
exceed for such month an amount equal to 0.40% per year of the
daily ANAV of the Trust for such month, the Sponsor and the
Marketing Agent will waive the amount of such excess from the
fees payable to them from the assets of the Trust for such month
in equal shares up to the amount of their fees. Investors should
be aware that, based on current expenses, if the gross value of
the Trust assets is less than approximately $1.2 billion,
the ordinary expenses of the Trust will be accrued at a rate
greater than 0.40% per year of the daily ANAV of the Trust, even
after the Sponsor and the Marketing Agent have completely waived
their combined fees of 0.30% per year of the daily ANAV of the
Trust. This amount is based on the estimated ordinary expenses
of the Trust and may be higher if the Trusts actual
ordinary expenses exceed those estimates. Additionally, if the
Trust incurs unforeseen expenses that cause the total ordinary
expenses of the Trust to exceed 0.70% per year of the daily ANAV
of the Trust, the ordinary expenses will accrue at a rate
greater than 0.40% per year of the daily ANAV of the Trust, even
after the Sponsor and the Marketing Agent have completely waived
their combined fees of 0.30% per year of the daily ANAV of the
Trust.
For the years ended September 30, 2011, 2010 and 2009 the
fees payable to the Sponsor and the Marketing Agent from the
assets of the Trust were each reduced by $6,865, $175,823 and
$657,248 respectively.
In addition, the following expenses are or may be charged to the
Trust:
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Expenses of custody, deposit or delivery of gold (other than
expenses borne by Authorized Participants) and disbursements
charged by and indemnification due to any Custodian;
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Fees of the Trustee for extraordinary services;
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Various taxes and governmental charges and any taxes, fees and
charges payable by the Trustee with respect to the creation or
redemption of Baskets;
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Expenses and costs of any action taken by the Trustee or the
Sponsor to protect the Trust and the rights and interests of
Shareholders;
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Amounts for indemnification of the Trustee or the Sponsor as
permitted under the Trust Indenture;
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Amounts for reimbursement in respect of certain claims described
under Risk Factors The Trusts obligation
to reimburse the Marketing Agent, the Authorized Participants
and certain parties...
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Expenses incurred in contacting Shareholders;
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Legal and auditing expenses, and the compensation paid to agents
properly employed by or on behalf of the Trustee;
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Fees paid to DTC for custody of the Shares;
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Federal and state annual fees in keeping the registration of the
Shares on a current basis for the issuance of Baskets;
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Expenses of the Sponsor relating to the printing and
distribution of marketing materials describing the Trust and the
Shares;
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Fees and expenses of the Marketing Agent; and
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Stationery, postage and all other
out-of-pocket
expenses of the Trust not otherwise stated above incurred by the
Trustee, the Sponsor or the Custodian or any additional or
successor custodian pursuant to actions permitted or required
under the Trust Indenture.
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The administration fees of the Trust were $2,615,081 in the year
ended September 30, 2011. These fees include the following:
(1) SEC registration fees and other regulatory fees of
$648,062; (2) legal fees of $493,051; (3) audit and
quarterly review fees of $450,952; (4) internal and
external auditor fees in respect of Sarbanes Oxley compliance of
$218,821; (5) printing fees of $359,446; and (6) other
costs of $444,749. Investors should be aware that administration
fees are likely to increase over time due to increases in the
fees of service providers to the Trust.
The
Sponsor
The Sponsor is a Delaware limited liability company formed on
July 17, 2002. The Sponsor was responsible for establishing
the Trust and for the registration of the Shares. The Sponsor
generally oversees the performance of the Trustee and the
Trusts principal service providers, but does not exercise
day-to-day oversight over the Trustee or such service providers.
The Sponsor regularly communicates with the Trustee to monitor
the overall performance of the Trust. The Sponsor may direct the
Trustee, but only as provided in the Trust Indenture. The
Sponsor, with assistance and support from the Trustee, is
responsible for preparing and filing periodic reports on behalf
of the Trust with the SEC and will provide any required
certification for such reports. The Sponsor will designate the
independent registered public accounting firm of the Trust and
may from time to time employ legal counsel for the Trust. To
assist the Sponsor in marketing the Shares, the Sponsor has
entered into the Marketing Agent Agreement with the Marketing
Agent and the Trust. See The Marketing Agent for
more information about the Marketing Agent. The Sponsor
maintains a public website on behalf of the Trust
(www.spdrgoldshares.com), which contains information about the
Trust and the Shares.
The Sponsor will not be liable to the Trustee or any Shareholder
for any action taken or for refraining from taking any action in
good faith, or for errors in judgment or for depreciation or
loss incurred by reason of the sale of any gold or other assets
of the Trust. However, the preceding liability exclusion will
not protect the Sponsor against any liability resulting from its
own gross negligence, bad faith, willful misconduct or willful
malfeasance in the performance of its duties or the reckless
disregard of its obligations and duties to the Trust.
The Sponsor and its shareholders, members, directors, officers,
employees, affiliates and subsidiaries are indemnified from the
Trust and held harmless against certain losses, liabilities or
expenses incurred in the performance of its duties under the
Trust Indenture without gross negligence, bad faith,
willful misconduct, willful malfeasance or reckless disregard of
the indemnified partys obligations and duties under the
Trust Indenture. Such indemnity includes payment from the
Trust of the costs and expenses incurred in defending against
any claim or liability under the Trust Indenture. Under the
Trust Indenture, the Sponsor may be able to seek
indemnification from the Trust for payments it makes in
connection with the Sponsors activities under the
Trust Indenture to the extent its conduct does not
disqualify it from receiving such indemnification under the
terms of the Trust Indenture. The Sponsor shall also be
indemnified from the Trust and held harmless against any loss,
liability or expense arising under the Marketing Agent Agreement
or any Participant Agreement insofar as such loss, liability or
expense arises from any untrue statement or alleged untrue
statement of a material fact contained in any written statement
provided to the Sponsor by the Trustee. Any amounts payable to
the Sponsor are secured by a lien on the Trust.
14
The
Trustee
BNYM, a banking corporation organized under the laws of the
State of New York with trust powers, serves as the Trustee. BNYM
has a trust office at 2 Hanson Place, Brooklyn, New York 11217.
BNYM is subject to supervision by the New York State Banking
Department and the Board of Governors of the Federal Reserve
System. Information regarding creation and
redemption Basket composition, NAV of the Trust,
transaction fees and the names of the parties that have each
executed a Participant Agreement may be obtained from BNYM. A
copy of the Trust Indenture is filed as an exhibit and is
available at BNYMs trust office identified above. Under
the Trust Indenture, the Trustee is required to maintain
capital, surplus and undivided profits of $500 million.
The Trustee is generally responsible for the day-to-day
administration of the Trust, including keeping the Trusts
operational records. The Trustees principal
responsibilities include: (1) selling the Trusts gold
as needed to pay the Trusts expenses (gold sales occur
monthly in the ordinary course), (2) calculating the NAV of
the Trust and the NAV per Share, (3) receiving and
processing orders from Authorized Participants to create and
redeem Baskets and coordinating the processing of such orders
with the Custodian and DTC, and (4) monitoring the
Custodian. If the Trustee determines that maintaining gold with
the Custodian is not in the best interest of the Trust, the
Trustee must so advise the Sponsor, who may direct the Trustee
to take certain actions in respect of the Custodian. In the
absence of such instructions, the Trustee may initiate action to
remove the gold from the Custodian. The ability of the Trustee
to monitor the performance of the Custodian may be limited
because under the Custody Agreements the Trustee may, only up to
twice a year, visit the premises of the Custodian for the
purpose of examining the Trusts gold and certain related
records maintained by the Custodian. In addition, the Trustee
has no right to visit the premises of any subcustodian for the
purposes of examining the Trusts gold or any records
maintained by the subcustodian, and no subcustodian is obligated
to cooperate in any review the Trustee may wish to conduct of
the facilities, procedures, records or creditworthiness of such
subcustodian.
The Trustee regularly communicates with the Sponsor to monitor
the overall performance of the Trust. The Trustee, along with
the Sponsor, liaise with the Trusts legal, accounting and
other professional service providers as needed. The Trustee
assists and supports the Sponsor with the preparation of all
periodic reports required to be filed with the SEC on behalf of
the Trust.
Affiliates of the Trustee may from time to time act as
Authorized Participants or purchase or sell gold or Shares for
their own account, as agent for their customers and for accounts
over which they exercise investment discretion.
The
Custodian
HSBC serves as the Custodian of the Trusts gold. HSBC is a
national banking association organized under the laws of the
United States of America. HSBC is subject to supervision by the
Federal Reserve Bank of New York and the Federal Deposit
Insurance Corporation. HSBCs London custodian office is
located at 8 Canada Square, London, E14 5HQ, United Kingdom. In
addition to supervision and examination by the U.S. federal
banking authorities, HSBCs London custodian operations are
subject to supervision by the Financial Services Authority, or
the FSA.
The global parent company of HSBC is HSBC Holdings plc (HSBC
Group), a public limited company incorporated in England. HSBC
Group had $174 billion in regulatory capital resources as
of June 30, 2011.
The Custodian is responsible for safekeeping for the Trust gold
deposited with it by Authorized Participants in connection with
the creation of Baskets. The Custodian facilitates the transfer
of gold in and out of the Trust through the unallocated gold
accounts it maintains for each Authorized Participant and the
unallocated and allocated gold accounts it maintains for the
Trust. The Custodian is responsible for allocating specific bars
of gold bullion to the Trust Allocated Account. The
Custodian provides the Trustee with regular reports detailing
the gold transfers in and out of the Trust Unallocated
Account and the Trust Allocated Account and identifying the
gold bars held in the Trust Allocated Account.
15
The Custodian and its affiliates may from time to time act as
Authorized Participants or purchase or sell gold or Shares for
their own account, as agent for their customers and for accounts
over which they exercise investment discretion.
The
Marketing Agent
SSGM, a wholly-owned subsidiary of State Street Corporation,
acts as the Marketing Agent. The Marketing Agent is a registered
broker-dealer with the SEC, and is a member of FINRA, the
Municipal Securities Rulemaking Board, the National Futures
Association and the Boston Stock Exchange. The Marketing
Agents office is located at State Street Financial Center,
One Lincoln Street, Boston, Massachusetts 02111.
The
Marketing Agents Role and the Marketing Agent
Agreement
The Marketing Agent assists the Sponsor in: (1) developing
a marketing plan for the Trust on an ongoing basis,
(2) preparing marketing materials regarding the Shares,
including the content of the Trusts website,
(3) executing the marketing plan for the Trust,
(4) incorporating gold into its strategic and tactical
exchange-traded fund research, (5) sublicensing the
SPDR®
trademark, and (6) assisting with certain shareholder
services, such as a call center and prospectus fulfillment.
The Marketing Agent and its affiliates may from time to time
become Authorized Participants or purchase or sell gold or
Shares for their own account, as agent for their customers and
for accounts over which they exercise investment discretion.
The Marketing Agent Agreement contains customary
representations, warranties and covenants. In addition, the
Sponsor has agreed to indemnify the Marketing Agent from and
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or the Securities Act, and
to contribute to payments that the Marketing Agent may be
required to make in respect thereof. The Trustee has agreed to
reimburse the Marketing Agent, solely from and to the extent of
the Trusts assets, for indemnification and contribution
amounts due from the Sponsor in respect of such liabilities to
the extent the Sponsor has not paid such amounts when due.
The initial term of the Marketing Agent Agreement expired in
November 2011 and automatically renewed for three years. The
agreement provides for successive three year terms unless
terminated in accordance with the Marketing Agent Agreement by
either party prior to any such successive term. If the Sponsor
terminates the Marketing Agent Agreement, the Sponsor is
required to pay the Marketing Agent an amount equal to the
present market value of the future payments the Marketing Agent
would otherwise receive under the Marketing Agent Agreement over
the subsequent 10 year period.
License
Agreement with the Marketing Agent
In connection with the Marketing Agent Agreement, the Sponsor
and the World Gold Council, or the WGC, entered into a license
agreement, dated as of November 16, 2004, with the
Marketing Agent. Under the license agreement, the Sponsor and
the WGC granted the Marketing Agent, a royalty-free, worldwide,
non-exclusive, non-transferable: (i) sublicense under the
license agreement among the Sponsor, the WGC and BNYM, to
BNYMs patents and patent applications that cover
securitized gold products in connection with the Marketing
Agents performance of its services under the Marketing
Agent Agreement; and (ii) a license to the Sponsors
and the WGCs patents, patent applications and intellectual
property and trade name and trademark rights in connection with
the Marketing Agents performance of its services under the
Marketing Agent Agreement and for the purpose of establishing,
operating and marketing financial products involving the
securitization of gold.
The license agreement will expire upon the expiration or
termination of the Marketing Agent Agreement. Either party may
terminate the license agreement prior to such term if the other
party materially breaches the license agreement and fails to
cure such breach within 30 days following written notice of
such breach from the non-breaching party. The license agreement
contains customary representations, warranties and covenants. In
addition, the Sponsor, the WGC and the Marketing
16
Agent have agreed to indemnify each other for breaches of their
respective representations and warranties and the Sponsor and
the WGC have agreed to indemnify the Marketing Agent for
violations of the intellectual property rights of others as a
result of the Marketing Agents use of the licensed
intellectual property.
SPDR
Sublicense Agreement
SPDR is a trademark of S&P and has been
licensed for use by the
SPDR®
Gold Trust pursuant to a SPDR Sublicense Agreement, dated
May 20, 2008, between the Sponsor, the WGC, the Marketing
Agent and State Street Corporation, pursuant to which the
Marketing Agent and State Street Corporation granted the Sponsor
and the WGC a royalty-free, worldwide, non-exclusive,
non-transferable sublicense to use the
SPDR®
trademark (in accordance with the SPDR Trademark License
Agreement dated as of November 29, 2006, as amended,
between State Street Global Advisors, a division of State Street
Bank and Trust Company, and S&P), for the purpose of
establishing and operating the Trust, issuing and distributing
the Shares, as part of the name of the Shares, and listing the
Shares on exchanges.
The sublicense agreement will expire upon the expiration or
termination of the earlier of (i) the Marketing Agent
Agreement or (ii) the SDPR Trademark License Agreement.
Either party may terminate the sublicense agreement prior to
such term if the other party materially breaches the license
agreement and fails to cure such breach within 30 days
following written notice of such breach from the non-breaching
party. The sublicense agreement contains customary
representations, warranties and covenants. In addition, the
Sponsor, the WGC, the Marketing Agent and State Street
Corporation have agreed to indemnify each other for breaches of
their respective representations, warranties and covenants.
Custody
of the Trusts Gold
Custody of the gold bullion deposited with and held by the Trust
is provided by the Custodian at its London, England vaults. The
Custodian will hold all of the Trusts gold in its own
vault premises except when the gold has been allocated in the
vault of a subcustodian, and in such cases the Custodian has
agreed that it will use commercially reasonable efforts promptly
to transport the gold from the subcustodians vault to the
Custodians vault, at the Custodians cost and risk.
The Custodian is a market maker, clearer and approved weigher
under the rules of the LBMA.
The Custodian, as instructed by the Trustee, is authorized to
accept, on behalf of the Trust, deposits of gold in unallocated
form. Acting on standing instructions given by the Trustee, the
Custodian allocates gold deposited in unallocated form with the
Trust by selecting bars of gold bullion for deposit to the
Trust Allocated Account from unallocated bars which the
Custodian holds or by instructing a subcustodian to allocate
bars from unallocated bars held by the subcustodian. All gold
bullion allocated to the Trust must conform to the rules,
regulations, practices and customs of the LBMA and the Custodian
must replace any non-conforming gold bullion with conforming
bullion as soon as practical.
The Trustee and the Custodian have entered into the Custody
Agreements which establish the Trust Unallocated Account
and the Trust Allocated Account. The Trust Unallocated
Account is used to facilitate the transfer of gold deposits and
gold redemption distributions between Authorized Participants
and the Trust in connection with the creation and redemption of
Baskets and the sales of gold made by the Trustee for the Trust.
Except when gold is transferred in and out of the Trust, all
gold deposited with the Trust is held in the
Trust Allocated Account.
The Custodian is authorized to appoint from time to time one or
more subcustodians to hold the Trusts gold until it can be
transported to the Custodians vault. The subcustodians
that the Custodian currently uses are the Bank of England, The
Bank of Nova Scotia-ScotiaMocatta, Barclays Bank PLC, Deutsche
Bank AG, JPMorgan Chase Bank and UBS AG. In accordance with LBMA
practices and customs, the Custodian does not have written
custody agreements with the subcustodians it selects. The
Custodians selected subcustodians may appoint further
subcustodians. These further subcustodians are not expected to
17
have written custody agreements with the Custodians
subcustodians that selected them. The lack of such written
contracts could affect the recourse of the Trust and the
Custodian against any subcustodian in the event a subcustodian
does not use due care in the safekeeping of the Trusts
gold. See Risk FactorsThe ability of the Trustee or
the Custodian to take legal action against subcustodians may be
limited...
The Custodian is required to use reasonable care in selecting
subcustodians, but otherwise has limited responsibility in
relation to the subcustodians appointed by it. The Custodian is
obliged under the Allocated Bullion Account Agreement to use
commercially reasonable efforts to obtain delivery of gold from
those subcustodians appointed by it. However, the Custodian may
not have the right to, and does not have the obligation to, seek
recovery of the gold from any subcustodian appointed by a
subcustodian. Otherwise, the Custodian does not undertake to
monitor the performance by subcustodians of their custody
functions or their selection of additional subcustodians and is
not responsible for the actions or inactions of subcustodians.
During the three years ended September 30, 2011, the
Custodian did not utilize any subcustodians on behalf of the
Trust.
Under the customs and practices of the London bullion market,
allocated gold is held by custodians and, on their behalf, by
subcustodians under arrangements that permit each entity for
which gold is being held: (1) to request from the
entitys custodian (and a custodian or subcustodian to
request from its subcustodian) a list identifying each gold bar
being held and the identity of the particular custodian or
subcustodian holding the gold bar and (2) to request the
entitys custodian to release the entitys gold within
two business days following demand for release. Each custodian
or subcustodian is obligated under the customs and practices of
the London bullion market to provide the bar list and the
identification of custodians and subcustodians referred to in
(1) above, and each custodian is obligated to release gold
as requested. Under English law, unless otherwise provided in
any applicable custody agreement, a custodian generally is
liable to its customer for failing to take reasonable care of
the customers gold and for failing to release the
customers gold upon demand. The Custodian will not be
liable for the acts or omissions, or for the solvency, of any
subcustodian that it selects unless the selection of that
subcustodian was made negligently or in bad faith.
The Custodian and the Trustee do not require any direct or
indirect subcustodians to be insured or bonded with respect to
their custodial activities. The Custodian maintains insurance
with regard to its business on such terms and conditions as it
considers appropriate. The Trustee and the Sponsor (so long as
the Sponsor is WGTS) may, subject to confidentiality
restrictions, review this insurance coverage. The Trust will not
be a beneficiary of any such insurance and does not have the
ability to dictate the existence, nature or amount of the
coverage. Therefore, Shareholders cannot be assured that the
Custodian maintains adequate insurance or any insurance with
respect to the gold held by the Custodian on behalf of the Trust.
Description
of the Custody Agreements
The Allocated Bullion Account Agreement and the Unallocated
Bullion Account Agreement between the Trustee and the Custodian
establish the Trust Allocated Account and the
Trust Unallocated Account, respectively. These agreements
are sometimes referred to together as the Custody
Agreements in this report. The following is a description
of the material terms of the Custody Agreements. As the Custody
Agreements are similar in form, they are discussed together,
with material distinctions between the agreements noted.
Reports
The Custodian provides the Trustee with reports for each
business day, identifying the movements of gold in and out of
the Trust Allocated Account and the credits and debits of
gold to the Trust Unallocated Account. The Custodian also
provides the Trustee with monthly statements of account for the
Trust Allocated Account and the Trust Unallocated
Account as of the last business day of each month. The monthly
statements contain sufficient information to identify each bar
of gold held
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in the Trust Allocated Account and, if the bar is being
held temporarily by a subcustodian, the identity of the
subcustodian having custody.
Transfers
into the Trust Unallocated Account
The Custodian credits to the Trust Unallocated Account the
amount of gold it receives from the Trust Allocated
Account, an Authorized Participant Unallocated Account or from
other third party unallocated accounts for credit to the
Trust Unallocated Account. Unless otherwise agreed by the
Custodian in writing, the only gold the Custodian will accept in
physical form for credit to the Trust Unallocated Account
is gold the Trustee has transferred from the
Trust Allocated Account. No interest will be paid by the
Custodian on any credit balance to the Trust Unallocated
Account.
Transfers
from the Trust Unallocated Account
The Custodian transfers gold from the Trust Unallocated
Account only in accordance with the Trustees instructions
to the Custodian. A transfer of gold from the
Trust Unallocated Account may only be made, (1) by
transferring gold to a third party unallocated account,
(2) by transferring gold to the Trust Allocated
Account, or (3) by either (A) making gold available
for collection at the Custodians vault premises or at such
other location as the Custodian may specify or (B), if
separately agreed, delivering the gold to such location as the
Custodian and the Trustee agree at the Trusts expense and
risk. Any gold made available in physical form will be in a form
which complies with the rules, regulations, practices and
customs of the LBMA, the Bank of England or any applicable
regulatory body, or Custody Rules, or in such other form as may
be agreed between the Trustee and the Custodian, and in all
cases will comprise one or more whole gold bars selected by the
Custodian.
The Custody Agreements were amended and restated on June 1,
2011 in order to provide, among other things, for the full
allocation of all gold credited to the Trust Unallocated
Account at the end of each business day. The Sponsor established
an overdraft facility with the Custodian under which the
Custodian will make available to the Trust Unallocated
Account up to 430 fine ounces of gold in order to allow the
Custodian to fully allocate all gold credited to the
Trust Unallocated Account to the Trust Allocated
Account at the end of each business day.
Transfers
into the Trust Allocated Account
The Custodian receives transfers of gold into the
Trust Allocated Account only at the Trustees
instructions by debiting gold from the Trust Unallocated
Account and crediting such gold to the Trust Allocated
Account.
Transfers
from the Trust Allocated Account
The Custodian transfers gold from the Trust Allocated
Account only in accordance with the Trustees instructions.
Generally, the Custodian transfers gold from the
Trust Allocated Account only by debiting gold from the
Trust Allocated Account and crediting the gold to the
Trust Unallocated Account.
Withdrawals
of Gold Directly from the Trust Allocated Account
Upon the Trustees instruction, the Custodian debits gold
from the Trust Allocated Account and makes the gold
available for collection by the Trustee or, if separately
agreed, for delivery by the Custodian in accordance with its
usual practices at the Trusts expense and risk. The
Trustee and the Custodian expect that the Trustee will withdraw
gold physically from the Trust Allocated Account (rather
than by crediting it to the Trust Unallocated Account and
instructing a further transfer from that account) only in
exceptional circumstances, such as if, for some unforeseen
reason, it was not possible to transfer gold in unallocated
form. The Custodian is not obliged to effect any requested
delivery if, in its reasonable opinion, (1) this would
cause the Custodian or its agents to be in breach of the Custody
Rules or other applicable law, court order or regulation,
(2) the costs incurred would be excessive or
(3) delivery is impracticable for any reason. When gold is
physically withdrawn from the Trust Allocated Account
pursuant to the Trustees
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instruction, all right, title, risk and interest in and to the
gold withdrawn shall pass to the person to whom or to or for
whose account such gold is transferred, delivered or collected
at the time the recipient or its agent acknowledges in writing
its receipt of gold. Unless the Trustee specifies the bars of
gold to be debited from the Trust Allocated Account, the
Custodian is entitled to select the gold bars.
Exclusion
of Liability
The Custodian will use reasonable care in the performance of its
duties under the Custody Agreements and is only responsible for
any loss or damage suffered by the Trust as a direct result of
any negligence, fraud or willful default in the performance of
its duties. The Custodians liability under the Allocated
Bullion Account Agreement is further limited to the market value
of the gold held in the Trust Allocated Account at the time
such negligence, fraud or willful default is discovered by the
Custodian, provided that the Custodian promptly notifies the
Trustee of its discovery. The Custodians liability under
the Unallocated Bullion Account Agreement is further limited to
the amount of the gold credited to the Trust Unallocated
Account at the time such negligence, fraud or willful default is
discovered by the Custodian, provided that the Custodian
promptly notifies the Trustee of its discovery.
Furthermore, the Custodian has no duty to make or take or to
require any subcustodian selected by it to make or take any
special arrangements or precautions beyond those required by the
Custody Rules or as specifically set forth in the Custody
Agreements.
In the event of a loss caused by the failure of the Custodian or
a subcustodian to exercise reasonable care, the Trustee, on
behalf of the Trust, has the right to seek recovery from the
Custodian or subcustodian in breach. The Custodian is not liable
for any delay in performance or any non-performance of any of
its obligations under the Custody Agreements by reason of any
cause beyond its reasonable control, including, acts of God, war
or terrorism.
Indemnity
Solely out of the Trusts assets, the Trust will indemnify
the Custodian and each of its officers, directors, employees and
affiliates on demand against all costs and expenses, damages,
liabilities and losses which the Custodian or any such officer,
director, employee or affiliate may suffer or incur in
connection with the Custody Agreements, except to the extent
that such sums are due directly to the Custodians
negligence, willful default or fraud.
Termination
The Trustee and the Custodian may each terminate any Custody
Agreement upon 90 business days prior notice. The Custody
Agreements will also terminate 90 business days after the
resignation or removal of the Trustee except as otherwise
provided in the Custody Agreements. If either the Allocated
Bullion Account Agreement or the Unallocated Bullion Account
Agreement is terminated, the other agreement automatically
terminates.
Governing
Law
The Custody Agreements are governed by English law. The Trustee
and the Custodian both consent to the non-exclusive jurisdiction
of the courts of the State of New York and the federal courts
located in the borough of Manhattan in New York City. Such
consent is not required for any person to assert a claim of New
York jurisdiction over the Trustee or the Custodian.
Description
of the Shares
General
The Trustee is authorized under the Trust Indenture to
create and issue an unlimited number of Shares. The Shares
represent units of fractional undivided beneficial interest in
and ownership of the Trust and
20
have no par value. Any creation and issuance of Shares above the
amount registered on the registration statement of which this
report is a part will require the registration of such
additional Shares.
Description
of Limited Rights
The Shares do not represent a traditional investment and
Shareholders should not view them as similar to
shares of a corporation operating a business
enterprise with management and a board of directors. As a
Shareholder, you do not have the statutory rights normally
associated with the ownership of shares of a corporation,
including, for example, the right to bring
oppression or derivative actions. All
Shares are of the same class with equal rights and privileges.
Each Share is transferable, is fully paid and non-assessable and
entitles the holder to vote on the limited matters upon which
Shareholders may vote under the Trust Indenture. The Shares
do not entitle their holders to any conversion or pre-emptive
rights, or, except as provided below, any redemption rights or
rights to distributions.
Distributions
The Trust Indenture provides for distributions to
Shareholders in only two circumstances. First, if the Trustee
and the Sponsor determine that the Trusts cash account
balance exceeds the anticipated expenses of the Trust for the
next 12 months and the excess amount is more than $0.01 per
Share outstanding, they shall direct the excess amount to be
distributed to the Shareholders. Second, if the Trust is
terminated and liquidated, the Trustee will distribute to the
Shareholders any amounts remaining after the satisfaction of all
outstanding liabilities of the Trust and the establishment of
such reserves for applicable taxes, other governmental charges
and contingent or future liabilities as the Trustee shall
determine. Shareholders of record on the record date fixed by
the Trustee for a distribution will be entitled to receive their
pro rata portion of any distribution.
Voting
and Approvals
Under the Trust Indenture, Shareholders have no voting
rights, except in limited circumstances. Shareholders holding at
least
662/3%
of the Shares outstanding may vote to remove the Trustee. The
Trustee may terminate the Trust upon the agreement of
Shareholders owning at least
662/3%
of the outstanding Shares. In addition, certain amendments to
the Trust Indenture require 51% or unanimous consent of the
Shareholders.
Book-Entry
Form
Individual certificates will not be issued for the Shares.
Instead, global certificates are deposited by the Trustee with
DTC and registered in the name of Cede & Co., as
nominee for DTC. The global certificates evidence all of the
Shares outstanding at any time. Under the Trust Indenture,
Shareholders are limited to: (1) DTC Participants;
(2) those who maintain, either directly or indirectly, a
custodial relationship with a DTC Participant, or Indirect
Participants; and (3) those banks, brokers, dealers, trust
companies and others who hold interests in the Shares through
DTC Participants or Indirect Participants. The Shares are only
transferable through the book-entry system of DTC. Shareholders
who are not DTC Participants may transfer their Shares through
DTC by instructing the DTC Participant holding their Shares (or
by instructing the Indirect Participant or other entity through
which their Shares are held) to transfer the Shares. Transfers
are made in accordance with standard securities industry
practice.
United
States Federal Tax Consequences
The following discussion of the material United States federal
income tax consequences that generally apply to the purchase,
ownership and disposition of Shares by a U.S. Shareholder (as
defined below), and certain United States federal income, gift
and estate tax consequences that may apply to an investment in
Shares by a Non-U.S. Shareholder (as defined below), represents,
insofar as it describes conclusions as to U.S. federal tax law
and subject to the limitations and qualifications described
therein, the opinion of Carter Ledyard & Milburn LLP,
special United States federal tax counsel to the
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Sponsor. The discussion below is based on the United States
Internal Revenue Code of 1986, as amended, or Code, Treasury
Regulations promulgated under the Code and judicial and
administrative interpretations of the Code, all as in effect on
the date of this annual report and all of which are subject to
change either prospectively or retroactively. The tax treatment
of Shareholders may vary depending upon their own particular
circumstances. Certain Shareholders (including broker-dealers,
traders or other investors with special circumstances) may be
subject to special rules not discussed below. In addition, the
following discussion applies only to investors who hold Shares
as capital assets within the meaning of Code
section 1221. Moreover, the discussion below does not
address the effect of any state, local or foreign tax law on an
owner of Shares. Purchasers of Shares are urged to consult their
own tax advisors with respect to all federal, state, local and
foreign tax law considerations potentially applicable to their
investment in Shares.
For purposes of this discussion, a U.S. Shareholder
is a Shareholder that is:
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An individual who is treated as a citizen or resident of the
United States for U.S. federal income tax purposes;
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A corporation created or organized in or under the laws of the
United States or any political subdivision thereof;
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An estate, the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its
source; or
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A trust, if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more U.S. persons have the authority to control all
substantial decisions of the trust.
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A Shareholder that is not a U.S. Shareholder as defined above is
generally considered a Non-U.S. Shareholder for
purposes of this discussion. For United States federal income
tax purposes, the treatment of any beneficial owner of an
interest in a partnership, including any entity treated as a
partnership for United States federal income tax purposes, will
generally depend upon the status of the partner and upon the
activities of the partnership. Partnerships and partners in
partnerships should consult their tax advisors about the United
States federal income tax consequences of purchasing, owning and
disposing of Shares.
Taxation
of The Trust
The Trust is treated as a grantor trust for U.S.
federal income tax purposes. As a result, the Trust itself will
not pay to U.S. federal income tax. Instead, the Trusts
income and expenses flow through to the
Shareholders, and the Trustee will report the Trusts
income, gains, losses and deductions to the Internal Revenue
Service, or IRS, on that basis.
Taxation
of U.S. Shareholders
Shareholders generally will be treated, for U.S. federal income
tax purposes, as if they directly owned a pro rata share of the
underlying assets held in the Trust. Shareholders also will be
treated as if they directly received their respective pro rata
shares of the Trusts income, if any, and as if they
directly incurred their respective pro rata shares of the
Trusts expenses. In the case of a Shareholder that
purchases Shares for cash, its initial tax basis in its pro rata
share of the assets held in the Trust at the time it acquires
its Shares will be equal to its cost of acquiring the Shares. In
the case of a Shareholder that acquires its Shares by delivering
gold to the Trust, the delivery of gold to the Trust in exchange
for the underlying gold represented by the Shares will not be a
taxable event to the Shareholder, and the Shareholders tax
basis and holding period for the Shareholders pro rata
share of the gold held in the Trust will be the same as its tax
basis and holding period for the gold delivered in exchange
therefor. For purposes of this discussion, it is assumed that
all of a Shareholders Shares are acquired on the same
date, at the same price per Share and, except where otherwise
noted, that the sole asset of the Trust is gold.
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When the Trust sells gold, for example to pay expenses, a
Shareholder generally will recognize gain or loss in an amount
equal to the difference between (1) the Shareholders
pro rata share of the amount realized by the Trust upon the sale
and (2) the Shareholders tax basis for its pro rata
share of the gold that was sold, which gain or loss will
generally be long-term or short-term capital gain or loss,
depending upon whether the Shareholder has held its Shares for
more than one year. A Shareholders tax basis for its share
of any gold sold by the Trust generally will be determined by
multiplying the Shareholders total basis for its share of
all of the gold held in the Trust immediately prior to the sale,
by a fraction the numerator of which is the amount of gold sold
and the denominator of which is the total amount of the gold
held in the Trust immediately prior to the sale. After any such
sale, a Shareholders tax basis for its pro rata share of
the gold remaining in the Trust will be equal to its tax basis
for its share of the total amount of the gold held in the Trust
immediately prior to the sale, less the portion of such basis
allocable to its share of the gold that was sold.
Upon a Shareholders sale of some or all of its Shares, the
Shareholder will be treated as having sold the portion of its
pro rata share of the gold held in the Trust at the time of the
sale that is attributable to the Shares sold. Accordingly, the
Shareholder generally will recognize gain or loss on the sale in
an amount equal to the difference between (1) the amount
realized pursuant to the sale of the Shares, and (2) the
Shareholders tax basis for the portion of its pro rata
share of the gold held in the Trust at the time of sale that is
attributable to the Shares sold, as determined in the manner
described in the preceding paragraph.
A redemption of some or all of a Shareholders Shares in
exchange for the underlying gold represented by the Shares
redeemed generally will not be a taxable event to the
Shareholder. The Shareholders tax basis for the gold
received in the redemption generally will be the same as the
Shareholders tax basis for the portion of its pro rata
share of the gold held in the Trust immediately prior to the
redemption that is attributable to the Shares redeemed. The
Shareholders holding period with respect to the gold
received should include the period during which the Shareholder
held the Shares redeemed. A subsequent sale of the gold received
by the Shareholder will be a taxable event.
After any sale or redemption of less than all of a
Shareholders Shares, the Shareholders tax basis for
its pro rata share of the gold held in the Trust immediately
after such sale or redemption generally will be equal to its tax
basis for its share of the total amount of the gold held in the
Trust immediately prior to the sale or redemption, less the
portion of such basis which is taken into account in determining
the amount of gain or loss recognized by the Shareholder upon
such sale or, in the case of a redemption, which is treated as
the basis of the gold received by the Shareholder in the
redemption.
As noted above, the foregoing discussion assumes that all of a
Shareholders Shares were acquired on the same date and at
the same price per Share. If a Shareholder owns multiple lots of
Shares (i.e., Shares acquired on different dates
and/or at
different prices), it is uncertain whether the Shareholder may
use the specific identification rules that apply
under Treas. Reg. § 1.1012-1(c) in the case of sales
of shares of stock, in determining the amount, and the long-term
or short-term character, of any gain or loss recognized by the
Shareholder upon the sale of gold by the Trust, upon the sale of
any Shares by the Shareholder, or upon the sale by the
Shareholder of any gold received by it upon the redemption of
any of its Shares. The IRS could take the position that a
Shareholder has a blended tax basis and holding period for its
pro rata share of the underlying gold in the Trust. Shareholders
that hold multiple lots of Shares, or that are contemplating
acquiring multiple lots of Shares, should consult their own tax
advisors as to the determination of the tax basis and holding
period for the underlying gold related to such Shares.
Maximum
28% Long-Term Capital Gains Tax Rate for U.S. Shareholders Who
are Individuals
Under current law, gains recognized by individuals from the sale
of collectibles, including gold bullion, held for
more than one year are taxed at a maximum rate of 28%, rather
than the 15% rate applicable to most other long-term capital
gains. For these purposes, gain recognized by an individual upon
the sale of an interest in a trust that holds collectibles is
treated as gain recognized on the sale of
23
collectibles, to the extent that the gain is attributable to
unrealized appreciation in value of the collectibles held by the
trust. Therefore, any gain recognized by an individual U.S.
Shareholder attributable to a sale of Shares held for more than
one year, or attributable to the Trusts sale of any gold
bullion which the Shareholder is treated (through its ownership
of Shares) as having held for more than one year, generally will
be taxed at a maximum rate of 28%. The tax rates for capital
gains recognized upon the sale of assets held by an individual
U.S. Shareholder for one year or less or by a taxpayer other
than an individual U.S. taxpayer are generally the same as those
at which ordinary income is taxed.
3.8% Tax
On Net Investment Income For Taxable Years Beginning After
December 31, 2012
The Health Care Reform and Education Reconciliation Act of 2010
(Pub. Law
111-152)
requires certain U.S. Shareholders who are individuals to
pay a 3.8% tax on the lesser of the excess of their modified
adjusted gross income over a threshold amount ($250,000 for
married persons filing jointly and $200,000 for single
taxpayers) or their net investment income, which
generally includes capital gains from the disposition of
property, for taxable years beginning after December 31,
2012. This tax is in addition to any capital gains taxes due on
such investment income. A similar tax will apply to estates and
trusts. U.S. Shareholders should consult their tax advisors
regarding the effect, if any, this law may have on an investment
in the Shares.
Brokerage
Fees and Trust Expenses
Any brokerage or other transaction fee incurred by a Shareholder
in purchasing Shares will be treated as part of the
Shareholders tax basis in the underlying assets of the
Trust. Similarly, any brokerage fee incurred by a Shareholder in
selling Shares will reduce the amount realized by the
Shareholder with respect to the sale.
Shareholders will be required to recognize gain or loss upon a
sale of gold by the Trust (as discussed above), even though some
or all of the proceeds of such sale are used by the Trustee to
pay Trust expenses. Shareholders may deduct their respective pro
rata shares of each expense incurred by the Trust to the same
extent as if they directly incurred the expense. Shareholders
who are individuals, estates or trusts, however, may be required
to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions. Individuals may deduct
certain miscellaneous itemized deductions only to the extent
they exceed 2% of adjusted gross income. In addition, such
deductions may be subject to phase-outs and other limitations
under applicable provisions of the Code.
Investment
by U.S. Tax-Exempt Shareholders
U.S. Tax-Exempt Shareholders are subject to United States
federal income tax only on their unrelated business taxable
income, or UBTI. Unless they incur debt in order to purchase
Shares, it is expected that U.S. Tax-Exempt Shareholders should
not realize UBTI in respect of income or gains from the Shares.
U.S. Tax-Exempt Shareholders should consult their own
independent tax advisors regarding the United States federal
income tax consequences of holding Shares in light of their
particular circumstances.
Investment
by Regulated Investment Companies
Mutual funds and other investment vehicles which are
regulated investment companies within the meaning of
Code section 851 should consult with their tax advisors
concerning (1) the likelihood that an investment in Shares,
although they are a security within the meaning of
the Investment Company Act of 1940, may be considered an
investment in the underlying gold for purposes of Code
section 851(b), and (2) the extent to which an
investment in Shares might nevertheless be consistent with
preservation of their qualification under Code section 851.
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Investment
by Certain Retirement Plans
Code section 408(m) provides that the acquisition of a
collectible by an individual retirement account, or
IRA, or a participant-directed account maintained under any plan
that is tax-qualified under Code section 401(a) is treated
as a taxable distribution from the account to the owner of the
IRA, or to the participant for whom the plan account is
maintained, of an amount equal to the cost to the account of
acquiring the collectible. The Sponsor has received a private
letter ruling from the IRS to the effect that a purchase of
Shares by an IRA, or by a participant-directed account under a
Code section 401(a) plan, will not be treated as resulting
in a taxable distribution to the IRA owner or plan participant
under Code section 408(m). However, if any of the Shares so
purchased are distributed from the IRA or plan account to the
IRA owner or plan participant, or if any gold received by such
IRA or plan account upon the redemption of any of the Shares
purchased by it is distributed to the IRA owner or plan
participant, the Shares or gold so distributed will be subject
to federal income tax in the year of distribution, to the extent
provided under the applicable provisions of Code
section 408(d) or Code section 402. See also
ERISA and Related Considerations.
U.S.
Information Reporting and Backup Withholding for U.S. and
Non-U.S. Shareholders
The Trustee will file certain information returns with the IRS,
and provide certain tax-related information to Shareholders, in
connection with the Trust. Each Shareholder will be provided
with information regarding its allocable portion of the
Trusts annual income (if any) and expenses.
A U.S. Shareholder may be subject to U.S. backup withholding tax
in certain circumstances unless it provides its taxpayer
identification number and complies with certain certification
procedures. Non-U.S. Shareholders may have to comply with
certification procedures to establish that they are not a U.S.
person in order to avoid the information reporting and backup
withholding tax requirements.
The amount of any backup withholding will be allowed as a credit
against a Shareholders U.S. federal income tax liability
and may entitle such a Shareholder to a refund, provided that
the required information is furnished to the IRS.
Income
Taxation of Non-U.S. Shareholders
The Trust does not expect to generate taxable income except for
gain (if any) upon the sale of gold. A Non-U.S. Shareholder
generally will not be subject to U.S. federal income tax with
respect to gain recognized upon the sale or other disposition of
Shares, or upon the sale of gold by the Trust, unless
(1) the Non-U.S. Shareholder is an individual and is
present in the United States for 183 days or more during
the taxable year of the sale or other disposition, and the gain
is treated as being from United States sources; or
(2) the gain is effectively connected with the conduct by
the Non-U.S. Shareholder of a trade or business in the United
States and certain other conditions are met.
Estate
and Gift Tax Considerations for Non-U.S. Shareholders
Under the U.S. federal tax law, individuals who are neither
citizens nor residents (as determined for estate and gift tax
purposes) of the United States are subject to estate tax on all
property that has a U.S. situs. Shares may well be
considered to have a U.S. situs for these purposes. If they are,
then Shares would be includible in the U.S. gross estate of a
non-resident alien Shareholder. Currently, U.S. estate tax is
imposed at rates of up to 35% of the fair market value of the
taxable estate. The U.S. estate tax rate is subject to change in
future years. In addition, the U.S. federal
generation-skipping transfer tax may apply in
certain circumstances. The estate of a non-resident alien
Shareholder who was resident in a country which has an estate
tax treaty with the United States may be entitled to benefit
from such treaty.
For non-citizens and non-residents of the United States, the
U.S. federal gift tax generally applies only to gifts of
tangible personal property or real property having a U.S. situs.
Tangible personal property (including gold) has a U.S. situs if
it is physically located in the United States. Although the
matter is
25
not settled, it appears that ownership of Shares should not be
considered ownership of the underlying gold for this purpose,
even to the extent that gold were held in custody in the United
States. Instead, Shares should be considered intangible
property, and therefore they should not be subject to U.S. gift
tax if transferred during the holders lifetime.
Such Shareholders are urged to consult their tax advisors
regarding the possible application of U.S. estate, gift and
generation-skipping transfer taxes in their particular
circumstances.
Taxation
in Jurisdictions Other than the United States
Prospective purchasers of Shares that are based in or acting out
of a jurisdiction other than the United States are advised
to consult their own tax advisors as to the tax consequences,
under the laws of such jurisdiction (or any other jurisdiction
not being the United States to which they are subject), of their
purchase, holding, sale and redemption of or any other dealing
in Shares and, in particular, as to whether any value added tax,
other consumption tax or transfer tax is payable in relation to
such purchase, holding, sale, redemption or other dealing.
ERISA and
Related Considerations
The Employee Retirement Income Security Act of 1974, as amended,
or ERISA,
and/or Code
section 4975 impose certain requirements on employee
benefit plans and certain other plans and arrangements,
including individual retirement accounts and annuities, Keogh
plans, and certain collective investment funds or insurance
company general or separate accounts in which such plans or
arrangements are invested, that are subject to ERISA
and/or the
Code, collectively the Plans, and on persons who are fiduciaries
with respect to the investment of assets treated as plan
assets of a Plan. Government plans and some church plans
are not subject to the fiduciary responsibility provisions of
ERISA or the provisions of section 4975 of the Code, but
may be subject to substantially similar rules under state or
other federal law.
In contemplating an investment of a portion of Plan assets in
Shares, the Plan fiduciary responsible for making such
investment should carefully consider, taking into account the
facts and circumstances of the Plan, the Risk
Factors discussed below and whether such investment is
consistent with its fiduciary responsibilities, including, but
not limited to (1) whether the fiduciary has the authority
to make the investment under the appropriate governing plan
instrument, (2) whether the investment would constitute a
direct or indirect non-exempt prohibited transaction with a
party in interest, (3) the Plans funding objectives,
and (4) whether under the general fiduciary standards of
investment prudence and diversification such investment is
appropriate for the Plan, taking into account the overall
investment policy of the Plan, the composition of the
Plans investment portfolio and the Plans need for
sufficient liquidity to pay benefits when due.
The Shares constitute publicly-offered securities as
defined in Department of Labor Regulations
§ 2510.3-101(b)(2). Accordingly, Shares purchased by a
Plan, and not the Plans interest in the underlying gold
bullion held in the Trust represented by the Shares, should be
treated as assets of the Plan, for purposes of applying the
fiduciary responsibility and prohibited
transaction rules of ERISA and the Code. See also
United States Federal Tax ConsequencesInvestment by
Certain Retirement Plans.
You should consider carefully the risks described below
before making an investment decision. You should also
refer to the other information included in this report,
including the Trusts financial statements and the related
notes.
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The value of the Shares relates directly to the value of
the gold held by the Trust and fluctuations in the price of gold
could materially adversely affect an investment in the
Shares.
The Shares are designed to mirror as closely as possible the
performance of the price of gold, and the value of the Shares
relates directly to the value of the gold held by the Trust,
less the Trusts liabilities (including estimated accrued
expenses). The price of gold has fluctuated widely over the past
several years. Several factors may affect the price of gold,
including:
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Global gold supply and demand, which is influenced by such
factors as forward selling by gold producers, purchases made by
gold producers to unwind gold hedge positions, central bank
purchases and sales, and production and cost levels in major
gold-producing countries such as South Africa, the United States
and Australia;
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Global or regional political, economic or financial events and
situations;
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Investors expectations with respect to the rate of
inflation;
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Currency exchange rates;
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Interest rates; and
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Investment and trading activities of hedge funds and commodity
funds.
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The Shares have experienced significant price fluctuations. If
gold markets continue to be subject to sharp fluctuations, this
may result in potential losses if you need to sell your Shares
at a time when the price of gold is lower than it was when you
made your investment. Even if you are able to hold Shares for
the long-term, you may never experience a profit, since gold
markets have historically experienced extended periods of flat
or declining prices, in addition to sharp fluctuations.
In addition, investors should be aware that there is no
assurance that gold will maintain its long-term value in terms
of purchasing power in the future. In the event that the price
of gold declines, the Sponsor expects the value of an investment
in the Shares to decline proportionately.
The amount of gold represented by the Shares will continue
to be reduced during the life of the Trust due to the sales of
gold necessary to pay the Trusts expenses irrespective of
whether the trading price of the Shares rises or falls in
response to changes in the price of gold.
Each outstanding Share represents a fractional, undivided
interest in the gold held by the Trust. The Trust does not
generate any income and regularly sells gold to pay for its
ongoing expenses. Therefore, the amount of gold represented by
each Share has gradually declined over time. This is also true
with respect to Shares that are issued in exchange for
additional deposits of gold into the Trust, as the amount of
gold required to create Shares proportionately reflects the
amount of gold represented by the Shares outstanding at the time
of creation. Assuming a constant gold price, the trading price
of the Shares is expected to gradually decline relative to the
price of gold as the amount of gold represented by the Shares
gradually declines.
Investors should be aware that the gradual decline in the amount
of gold represented by the Shares will occur regardless of
whether the trading price of the Shares rises or falls in
response to changes in the price of gold. The estimated ordinary
operating expenses of the Trust, which accrue daily commencing
after the first day of trading of the Shares, are described in
Business of the TrustTrust Expenses.
The Trust is a passive investment vehicle. This means that
the value of the Shares may be adversely affected by Trust
losses that, if the Trust had been actively managed, it might
have been possible to avoid.
The Trustee does not actively manage the gold held by the Trust.
This means that the Trustee does not sell gold at times when its
price is high, or acquire gold at low prices in the expectation
of future price increases. It also means that the Trustee does
not make use of any of the hedging techniques available to
professional gold investors to attempt to reduce the risks of
losses resulting from price decreases. Any losses sustained by
the Trust will adversely affect the value of the Shares.
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The Shares may trade at a price which is at, above or
below the NAV per Share and any discount or premium in the
trading price relative to the NAV per Share may widen as a
result of non-concurrent trading hours between the COMEX and
NYSE Arca.
The Shares may trade at, above or below the NAV per Share. The
NAV per Share fluctuates with changes in the market value of the
Trusts assets. The trading price of the Shares fluctuates
in accordance with changes in the NAV per Share as well as
market supply and demand. The amount of the discount or premium
in the trading price relative to the NAV per Share may be
influenced by non-concurrent trading hours between the COMEX and
NYSE Arca. While the Shares trade on NYSE Arca until
8:00 PM New York time, liquidity in the global gold market
may be reduced after the close of the COMEX at 1:30 PM New
York time. As a result, during this time, trading spreads, and
the resulting premium or discount, on the Shares may widen.
The sale of the Trusts gold to pay expenses at a
time of low gold prices could adversely affect the value of the
Shares.
The Trustee sells gold held by the Trust to pay Trust expenses
on an as-needed basis irrespective of then-current gold prices.
The Trust is not actively managed and no attempt will be made to
buy or sell gold to protect against or to take advantage of
fluctuations in the price of gold. Consequently, the
Trusts gold may be sold at a time when the gold price is
low, resulting in a negative effect on the value of the Shares.
Crises may motivate large-scale sales of gold which could
decrease the price of gold and adversely affect an investment in
the Shares.
The possibility of large-scale distress sales of gold in times
of crisis may have a negative impact on the price of gold and
adversely affect an investment in the Shares. For example, the
1998 Asian financial crisis resulted in significant sales of
gold by individuals which depressed the price of gold. Crises in
the future may impair golds price performance which would,
in turn, adversely affect an investment in the Shares.
Purchasing activity in the gold market associated with the
delivery of gold bullion to the Trust in exchange for Baskets
may cause a temporary increase in the price of gold. This
increase may adversely affect an investment in the
Shares.
Purchasing activity associated with acquiring the gold bullion
required for deposit into the Trust in connection with the
creation of Baskets may temporarily increase the market price of
gold, which will result in higher prices for the Shares.
Temporary increases in the market price of gold may also occur
as a result of the purchasing activity of other market
participants. Other market participants may attempt to benefit
from an increase in the market price of gold that may result
from increased purchasing activity of gold connected with the
issuance of Baskets. Consequently, the market price of gold may
decline immediately after Baskets are created. If the price of
gold declines, the trading price of the Shares will also decline.
Shareholders do not have the protections associated with
ownership of shares in an investment company registered under
the Investment Company Act of 1940 or the protections afforded
by the CEA.
The Trust is not registered as an investment company under the
Investment Company Act of 1940 and is not required to register
under such act. Consequently, Shareholders do not have the
regulatory protections provided to investors in investment
companies. The Trust will not hold or trade in commodity futures
contracts regulated by the CEA, as administered by the CFTC.
Furthermore, the Trust is not a commodity pool for purposes of
the CEA, and none of the Sponsor, the Trustee or the Marketing
Agent is subject to regulation by the CFTC as a commodity pool
operator or a commodity trading advisor in connection with the
Shares. Consequently, Shareholders do not have the regulatory
protections provided to investors in CEA-regulated instruments
or commodity pools.
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The Trust may be required to terminate and liquidate at a
time that is disadvantageous to Shareholders.
If the Trust is required to terminate and liquidate, such
termination and liquidation could occur at a time which is
disadvantageous to Shareholders, such as when gold prices are
lower than the gold prices at the time when Shareholders
purchased their Shares. In such a case, when the Trusts
gold is sold as part of the Trusts liquidation, the
resulting proceeds distributed to Shareholders will be less than
if gold prices were higher at the time of sale.
The liquidity of the Shares may also be affected by the
withdrawal of Authorized Participants.
In the event that one of more Authorized Participants which has
substantial interests in the Shares withdraws from
participation, the liquidity of the Shares will likely decrease,
which could adversely affect the market price of the Shares.
The lack of an active trading market or a halt in trading
of the Shares may result in losses on investment at the time of
disposition of the Shares.
Although Shares are listed for trading on NYSE Arca, it cannot
be assumed that an active trading market for the Shares will be
maintained. If an investor needs to sell Shares at a time when
no active market for Shares exists, or there is a halt in
trading of securities generally or of the Shares, this will most
likely adversely affect the price the investor receives for the
Shares (assuming the investor is able to sell them).
The price of gold may be affected by the sale of gold by
ETFs or other exchange traded vehicles tracking gold
markets.
To the extent existing exchange traded funds, or ETFs, or other
exchange traded vehicles tracking gold markets represent a
significant proportion of demand for physical gold bullion,
large redemptions of the securities of these ETFs or other
exchange traded vehicles could negatively affect physical gold
bullion prices and the price and NAV of the Shares.
Redemption orders are subject to postponement, suspension
or rejection by the Trustee under certain circumstances.
The Trustee may, in its discretion, and will when directed by
the Sponsor, suspend the right of redemption or postpone the
redemption settlement date, (1) for any period during which
NYSE Arca is closed other than customary weekend or holiday
closings, or trading on NYSE Arca is suspended or restricted,
(2) for any period during which an emergency exists as a
result of which the delivery, disposal or evaluation of gold is
not reasonably practicable, or (3) for such other period as
the Sponsor determines to be necessary for the protection of
Shareholders. In addition, the Trustee will reject a redemption
order if the order is not in proper form as described in the
Participant Agreement or if the fulfillment of the order, in the
opinion of its counsel, might be unlawful. Any such
postponement, suspension or rejection could adversely affect a
redeeming Shareholder. For example, the resulting delay may
adversely affect the value of the Shareholders redemption
distribution if the price of the Shares declines during the
period of the delay. See Creation and Redemption of
SharesRedemption ProceduresSuspension or
rejection of redemption orders. Under the
Trust Indenture, the Sponsor and the Trustee disclaim any
liability for any loss or damage that may result from any such
suspension or postponement.
Shareholders do not have the rights enjoyed by investors
in certain other vehicles.
As interests in an investment trust, the Shares have none of the
statutory rights normally associated with the ownership of
shares of a corporation (including, for example, the right to
bring oppression or derivative actions).
In addition, the Shares have limited voting and distribution
rights (for example, Shareholders do not have the right to elect
directors and will not receive dividends). See Description
of the Shares for a description of the limited rights of
holders of Shares.
29
An investment in the Shares may be adversely affected by
competition from other methods of investing in gold.
The Trust competes with other financial vehicles, including
traditional debt and equity securities issued by companies in
the gold industry and other securities backed by or linked to
gold, direct investments in gold and investment vehicles similar
to the Trust. Market and financial conditions, and other
conditions beyond the Sponsors control, may make it more
attractive to invest in other financial vehicles or to invest in
gold directly, which could limit the market for the Shares and
reduce the liquidity of the Shares.
Substantial sales of gold by the official sector could
adversely affect an investment in the Shares.
The official sector consists of central banks, other
governmental agencies and multi-lateral institutions that buy,
sell and hold gold as part of their reserve assets. The official
sector holds a significant amount of gold, most of which is
static, meaning that it is held in vaults and is not bought,
sold, leased or swapped or otherwise mobilized in the open
market. A number of central banks have sold portions of their
gold over the past 10 years, with the result that the
official sector, taken as a whole, has been a net supplier to
the open market. Since 1999, most sales have been made in a
coordinated manner under the terms of the Central Bank Gold
Agreement, as amended, under which 18 of the worlds major
central banks (including the European Central Bank) agree to
limit the level of their gold sales and lending to the market.
See The Gold IndustrySources of Gold Supply
and Movements in the Price of Gold Since the Inception of
the Trust for more details. In the event that future
economic, political or social conditions or pressures require
members of the official sector to liquidate their gold assets
all at once or in an uncoordinated manner, the demand for gold
might not be sufficient to accommodate the sudden increase in
the supply of gold to the market. Consequently, the price of
gold could decline significantly, which would adversely affect
an investment in the Shares.
The estimated ordinary operating expenses of the Trust, which
accrue daily, are described in Business of the
TrustTrust Expenses.
The Trusts gold may be subject to loss, damage,
theft or restriction on access.
There is a risk that some or all of the Trusts gold bars
held by the Custodian or any subcustodian on behalf of the Trust
could be lost, damaged or stolen. Access to the Trusts
gold bars could also be restricted by natural events (such as an
earthquake) or human actions (such as a terrorist attack). Any
of these events may adversely affect the operations of the Trust
and, consequently, an investment in the Shares.
The Trust may not have adequate sources of recovery if its
gold is lost, damaged, stolen or destroyed and recovery may be
limited, even in the event of fraud, to the market value of the
gold at the time the fraud is discovered.
Shareholders recourse against the Trust, the Trustee and
the Sponsor, under New York law, the Custodian, under English
law, and any subcustodians under the law governing their custody
operations is limited. The Trust does not insure its gold. The
Custodian maintains insurance with regard to its business on
such terms and conditions as it considers appropriate which does
not cover the full amount of gold. The Trust is not a
beneficiary of any such insurance and does not have the ability
to dictate the existence, nature or amount of coverage.
Therefore, Shareholders cannot be assured that the Custodian
will maintain adequate insurance or any insurance with respect
to the gold held by the Custodian on behalf of the Trust. In
addition, the Custodian and the Trustee do not require any
direct or indirect subcustodians to be insured or bonded with
respect to their custodial activities or in respect of the gold
held by them on behalf of the Trust. Consequently, a loss may be
suffered with respect to the Trusts gold which is not
covered by insurance and for which no person is liable in
damages.
The liability of the Custodian is limited under the Custody
Agreements. Under the Custody Agreements, the Custodian is only
liable for losses that are the direct result of its own
negligence, fraud or willful default in the performance of its
duties. Any such liability is further limited, in the case
30
of the Allocated Bullion Account Agreement, to the market value
of the gold bars held in the Trusts allocated gold account
(Trust Allocated Account) at the time such negligence,
fraud or willful default is discovered by the Custodian and, in
the case of the Unallocated Bullion Account Agreement, to the
amount of gold credited to the Trusts unallocated gold
account (Trust Unallocated Account) at the time such
negligence, fraud or willful default is discovered by the
Custodian. The Custodian is not contractually or otherwise
liable for any losses suffered by any Authorized Participant or
Shareholder that are not the direct result of its own gross
negligence, fraud or willful default in the performance of its
duties under such agreement, and in no event will its liability
exceed the market value of the balance in the Authorized
Participant Unallocated Account at the time such gross
negligence, fraud or willful default is discovered by the
Custodian.
In addition, the Custodian will not be liable for any delay in
performance or any non-performance of any of its obligations
under the Custody Agreements by reason of any cause beyond its
reasonable control, including acts of God, war or terrorism. As
a result, the recourse of the Trustee or the investor, under
English law, is limited. Furthermore, under English common law,
the Custodian or any subcustodian will not be liable for any
delay in the performance or any non-performance of its custodial
obligations by reason of any cause beyond its reasonable control.
Gold bars may be held by one or more subcustodians appointed by
the Custodian, or employed by the subcustodians appointed by the
Custodian, until it is transported to the Custodians
London vault premises. Under the Allocated Bullion Account
Agreement, except for an obligation on the part of the Custodian
to use commercially reasonable efforts to obtain delivery of the
Trusts gold bars from any subcustodians appointed by the
Custodian, the Custodian is not liable for the acts or omissions
of its subcustodians unless the selection of such subcustodians
was made negligently or in bad faith. There are expected to be
no written contractual arrangements between subcustodians that
hold the Trusts gold bars and the Trustee or the
Custodian, because traditionally such arrangements are based on
the LBMAs rules and on the customs and practices of the
London bullion market. In the event of a legal dispute with
respect to or arising from such arrangements, it may be
difficult to define such customs and practices. The LBMAs
rules may be subject to change outside the control of the Trust.
Under English law, neither the Trustee, nor the Custodian would
have a supportable breach of contract claim against a
subcustodian for losses relating to the safekeeping of gold. If
the Trusts gold bars are lost or damaged while in the
custody of a subcustodian, the Trust may not be able to recover
damages from the Custodian or the subcustodian.
The obligations of the Custodian under the Allocated Bullion
Account Agreement, the Unallocated Bullion Account Agreement and
the Participant Unallocated Bullion Account Agreement are
governed by English law. The Custodian may enter into
arrangements with English subcustodians, which arrangements may
also be governed by English law. The Trust is a New York
investment trust. Any United States, New York or other court
situated in the United States may have difficulty interpreting
English law (which, insofar as it relates to custody
arrangements, is largely derived from court rulings rather than
statute), LBMA rules or the customs and practices in the London
custody market. It may be difficult or impossible for the Trust
to sue a subcustodian in a United States, New York or other
court situated in the United States. In addition, it may be
difficult, time consuming
and/or
expensive for the Trust to enforce in a foreign court a judgment
rendered by a United States, New York or other court situated in
the United States.
If the Trusts gold bars are lost, damaged, stolen or
destroyed under circumstances rendering a party liable to the
Trust, the responsible party may not have the financial
resources sufficient to satisfy the Trusts claim. For
example, as to a particular event of loss, the only source of
recovery for the Trust might be limited to the Custodian, as
currently it is the sole custodian holding all of the
Trusts gold; or one or more subcustodians, if appointed;
or, to the extent identifiable, other responsible third parties
(e.g., a thief or terrorist), any of which may not have the
financial resources (including liability insurance coverage) to
satisfy a valid claim of the Trust.
31
Neither the Shareholders nor any Authorized Participant has a
right under the Custody Agreements to assert a claim of the
Trustee against the Custodian or any subcustodian; claims under
the Custody Agreements may only be asserted by the Trustee on
behalf of the Trust.
Because neither the Trustee nor the Custodian oversees or
monitors the activities of subcustodians who may temporarily
hold the Trusts gold bars until transported to the
Custodians London vault, failure by the subcustodians to
exercise due care in the safekeeping of the Trusts gold
bars could result in a loss to the Trust.
Under the Allocated Bullion Account Agreement, the Custodian
agreed that it will hold all of the Trusts gold bars in
its own vault premises except when the gold bars have been
allocated in a vault other than the Custodians vault
premises, and in such cases the Custodian agreed that it will
use commercially reasonable efforts promptly to transport the
gold bars to the Custodians vault, at the Custodians
cost and risk. Nevertheless, there will be periods of time when
some portion of the Trusts gold bars will be held by one
or more subcustodians appointed by the Custodian or by a
subcustodian of such subcustodian. The Allocated Bullion Account
Agreement is described in Description of the Custody
Agreements.
The Custodian is required under the Allocated Bullion Account
Agreement to use reasonable care in appointing its subcustodians
but otherwise has no other responsibility in relation to the
subcustodians appointed by it. These subcustodians may in turn
appoint further subcustodians, but the Custodian is not
responsible for the appointment of these further subcustodians.
The Custodian does not undertake to monitor the performance by
subcustodians of their custody functions or their selection of
further subcustodians. The Trustee does not undertake to monitor
the performance of any subcustodian. Furthermore, the Trustee
may have no right to visit the premises of any subcustodian for
the purposes of examining the Trusts gold bars or any
records maintained by the subcustodian, and no subcustodian will
be obligated to cooperate in any review the Trustee may wish to
conduct of the facilities, procedures, records or
creditworthiness of such subcustodian. See Custody of the
Trusts Gold for more information about subcustodians
that may hold the Trusts gold.
In addition, the ability of the Trustee to monitor the
performance of the Custodian may be limited because under the
Custody Agreements the Trustee has only limited rights to visit
the premises of the Custodian for the purpose of examining the
Trusts gold bars and certain related records maintained by
the Custodian.
The ability of the Trustee and the Custodian to take legal
action against subcustodians may be limited, which increases the
possibility that the Trust may suffer a loss if a subcustodian
does not use due care in the safekeeping of the Trusts
gold bars.
If any subcustodian which holds gold on a temporary basis does
not exercise due care in the safekeeping of the Trusts
gold bars, the ability of the Trustee or the Custodian to
recover damages against such subcustodian may be limited to only
such recourse, if any, as may be available under applicable
English law or, if the subcustodian is not located in England,
under other applicable law. This is because there are expected
to be no written contractual arrangements between subcustodians
who may hold the Trusts gold bars and the Trustee or the
Custodian, as the case may be. If the Trustees or the
Custodians recourse against the subcustodian is so
limited, the Trust may not be adequately compensated for the
loss. For more information on the Trustees and the
Custodians ability to seek recovery against subcustodians
and the subcustodians duty to safekeep the Trusts
gold bars, see Custody of the Trusts Gold.
Gold held in the Trusts unallocated gold account and
any Authorized Participants unallocated gold account will
not be segregated from the Custodians assets. If the
Custodian becomes insolvent, its assets may not be adequate to
satisfy a claim by the Trust or any Authorized Participant. In
addition,
32
in the event of the Custodians insolvency, there may
be a delay and costs incurred in identifying the gold bars held
in the Trusts allocated gold account.
Gold which is part of a deposit for a purchase order or part of
a redemption distribution will be held for a time in the
Trust Unallocated Account and, previously or subsequently
in, the Authorized Participant Unallocated Account of the
purchasing or redeeming Authorized Participant. During those
times, the Trust and the Authorized Participant, as the case may
be, will have no proprietary rights to any specific bars of gold
held by the Custodian and will each be an unsecured creditor of
the Custodian with respect to the amount of gold held in such
unallocated accounts. In addition, if the Custodian fails to
allocate the Trusts gold in a timely manner, in the proper
amounts or otherwise in accordance with the terms of the
Unallocated Bullion Account Agreement, or if a subcustodian
fails to so segregate gold held by it on behalf of the Trust,
unallocated gold will not be segregated from the
Custodians assets, and the Trust will be an unsecured
creditor of the Custodian with respect to the amount so held in
the event of the insolvency of the Custodian. In the event the
Custodian becomes insolvent, the Custodians assets might
not be adequate to satisfy a claim by the Trust or the
Authorized Participant for the amount of gold held in their
respective unallocated gold accounts.
In the event of the insolvency of the Custodian, a liquidator
may seek to freeze access to the gold held in all of the
accounts held by the Custodian, including the Trust Allocated
Account. Although the Trust would retain legal title to the
allocated gold bars, the Trust could incur expenses in
connection with obtaining control of the allocated gold bars,
and the assertion of a claim by such liquidator for unpaid fees
due to the Custodian could delay creations and redemptions of
Baskets.
In issuing Baskets, the Trustee relies on certain
information received from the Custodian which is subject to
confirmation after the Trustee has relied on the information. If
such information turns out to be incorrect, Baskets may be
issued in exchange for an amount of gold which is more or less
than the amount of gold which is required to be deposited with
the Trust.
The Custodians definitive records are prepared after the
close of its business day. However, when issuing Baskets, the
Trustee relies on information reporting the amount of gold
credited to the Trusts accounts which it receives from the
Custodian during the business day and which is subject to
correction during the preparation of the Custodians
definitive records after the close of business. If the
information relied upon by the Trustee is incorrect, the amount
of gold actually received by the Trust may be more or less than
the amount required to be deposited for the issuance of Baskets.
The Trusts obligation to reimburse the Marketing
Agent and the Authorized Participants for certain liabilities in
the event the Sponsor fails to indemnify such parties could
adversely affect an investment in the Shares.
The Sponsor has agreed to indemnify the Marketing Agent, its
partners, directors and officers, and any person who controls
the Marketing Agent, and its respective successors and assigns,
against any loss, damage, expense, liability or claim that may
be incurred by the Marketing Agent in connection with
(1) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement of which
this report forms a part (including this report, any preliminary
prospectus, any prospectus supplement and any exhibits thereto)
or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, (2) any untrue statement
or alleged untrue statement of a material fact made by the
Sponsor with respect to any representations and warranties or
any covenants under the Marketing Agent Agreement, or failure of
the Sponsor to perform any agreement or covenant therein,
(3) any untrue statement or alleged untrue statement of a
material fact contained in any materials used in connection with
the marketing of the Shares, (4) circumstances surrounding
the third party allegations relating to patent and contract
disputes, or (5) the Marketing Agents performance of
its duties under the Marketing Agent Agreement, and to
contribute to payments that the Marketing Agent may be required
to make in respect thereof. The Trustee has agreed to reimburse
the Marketing Agent, solely from and to the extent of the
Trusts assets, for indemnification and contribution due
under the preceding sentence to the extent the Sponsor has not
paid such amounts directly when due. Under the
33
Participant Agreement, the Sponsor also has agreed to indemnify
the Authorized Participants against certain liabilities,
including liabilities under the Securities Act and to contribute
to payments that the Authorized Participants may be required to
make in respect of such liabilities. The Trustee has agreed to
reimburse the Authorized Participants, solely from and to the
extent of the Trusts assets, for indemnification and
contribution amounts due from the Sponsor in respect of such
liabilities to the extent the Sponsor has not paid such amounts
when due. In the event the Trust is required to pay any such
amounts, the Trustee would be required to sell assets of the
Trust to cover the amount of any such payment and the NAV of the
Trust would be reduced accordingly, thus adversely affecting an
investment in the Shares.
Under the Trust Indenture, the Sponsor may be able to seek
indemnification from the Trust for payments it makes in
connection with the Sponsors activities under the
Trust Indenture to the extent its conduct does not
disqualify it from receiving such indemnification under the
terms of the Trust Indenture. The Sponsor shall also be
indemnified from the Trust and held harmless against any loss,
liability or expense arising under the Marketing Agent Agreement
or any Participant Agreement insofar as such loss, liability or
expense arises from any untrue statement or alleged untrue
statement of a material fact contained in any written statement
provided to the Sponsor by the Trustee.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
Not applicable.
Not applicable.
|
|
Item 3.
|
Legal
Proceedings
|
Not applicable.
|
|
Item 4.
|
(Removed
and Reserved)
|
34
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
The Trusts Shares are listed on NYSE Arca under the symbol
GLD since December 13, 2007, after a transfer
from the New York Stock Exchange, or NYSE, where the Shares were
listed since its initial public offering on November 18,
2004. The Shares have traded on the Mexican Stock Exchange
(Bolsa Mexicana de Valores) since August 10, 2006, on the
Singapore Exchange Securities Trading Limited since
October 11, 2006, on the Tokyo Stock Exchange since
June 30, 2008 and the Stock Exchange of Hong Kong since
July 31, 2008.
The following table sets forth the range of reported high and
low closing prices of the Shares as reported on NYSE Arca for
the fiscal years ended September 30, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal Year Ended September 30, 2011:
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
$
|
139.17
|
|
|
$
|
128.46
|
|
March 31, 2011
|
|
$
|
140.34
|
|
|
$
|
127.94
|
|
June 30, 2011
|
|
$
|
152.36
|
|
|
$
|
139.20
|
|
September 30, 2011
|
|
$
|
184.59
|
|
|
$
|
144.90
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal Year Ended September 30, 2010:
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
$
|
119.18
|
|
|
$
|
97.92
|
|
March 31, 2010
|
|
$
|
112.85
|
|
|
$
|
104.05
|
|
June 30, 2010
|
|
$
|
122.83
|
|
|
$
|
110.26
|
|
September 30, 2010
|
|
$
|
127.95
|
|
|
$
|
113.51
|
|
The number of shareholders of record of the Trust as of
October 31, 2011 was approximately 239.
Monthly
Share Price
The following table sets forth, for each of the most recent six
months, the high and low closing prices of the Shares, as
reported for NYSE Arca transactions.
|
|
|
|
|
|
|
|
|
Month
|
|
High
|
|
|
Low
|
|
|
May 2011
|
|
|
150.43
|
|
|
|
143.47
|
|
June 2011
|
|
|
150.99
|
|
|
|
145.73
|
|
July 2011
|
|
|
158.41
|
|
|
|
144.94
|
|
August 2011
|
|
|
184.59
|
|
|
|
157.70
|
|
September 2011
|
|
|
183.23
|
|
|
|
156.20
|
|
October 2011
|
|
|
169.94
|
|
|
|
157.63
|
|
November 2011 (through November 18, 2011)
|
|
|
174.98
|
|
|
|
167.07
|
|
Issuer
Purchase of Equity Securities
Although the Trust does not purchase shares directly from its
shareholders, in connection with its redemption of Baskets, the
Trust redeemed 1,380 Baskets (138,000,000 Shares) during
the year ended September 30, 2011 and 437 Baskets
(43,700,000 Shares) during the year ended
September 30, 2010.
35
From the inception of the Trust through September 30, 2011,
the Trust redeemed 3,644 Baskets (364,400,000 Shares).
|
|
Item 6.
|
Selected
Financial Data
|
The following selected financial data should be read in
conjunction with the Trusts financial statements and
related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations.
Financial
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
(Amounts in 000s of US$)
|
|
Sept 30, 2011
|
|
Sept 30, 2010
|
|
Sept 30, 2009
|
|
Sept 30, 2008
|
|
Sept 30, 2007
|
|
Total gain/(loss) on gold
|
|
$
|
7,579,013
|
|
|
$
|
1,385,254
|
|
|
$
|
508,473
|
|
|
$
|
2,036,135
|
|
|
$
|
353,110
|
|
Net gain/(loss) from operations
|
|
$
|
7,340,281
|
|
|
$
|
1,208,132
|
|
|
$
|
394,863
|
|
|
$
|
1,965,562
|
|
|
$
|
313,442
|
|
Net cash flows from operating activities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Statements
of Operation Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
(Amounts, except per share, are in 000s of US$)
|
|
Sept 30, 2011
|
|
|
Sept 30, 2010
|
|
|
Sept 30, 2009
|
|
|
Sept 30, 2008
|
|
|
Sept 30, 2007
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
230,696
|
|
|
$
|
170,598
|
|
|
$
|
108,235
|
|
|
$
|
68,188
|
|
|
$
|
37,965
|
|
Cost of gold sold to pay expenses
|
|
|
(147,576
|
)
|
|
|
(124,764
|
)
|
|
|
(93,494
|
)
|
|
|
(50,202
|
)
|
|
|
(31,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
83,120
|
|
|
|
45,834
|
|
|
|
14,741
|
|
|
|
17,986
|
|
|
|
6,908
|
|
Gain on gold distributed for the redemption of shares
|
|
|
7,495,893
|
|
|
|
1,339,420
|
|
|
|
493,732
|
|
|
|
2,018,149
|
|
|
|
346,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
7,579,013
|
|
|
|
1,385,254
|
|
|
|
508,473
|
|
|
|
2,036,135
|
|
|
|
353,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
39,054
|
|
|
|
29,030
|
|
|
|
18,863
|
|
|
|
12,307
|
|
|
|
7,202
|
|
Trustee fees
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
1,891
|
|
Sponsor fees
|
|
|
89,517
|
|
|
|
66,249
|
|
|
|
41,946
|
|
|
|
25,472
|
|
|
|
14,476
|
|
Marketing agent fees
|
|
|
89,517
|
|
|
|
66,249
|
|
|
|
41,946
|
|
|
|
25,472
|
|
|
|
14,476
|
|
Other expenses
|
|
|
18,644
|
|
|
|
13,594
|
|
|
|
8,855
|
|
|
|
5,322
|
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
238,732
|
|
|
|
177,122
|
|
|
|
113,610
|
|
|
|
70,573
|
|
|
|
39,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
7,340,281
|
|
|
$
|
1,208,132
|
|
|
$
|
394,863
|
|
|
$
|
1,965,562
|
|
|
$
|
313,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
17.87
|
|
|
$
|
3.10
|
|
|
$
|
1.24
|
|
|
$
|
9.60
|
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
410,730
|
|
|
|
389,968
|
|
|
|
319,348
|
|
|
|
204,762
|
|
|
|
152,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Statements
of Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$, except for share data)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in gold, at
cost(1)
|
|
$
|
42,736,696
|
|
|
$
|
37,736,064
|
|
|
$
|
28,463,669
|
|
|
$
|
16,878,554
|
|
|
$
|
10,644,489
|
|
Gold receivable
|
|
|
|
|
|
|
255,409
|
|
|
|
39,068
|
|
|
|
897,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
42,736,696
|
|
|
$
|
37,991,473
|
|
|
$
|
28,502,737
|
|
|
$
|
17,775,738
|
|
|
$
|
10,644,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold payable
|
|
$
|
520,297
|
|
|
$
|
76,622
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other liabilities
|
|
|
26,718
|
|
|
|
18,682
|
|
|
|
12,157
|
|
|
|
6,782
|
|
|
|
4,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
547,015
|
|
|
|
95,304
|
|
|
|
12,157
|
|
|
|
6,782
|
|
|
|
4,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at redemption value to
investors(2)
|
|
|
64,137,833
|
|
|
|
54,809,779
|
|
|
|
35,054,043
|
|
|
|
21,471,084
|
|
|
|
13,803,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Deficit
|
|
|
(21,948,152
|
)
|
|
|
(16,913,610
|
)
|
|
|
(6,563,463
|
)
|
|
|
(3,702,128
|
)
|
|
|
(3,163,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Redeemable Shares &
Shareholders Deficit
|
|
$
|
42,736,696
|
|
|
$
|
37,991,473
|
|
|
$
|
28,502,737
|
|
|
$
|
17,775,738
|
|
|
$
|
10,644,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The market value of Investment in Gold was $64,684,848 at
September 30, 2011, $54,649,674 at September 30, 2010,
$35,027,132 at September 30, 2009, $20,580,682 at
September 30, 2008, and $13,807,984 at September 30,
2007. |
|
(2) |
|
Authorized share capital is unlimited and share par value is
$0.00. Shares issued and outstanding: 406,800,000 at
September 30, 2011; 429,200,000 at September 30, 2010;
358,900,000 at September 30, 2009; 246,500,000 at
September 30, 2008; and 187,900,000 at September 30,
2007. |
37
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Trust Overview
The Trust is an investment trust that was formed on
November 12, 2004 (Date of Inception). The Trust issues
baskets of shares, or Baskets, in exchange for deposits of gold
and distributes gold in connection with the redemption of
Baskets. The investment objective of the Trust is for the shares
to reflect the performance of the price of gold bullion, less
the expenses of the Trusts operations. The shares are
designed to provide investors with a cost effective and
convenient way to invest in gold.
Investing in the Shares does not insulate the investor from
certain risks, including price volatility. The following table
illustrates the movement in the price of the Shares and Net
Asset Value of the Shares against the corresponding gold price
(per 1/10 of an oz. of gold) since the day the Shares first
began trading on the NYSE:
Share price
& NAV v. gold price November 18, 2004 to
September 30, 2011
The divergence of the price of the Shares and Net Asset Value of
the Shares from the gold price over time reflects the cumulative
effect of the Trust expenses that arise if an investment had
been held since inception.
Valuation
of Gold, Definition of Net Asset Value and Adjusted Net Asset
Value
At the Valuation Time, the Trustee values the Trusts gold
on the basis of that days London PM fix or, if no London
PM fix is made on such day or has not been announced by the
Valuation Time, the next most recent London gold price fix (AM
or PM) determined prior to the Valuation Time will be used,
unless the Trustee, in consultation with the Sponsor, determines
that such price is inappropriate as a basis for valuation. In
the event the Trustee and the Sponsor determine that the London
PM fix or last prior London fix is not an
appropriate basis for valuation of the Trusts gold, they
will identify an alternative basis for such valuation to be
employed by the Trustee.
Once the value of the gold has been determined, the Trustee
subtracts all estimated accrued fees (other than the fees to be
computed by reference to the value of the ANAV of the Trust or
custody fees computed by reference to the value of gold held in
the Trust), expenses and other liabilities of the Trust from the
total value of the gold and all other assets of the Trust (other
than any amounts credited to the
38
Trusts reserve account, if established). The resulting
figure is the ANAV of the Trust. The ANAV of the Trust is used
to compute the fees of the Trustee, the Sponsor and the
Marketing Agent.
To determine the Trusts NAV, the Trustee subtracts from
the ANAV of the Trust the amount of estimated accrued fees
computed by reference to the value of the ANAV of the Trust and
computed by reference to the value of the gold held in the Trust
(i.e. the fees of the Trustee, the Sponsor, the Marketing Agent
and the Custodian). The Trustee determines the NAV per Share by
dividing the NAV of the Trust by the number of shares
outstanding as of the close of trading on NYSE Arca.
Gold acquired, or disposed of, by the Trust is recorded at
average cost. The table below summarizes the impact of
unrealized gains on the Trusts gold holdings at
September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amount in 000s of US$)
|
|
2011
|
|
|
2010
|
|
|
Investment in gold average cost
|
|
$
|
42,736,696
|
|
|
$
|
37,736,064
|
|
Unrealized gain on investment in gold
|
|
|
21,948,152
|
|
|
|
16,913,610
|
|
|
|
|
|
|
|
|
|
|
Investment in gold market value
|
|
$
|
64,684,848
|
|
|
$
|
54,649,674
|
|
|
|
|
|
|
|
|
|
|
Critical
Accounting Policy
Valuation
of Gold
Gold is held by the Custodian on behalf of the Trust and is
valued, for financial statement purposes, at the lower of cost
or market. The cost of gold is determined according to the
average cost method and the market value is based on the London
fix used to determine the Net Asset Value of the Trust. Realized
gains and losses on sales of gold, or gold distributed for the
redemption of shares, are calculated on a trade date basis using
average cost.
Review of
Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Highlights
|
|
For the
|
|
For the
|
|
For the
|
(All amounts in the following table and the subsequent
paragraphs, except
|
|
year ended
|
|
year ended
|
|
year ended
|
per share, are in 000s of US$)
|
|
Sept 30, 2011
|
|
Sept 30, 2010
|
|
Sept 30, 2009
|
|
Total gain/(loss) on gold
|
|
$
|
7,579,013
|
|
|
$
|
1,385,254
|
|
|
$
|
508,473
|
|
Net gain/(loss) from operations
|
|
$
|
7,340,281
|
|
|
$
|
1,208,132
|
|
|
$
|
394,863
|
|
Net cash flows from operating activities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
The Trusts total gain on gold for the year ended
September 30, 2011 of $7,579,013 is made up of a gain of
$83,120 on the sale of gold to pay expenses plus a gain of
$7,495,893 on gold distributed on the redemption of shares.
The Trusts total gain on gold for the year ended
September 30, 2010 of $1,385,254 is made up of a gain of
$45,834 on the sale of gold to pay expenses plus a gain of
$1,339,420 on gold distributed on the redemption of shares.
The Trusts total gain on gold for the year ended
September 30, 2009 of $508,473 is made up of a gain of
$14,741 on the sale of gold to pay expenses plus a gain of
$493,732 on gold distributed on the redemption of shares.
39
Selected
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$, except for per ounce and per
share data)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Ounces of Gold:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
41,813.1
|
|
|
|
35,176.6
|
|
|
|
23,268.2
|
|
Creations (excluding gold receivable at September 30,
2011 0, at September 30, 2010
195.4, and at September 30, 2009 39.2)
|
|
|
11,463.0
|
|
|
|
11,001.2
|
|
|
|
16,607.2
|
|
Redemptions (excluding gold payable at September 30,
2011 321.2, at September 30, 2010
58.6, and at September 30, 2009 nil)
|
|
|
(13,192.2
|
)
|
|
|
(4,218.0
|
)
|
|
|
(4,578.9
|
)
|
Sales of gold
|
|
|
(155.0
|
)
|
|
|
(146.7
|
)
|
|
|
(119.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
|
39,928.9
|
|
|
|
41,813.1
|
|
|
|
35,176.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold price per ounce London PM fix
|
|
$
|
1,620.00
|
|
|
$
|
1,307.00
|
|
|
$
|
995.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of gold holdings
|
|
$
|
64,684,848
|
|
|
$
|
54,649,674
|
|
|
$
|
35,027,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
429,200
|
|
|
|
358,900
|
|
|
|
246,500
|
|
Creations
|
|
|
115,600
|
|
|
|
114,000
|
|
|
|
159,000
|
|
Redemptions
|
|
|
(138,000
|
)
|
|
|
(43,700
|
)
|
|
|
(46,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
|
406,800
|
|
|
|
429,200
|
|
|
|
358,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Creations
|
|
$
|
151.57
|
|
|
$
|
115.97
|
|
|
$
|
90.62
|
|
Redemptions
|
|
$
|
149.04
|
|
|
$
|
114.96
|
|
|
$
|
87.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at redemption value to investors at year end
|
|
$
|
64,137,833
|
|
|
$
|
54,809,779
|
|
|
$
|
35,054,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption value per redeemable share at year end
|
|
$
|
157.66
|
|
|
$
|
127.70
|
|
|
$
|
97.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in redemption value over the period
|
|
|
17.0
|
%
|
|
|
56.4
|
%
|
|
|
63.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Difference between Net Asset Value per share and market
value of ounces represented by each share
|
|
|
(0.042
|
)%
|
|
|
(0.034
|
)%
|
|
|
(0.035
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of Operations
On November 12, 2004, the date of formation of the Trust,
the Custodian received 30,000 ounces of gold on behalf of the
Trust in exchange for 300,000 shares (3 Baskets). Trading
in the shares in the Trust commenced on November 18, 2004.
In the year ended September 30, 2011 an additional
115,600,000 shares, (1,156 Baskets), were created in
exchange for 11,267,648 ounces of gold, and
138,000,000 shares (1,380 Baskets) were redeemed in
exchange for 13,454,766 ounces of gold, including 321,171 ounces
of gold payable, and 154,989 ounces of gold were sold to pay
expenses. For accounting purposes the Trust reflects creations
and the gold receivable with respect to such creations on the
date of receipt of a notification of a creation, but does not
issue shares until the requisite amount of gold is received.
Upon a redemption, the Trust delivers gold upon receipt of
shares. All references in this discussion to gold receivable and
gold payable relate to creations and redemptions that had not
been completed. These creations and redemptions were completed
in the normal course of business, including the receipt and
payment of the gold by the Custodian.
As at September 30, 2011, the amount of gold owned by the
Trust was 39,607,748 ounces, with a market value of
$64,164,551,336 (cost $42,216,398,936), including
gold payable of 321,171 ounces with a market value of
$520,296,937 based on the London PM fix on September 30,
2011 (in accordance with the Trust Indenture).
As at September 30, 2011, the Custodian held 39,928,919
ounces in its vault 100% of which is allocated gold in the form
of London Good Delivery gold bars excluding gold payable, with a
market value of $64,684,848,273 (cost
$42,736,695,873). Subcustodians held nil ounces of gold in their
vaults on
40
behalf of the Trust and 321,171 ounces of gold were payable by
the Trust in connection with the creation and redemption of
Baskets.
In the year ended September 30, 2010 an additional
114,000,000 shares (1,140 Baskets), were created in
exchange for 11,157,331 ounces of gold, including 195,416 ounces
of gold receivable, 43,700,000 shares (437 Baskets) were
redeemed in exchange for 4,276,638 ounces of gold, including
58,624 ounces of gold payable, and 146,706 ounces of gold were
sold to pay expenses.
As at September 30, 2010, the amount of gold owned by the
Trust was 41,949,855 ounces, with a market value of
$54,828,461,021 (cost $37,914,851,219), including
gold receivable of 195,416 ounces with a market value of
$255,409,156 and gold payable of 58,624 ounces with a market
value of $76,622,029, based on the London PM fix on
September 30, 2010 (in accordance with the
Trust Indenture).
As at September 30, 2010, the Custodian held 41,813,063
ounces of gold in its vault excluding gold receivable and gold
payable, (41,812,885 ounces of allocated gold in the form of
London Good Delivery gold bars and 178 ounces of unallocated
gold) with a market value of $54,649,673,894 (cost
$37,736,064,092). Subcustodians held nil ounces of gold in their
vaults on behalf of the Trust and 195,416 ounces of gold were
receivable and 58,624 ounces of gold were payable by the Trust
in connection with the creation and redemption of Baskets.
In the year ended September 30, 2009 an additional
159,000,000 shares (1,590 Baskets), were created in
exchange for 15,632,152 ounces of gold, including 39,235 ounces
of gold receivable, and 46,600,000 shares (466 Baskets),
were redeemed in exchange for 4,578,845 ounces of gold,
including nil ounces of gold payable, and 119,932 ounces of gold
were sold to pay expenses.
As at September 30, 2009, the amount of gold owned by the
Trust was 35,215,868 ounces, with a market value of
$35,066,200,848 (cost $28,502,737,382), including
gold receivable of 39,235 ounces with a market value of
$39,068,311, based on the London PM fix on September 30,
2009 (in accordance with the Trust Indenture).
As at September 30, 2009, the Custodian held 35,176,633
ounces in its vault excluding gold receivable, (35,176,460
ounces of allocated gold in the form of London Good Delivery
gold bars and 173 ounces of unallocated gold) with a market
value of $35,027,132,537 (cost $28,463,669,071).
Subcustodians held nil ounces of gold in their vaults on behalf
of the Trust and 39,235 ounces of gold were receivable by the
Trust in connection with the creation of Baskets.
Cash Flow
from Operations
The Trust had no net cash flow from operations in the years
ended September 30, 2011, 2010 and 2009. Cash received in
respect of gold sold to pay expenses in the years ended
September 30, 2011, 2010 and 2009 was the same as those
expenses, resulting in a zero cash balance at September 30,
2011, 2010 and 2009.
Off-Balance
Sheet Arrangements
The Trust is not a party to any off-balance sheet arrangements.
Cash
Resources and Liquidity
At September 30, 2011 and 2010 the Trust did not have any
cash balances. When selling gold to pay expenses, the Trustee
endeavors to sell the exact amount of gold needed to pay
expenses in order to minimize the Trusts holdings of
assets other than gold. As a consequence, we expect that the
Trust will not record any cash flow from its operations and that
its cash balance will be zero at the end of each reporting
period.
Analysis
of Movements in the Price Of Gold
As movements in the price of gold are expected to directly
affect the price of the Trusts shares, investors should
understand what the recent movements in the price of gold have
been. Investors,
41
however, should also be aware that past movements in the gold
price are not indicators of future movements.
The following chart provides historical background on the price
of gold. The chart illustrates movements in the price of gold in
U.S. dollars per ounce over the period from October 1, 2006
to September 30, 2011, and is based on the London PM fix.
Daily gold price
- October 1, 2006 to September 30, 2011
During the year between October 1, 2010 and
September 30, 2011, the gold price based on the London PM
fix traded between $1,895.00 per ounce (September 5,
2011) and $1,313.50 (October 4, 2010), and the average
was $1,491.55.
The average, high, low and end-of-period gold prices for the
three years ended September 30, 2009, 2010 and 2011, and
for the period from the inception of the Trust until
September 30, 2011, based on the London PM fix, were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Last
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of
|
|
|
business
|
|
Period
|
|
Average
|
|
|
High
|
|
|
Date
|
|
|
Low
|
|
|
Date
|
|
|
period
|
|
|
day(1)
|
|
|
Three months to December 31, 2008
|
|
$
|
796.52
|
(3)
|
|
$
|
903.50
|
|
|
|
Oct 08, 2008
|
|
|
$
|
712.50
|
|
|
|
Oct 24, 2008
|
|
|
$
|
865.00
|
|
|
|
Dec 31, 2008
|
(2)
|
Three months to March 31, 2009
|
|
$
|
908.41
|
|
|
$
|
989.00
|
|
|
|
Feb 20, 2009
|
|
|
$
|
810.00
|
|
|
|
Jan 15, 2009
|
|
|
$
|
916.50
|
|
|
|
Mar 31, 2009
|
|
Three months to June 30, 2009
|
|
$
|
922.18
|
|
|
$
|
981.75
|
|
|
|
Jun 01, 2009
|
|
|
$
|
870.25
|
|
|
|
Apr 06, 2009
|
|
|
$
|
934.50
|
|
|
|
Jun 30, 2009
|
|
Three months to September 30, 2009
|
|
$
|
960.00
|
|
|
$
|
1,018.50
|
|
|
|
Sep 17, 2009
|
|
|
$
|
908.50
|
|
|
|
Jul 13, 2009
|
|
|
$
|
995.75
|
|
|
|
Sep 30, 2009
|
|
Three months to December 31, 2009
|
|
$
|
1,099.77
|
(3)
|
|
$
|
1,212.50
|
|
|
|
Dec 02, 2009
|
|
|
$
|
1,003.50
|
|
|
|
Oct 02, 2009
|
|
|
$
|
1,104.00
|
|
|
|
Dec 31,
2009(2
|
)
|
Three months to March 31, 2010
|
|
$
|
1,109.12
|
|
|
$
|
1,153.00
|
|
|
|
Jan 11, 2010
|
|
|
$
|
1,058.00
|
|
|
|
Feb 05, 2010
|
|
|
$
|
1,115.50
|
|
|
|
Mar 31, 2010
|
|
Three months to June 30, 2010
|
|
$
|
1,196.74
|
|
|
$
|
1,261.00
|
|
|
|
Jun 28, 2010
|
|
|
$
|
1,123.50
|
|
|
|
Apr 01, 2010
|
|
|
$
|
1,244.00
|
|
|
|
Jun 30, 2010
|
|
Three month to September 30, 2010
|
|
$
|
1,226.75
|
|
|
$
|
1,307.50
|
|
|
|
Sep 29, 2010
|
|
|
$
|
1,157.00
|
|
|
|
Jul 28, 2010
|
|
|
$
|
1,307.00
|
|
|
|
Sep 30, 2010
|
|
Three months to December 31, 2010
|
|
$
|
1,367.68
|
(3)
|
|
$
|
1,421.00
|
|
|
|
Nov 09, 2010
|
|
|
$
|
1,313.50
|
|
|
|
Oct 04, 2010
|
|
|
$
|
1,410.25
|
|
|
|
Dec 31, 2010
|
(2)
|
Three months to March 31, 2011
|
|
$
|
1,386.27
|
|
|
$
|
1,447.00
|
|
|
|
Mar 24, 2011
|
|
|
$
|
1,319.00
|
|
|
|
Jan 28, 2011
|
|
|
$
|
1,439.00
|
|
|
|
Mar 31, 2011
|
|
Three months to June 30, 2011
|
|
$
|
1,506.13
|
|
|
$
|
1,552.50
|
|
|
|
Jun 22, 2011
|
|
|
$
|
1,418.00
|
|
|
|
Apr 01, 2011
|
|
|
$
|
1,505.50
|
|
|
|
Jun 30, 2011
|
|
Three months to September 30, 2011
|
|
$
|
1,702.12
|
|
|
$
|
1,895.00
|
|
|
|
Sep 05, 2011
|
|
|
$
|
1,483.00
|
|
|
|
Jul 01, 2011
|
|
|
$
|
1,620.00
|
|
|
|
Sep 30, 2011
|
|
|
|
Twelve months ended September 30, 2009
|
|
$
|
896.68
|
|
|
$
|
1,018.50
|
|
|
|
Sep 17, 2009
|
|
|
$
|
712.50
|
|
|
|
Oct 24, 2008
|
|
|
$
|
995.75
|
|
|
|
Sep 30, 2009
|
|
Twelve months ended September 30, 2010
|
|
$
|
1,158.10
|
|
|
$
|
1,307.50
|
|
|
|
Sep 29, 2010
|
|
|
$
|
1,003.50
|
|
|
|
Oct 02, 2009
|
|
|
$
|
1,307.00
|
|
|
|
Sep 30, 2010
|
|
Twelve months ended September 30, 2011
|
|
$
|
1,491.55
|
|
|
$
|
1,895.00
|
|
|
|
Sep 05, 2011
|
|
|
$
|
1,313.50
|
|
|
|
Oct 04, 2011
|
|
|
$
|
1,620.00
|
|
|
|
Sep 30, 2011
|
|
|
|
November 12, 2004 (the inception of the Trust) to
September 30, 2011
|
|
$
|
875.09
|
|
|
$
|
1,895.00
|
|
|
|
Sep 05, 2011
|
|
|
$
|
411.10
|
|
|
|
Feb 08, 2005
|
|
|
$
|
1,620.00
|
|
|
|
Sep 30, 2011
|
|
|
|
42
|
|
|
(1) |
|
The end of period gold price is the London PM fix on the last
business day of the period. This is in accordance with the
Trust Indenture and the basis used for calculating the Net
Asset Value of the Trust. |
|
(2) |
|
There was no London PM fix on December 31, 2008, 2009 and
2010. The London AM fix on the last business day of each of
these years was $865.00, $1,104.00 and $1,410.25 respectively.
The Net Asset Value of the Trust on December 31, 2007, 2008
and 2009 was calculated using the London AM fix, in accordance
with the Trust Indenture. |
|
(3) |
|
There was no London PM fix for both December 24th and
December 31st for the periods ended 2008, 2009 and 2010.
For comparative purposes, the average was calculated using the
London AM fix for those business days. Accordingly, the Net
Asset Value of the Trust for December 24th and
December 31st for the periods ended 2008, 2009 and 2010 was
calculated using the London AM fix. |
43
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
The Trust Indenture does not authorize the Trustee to
borrow for payment of the Trusts ordinary expenses. The
Trust does not engage in transactions in foreign currencies
which could expose the Trust or holders of Shares to any foreign
currency related market risk. The Trust invests in no derivative
financial instruments and has no foreign operations or long-term
debt instruments.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Quarterly
Information
Fiscal
Period Ended September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in 000s of US$ except for share and
|
|
Three Months Ended
|
|
|
Year Ended
|
|
per share data)
|
|
Dec-31, 2010
|
|
|
Mar-31, 2011
|
|
|
Jun-30, 2011
|
|
|
Sep-30, 2011
|
|
|
Sep-30, 2011
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
56,073
|
|
|
$
|
53,427
|
|
|
$
|
56,886
|
|
|
$
|
64,310
|
|
|
$
|
230,696
|
|
Cost of gold sold to pay expenses
|
|
|
(37,288
|
)
|
|
|
(36,035
|
)
|
|
|
(36,240
|
)
|
|
|
(38,013
|
)
|
|
|
(147,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
18,785
|
|
|
|
17,392
|
|
|
|
20,646
|
|
|
|
26,297
|
|
|
|
83,120
|
|
Gain on gold distributed for the redemption of shares
|
|
|
1,160,478
|
|
|
|
1,676,026
|
|
|
|
1,194,268
|
|
|
|
3,465,121
|
|
|
|
7,495,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
1,179,263
|
|
|
|
1,693,418
|
|
|
|
1,214,914
|
|
|
|
3,491,418
|
|
|
|
7,579,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
9,346
|
|
|
|
8,881
|
|
|
|
9,587
|
|
|
|
11,240
|
|
|
|
39,054
|
|
Trustee fees
|
|
|
504
|
|
|
|
493
|
|
|
|
499
|
|
|
|
504
|
|
|
|
2,000
|
|
Sponsor fees
|
|
|
21,458
|
|
|
|
20,321
|
|
|
|
21,946
|
|
|
|
25,792
|
|
|
|
89,517
|
|
Marketing agent fees
|
|
|
21,458
|
|
|
|
20,321
|
|
|
|
21,946
|
|
|
|
25,792
|
|
|
|
89,517
|
|
Other expenses
|
|
|
4,472
|
|
|
|
4,172
|
|
|
|
4,546
|
|
|
|
5,454
|
|
|
|
18,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
57,238
|
|
|
|
54,188
|
|
|
|
58,524
|
|
|
|
68,782
|
|
|
|
238,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
1,122,025
|
|
|
$
|
1,639,230
|
|
|
$
|
1,156,390
|
|
|
$
|
3,422,636
|
|
|
$
|
7,340,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
2.64
|
|
|
$
|
4.04
|
|
|
$
|
2.89
|
|
|
$
|
8.32
|
|
|
$
|
17.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (000s)
|
|
|
425,404
|
|
|
|
406,074
|
|
|
|
399,736
|
|
|
|
411,484
|
|
|
|
410,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
Fiscal
Period Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in 000s of US$ except for share and
|
|
Three Months Ended
|
|
|
Year Ended
|
|
per share data)
|
|
Dec-31, 2009
|
|
|
Mar-31, 2010
|
|
|
Jun-30, 2010
|
|
|
Sep-30, 2010
|
|
|
Sep-30, 2010
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
37,288
|
|
|
$
|
37,685
|
|
|
$
|
42,780
|
|
|
$
|
52,845
|
|
|
$
|
170,598
|
|
Cost of gold sold to pay expenses
|
|
|
(27,348
|
)
|
|
|
(27,664
|
)
|
|
|
(30,894
|
)
|
|
|
(38,858
|
)
|
|
|
(124,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
9,940
|
|
|
|
10,021
|
|
|
|
11,886
|
|
|
|
13,987
|
|
|
|
45,834
|
|
Gain on gold distributed for the redemption of shares
|
|
|
245,452
|
|
|
|
315,102
|
|
|
|
53,934
|
|
|
|
724,932
|
|
|
|
1,339,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
255,392
|
|
|
|
325,123
|
|
|
|
65,820
|
|
|
|
738,919
|
|
|
|
1,385,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
6,544
|
|
|
|
6,452
|
|
|
|
7,612
|
|
|
|
8,422
|
|
|
|
29,030
|
|
Trustee fees
|
|
|
504
|
|
|
|
493
|
|
|
|
499
|
|
|
|
504
|
|
|
|
2,000
|
|
Sponsor fees
|
|
|
14,833
|
|
|
|
14,606
|
|
|
|
17,461
|
|
|
|
19,349
|
|
|
|
66,249
|
|
Marketing agent fees
|
|
|
14,833
|
|
|
|
14,606
|
|
|
|
17,461
|
|
|
|
19,349
|
|
|
|
66,249
|
|
Other expenses
|
|
|
3,024
|
|
|
|
2,959
|
|
|
|
3,622
|
|
|
|
3,989
|
|
|
|
13,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
39,738
|
|
|
|
39,116
|
|
|
|
46,655
|
|
|
|
51,613
|
|
|
|
177,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
215,654
|
|
|
$
|
286,007
|
|
|
$
|
19,165
|
|
|
$
|
687,306
|
|
|
$
|
1,208,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
0.59
|
|
|
$
|
0.78
|
|
|
$
|
0.05
|
|
|
$
|
1.61
|
|
|
$
|
3.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (000s)
|
|
|
365,974
|
|
|
|
365,749
|
|
|
|
400,502
|
|
|
|
427,237
|
|
|
|
389,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Index to Financial Statements on
page F-1
for a list of the financial statements being filed therein.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
There have been no changes in accountants and no disagreements
with accountants on any matter of accounting principles or
practices or financial statement disclosures during the year
ended September 30, 2011.
|
|
Item 9A.
|
Controls
and Procedures
|
Conclusion
Regarding the Effectiveness of Disclosure Controls and
Procedures
The Trust maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in
its Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and
communicated to the Managing Director (principal executive
officer) and Chief Financial Officer of the Sponsor, and to the
audit committee of the Sponsors parent, as appropriate, to
allow timely decisions regarding required disclosure
Under the supervision and with the participation of the Managing
Director and the Chief Financial Officer of the Sponsor, the
Sponsor conducted an evaluation of the Trusts disclosure
controls and procedures, as defined under Exchange Act
Rule 13a-15(e).
Based on this evaluation, the Managing Director and the Chief
Financial Officer of the Sponsor concluded that, as of
September 30, 2011, the Trusts disclosure controls
and procedures were effective.
45
There was no change in the Trusts internal controls over
financial reporting that occurred during the Trusts most
recently completed fiscal quarter ended September 30, 2011
that has materially affected, or is reasonably likely to
materially affect, these internal controls.
Managements
Report on Internal Control over Financial Reporting
The Sponsors management is responsible for establishing
and maintaining adequate internal control over financial
reporting, as defined under Exchange Act
Rules 13a-15(f)
and
15d-15(f).
The Trusts internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States.
Internal control over financial reporting includes those
policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the
Trusts assets, (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that the Trusts receipts and
expenditures are being made only in accordance with appropriate
authorizations; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Trusts assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
ineffective because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The Managing Director and Chief Financial Officer of the Sponsor
assessed the effectiveness of the Trusts internal control
over financial reporting as of September 30, 2011. In
making this assessment, they used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal ControlIntegrated Framework. Their
assessment included an evaluation of the design of the
Trusts internal control over financial reporting and
testing of the operational effectiveness of its internal control
over financial reporting. Based on their assessment and those
criteria, the Managing Director and Chief Financial Officer of
the Sponsor concluded that the Trust maintained effective
internal control over financial reporting as of
September 30, 2011.
KPMG LLP, the independent registered public accounting firm that
audited and reported on the financial statements as of and for
the year ended September 30, 2011 included in this
Form 10-K,
as stated in their report which is included herein, issued an
attestation report on the effectiveness of the Trusts
internal control over financial reporting as of
September 30, 2011.
November 22, 2011
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Sponsor, Trustee and the Unitholders of the
SPDR®
Gold Trust
New York, New York
We have audited
SPDR®
Gold Trusts (the Trust) internal control over
financial reporting as of September 30, 2011, based on
criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The management of the
Trusts Sponsor is responsible for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting included in the accompanying Managements Report
on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Trusts internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
46
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting, may not prevent or detect misstatements.
Also, projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
In our opinion, the
SPDR®
Gold Trust maintained, in all material respects, effective
internal control over financial reporting as of
September 30, 2011, based on the criteria established in
Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
statement of condition of the
SPDR®
Gold Trust as of September 30, 2011 and the related
statements of operations, changes in shareholders deficit,
and cash flows for the year then ended and our report dated
November 22, 2011 expressed an unqualified opinion on those
financial statements.
New York, New York
November 22, 2011
|
|
Item 9B.
|
Other
Information
|
Not applicable.
47
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Not applicable.
|
|
Item 11.
|
Executive
Compensation
|
Not applicable.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and
Management
|
Securities
Authorized for Issuance under Equity Compensation Plans and
Related Stockholder Matters
Not applicable.
Security
Ownership of Certain Beneficial Owners and Management
Not applicable.
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
Not applicable.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Fees for services performed by KPMG LLP for the year ended
September 30, 2011 and Deloitte & Touche LLP for the
year ended September 30, 2010 were:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Audit fees
|
|
$
|
250,000
|
|
|
$
|
240,000
|
|
Audit-related fees
|
|
|
200,952
|
|
|
|
208,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
450,952
|
|
|
$
|
448,000
|
|
|
|
|
|
|
|
|
|
|
Pre-Approved
Policies and Procedures
The Trust has no board of directors, and as a result, has no
audit committee or pre-approval policy with respect to fees paid
to its principal accounting firm. Such determinations are made
by the Sponsor and the audit committee of World Gold Council.
48
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statements Schedules
|
See Index to Financial Statements on
Page F-1
for a list of the financial statements being filed herein.
|
|
2.
|
Financial
Statement Schedules
|
Schedules have been omitted since they are either not required,
not applicable, or the information has otherwise been included.
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
4.1
|
|
Trust Indenture dated November 12, 2004, is
incorporated by reference to Exhibit 4.1 filed with
Amendment No. 1 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007.
|
4.1.1
|
|
Amendment No. 1 to Trust Indenture dated
November 26, 2007, is incorporated by reference to
Exhibit 4.1 filed with the Registrants Current Report
on
Form 8-K
filed on December 13, 2007.
|
4.1.2
|
|
Amendment No. 2 to Trust Indenture dated May 20,
2008, is incorporated by reference to Exhibit 4.1.2 filed
with the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
4.1.3
|
|
Amendment No. 3 to Trust Indenture dated June 1,
2011, is incorporated by reference to Exhibit 4.1 filed
with the Registrants Current Report on
Form 8-K
filed on June 1, 2011.
|
4.2
|
|
Form of Participant Agreement is incorporated by reference to
Exhibit 4.2 filed with the Registrants Registration
Statement on
Form S-1,
File
No. 333-105202
filed on November 8, 2004.
|
4.2.1
|
|
Amendment No. 1 to Participant Agreements, is incorporated
by reference to Exhibit 4.2 filed with the
Registrants Current Report on
Form 8-K
filed on December 13, 2007.
|
4.2.2
|
|
Amendment No. 2 to Participant Agreements dated
May 20, 2008, is incorporated by reference to
Exhibit 4.2.2 filed with the Registrants Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
4.3
|
|
Sponsor Payment and Reimbursement Agreement dated
November 12, 2004, is incorporated by reference to
Exhibit 4.3 filed with Amendment No. 1 to the
Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007.
|
10.1
|
|
First Amended and Restated Allocated Bullion Account Agreement
dated June 1, 2011, is incorporated by reference to
Exhibit 10.1 filed with the Registrants Current
Report on
Form 8-K
filed on June 1, 2011.
|
10.2
|
|
First Amended and Restated Unallocated Bullion Account Agreement
dated June 1, 2011, is incorporated by reference to
Exhibit 10.2 filed with the Registrants Current
Report on
Form 8-K
filed on June 1, 2011.
|
10.3
|
|
Form of Participant Unallocated Bullion Account Agreement
(included as Attachment B to the Form of Participant Agreement
filed as Exhibit 4.2) is incorporated by reference to
Exhibit 4.2 filed with the Registrants Registration
Statement on
Form S-1,
File
No. 333-105202
filed on November 8, 2004.
|
10.3.1
|
|
Form of Amendment No. 1 to Participant Unallocated Bullion
Account Agreement dated November 26, 2007, is incorporated
by reference to Exhibit 10.3.1 filed with the
Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
10.3.2
|
|
Form of Amendment No. 2 to Participant Unallocated Bullion
Account Agreement, is incorporated by reference to
Exhibit 10.3.1 filed with the Registrants
Registration Statement on
Form S-3,
File
No. 333-151056,
filed on May 20, 2008.
|
10.4
|
|
Depository Agreement dated November 11, 2004, is
incorporated by reference to Exhibit 10.4 filed with
Amendment No. 1 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007 filed on
October 10, 2008.
|
49
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
10.5
|
|
License Agreement is incorporated by reference to
Exhibit 10.5 filed with the Registrants Registration
Statement on
Form S-1,
File
No. 333-105202
filed on September 26, 2003.
|
10.6
|
|
Marketing Agent Agreement dated November 16, 2004, is
incorporated by reference to Exhibit 10.6 filed with
Amendment No. 1 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007 filed on
October 10, 2008.
|
10.6.1
|
|
Amendment No. 2 to Marketing Agent Agreement, is
incorporated by reference to Exhibit 10.6 filed with the
Registrants Current Report on
Form 8-K
filed on December 13, 2007.
|
10.6.2
|
|
Amendment No. 3 to Marketing Agent Agreement dated
May 20, 2008, is incorporated by reference to
Exhibit 10.6.2 filed with the Registrants Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
10.6.3
|
|
Amendment No. 4 to Marketing Agent Agreement dated
November 9, 2011, is incorporated by reference to
Exhibit 10.6 filed with the Registrants Current
Report on
Form 8-K
filed on November 9, 2011.
|
10.8
|
|
WGC/WGTS License Agreement dated November 16, 2004, is
incorporated by reference to Exhibit 10.8 filed with
Amendment No. 1 to the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007 filed on
October 10, 2008.
|
10.8.1
|
|
Amendment No. 1 to WGC/WGTS License Agreement dated
May 20, 2008, is incorporated by reference to
Exhibit 10.8.1 filed with the Registrants Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
10.10
|
|
Marketing Agent Reimbursement Agreement dated November 16,
2004, is incorporated by reference to Exhibit 10.10 filed
with Amendment No. 1 to the Registrants Annual Report
on
Form 10-K
for the fiscal year ended September 30, 2007 filed on
October 10, 2008.
|
10.11
|
|
Amendment No. 1 dated December 5, 2005 to the
Allocated Bullion Account Agreement, is incorporated by
reference to Exhibit 10.11 filed with Amendment No. 1
to the Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007 filed on
October 10, 2008.
|
10.12
|
|
SPDR Sublicense Agreement dated May 20, 2008, is
incorporated by reference to Exhibit 10.12 filed with the
Registrants Annual Report on
Form 10-K
for the fiscal year ended September 30, 2008.
|
23.1
|
|
Consent of KPMG LLP
|
23.2
|
|
Consent of Deloitte & Touche LLP
|
23.3
|
|
Consent of Carter Ledyard & Milburn LLP
|
31.1
|
|
Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as amended.
|
31.2
|
|
Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as amended.
|
32.1
|
|
Certification of Principal Executive Officer Pursuant to Section
1350 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Principal Financial Officer Pursuant to Section
1350 of the Sarbanes-Oxley Act of 2002
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
* |
Pursuant to Rule 406T of Regulation S-T, these interactive data
files are deemed not filed or part of a registration statement
or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933,
|
50
|
|
|
as amended, are deemed not filed for the purposes of Section 18
of the Securities and Exchange Act of 1934, as amended, and
otherwise are not subject to liability under those sections.
|
51
SPDR®
GOLD TRUST
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2008
INDEX
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
F-2
|
|
|
|
|
F-4
|
|
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
|
|
F-6
|
|
|
|
|
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Sponsor, Trustee and the Unitholders of the
SPDR®
Gold Trust
New York, New York
We have audited the accompanying statement of condition of the
SPDR®
Gold Trust (the Trust) as of September 30,
2011, and the related statements of operations, changes in
shareholders deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the
management of the Trusts Sponsor. Our responsibility is to
express an opinion on these financial statements based on our
audit. The statement of condition for the year ended
September 30, 2010 and the related statements of
operations, changes in shareholders deficit and cash flows
for each of the years in the two-year period ended
September 30, 2010 were audited by other independent
registered public accountants whose report thereon, dated
November 22, 2010, expressed an unqualified opinion on
those financial statements.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
present fairly, in all material respects, the financial position
of
SPDR®
Gold Trust as of September 30, 2011, and the results of its
operations and its cash flows for the year then ended, in
conformity with U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
SPDR®
Gold Trusts internal control over financial reporting as
of September 30, 2011, based on the criteria established in
Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated November 22, 2011 expressed an
unqualified opinion on the Trusts internal control over
financial reporting.
New York, New York
November 22, 2011
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Sponsor, Trustee and the Unitholders of the
SPDR®
Gold Trust
New York, New York
We have audited the accompanying statement of condition of the
SPDR®
Gold Trust (the Trust) as of September 30,
2010, and the related statements of operations, changes in
shareholders deficit, and cash flows for the years ended
September 30, 2010 and 2009. These financial statements are
the responsibility of the management of the Trusts
Sponsor. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Trust as of
September 30, 2010 and the results of its operations and
its cash flows for the years ended September 30, 2010 and
2009, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte &
Touche LLP
New York, New York
November 22, 2010
F-3
SPDR®
GOLD TRUST
Statements
of Condition
at
September 30, 2011 and 2010
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$ except for share data)
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Investment in gold, at
cost(1)
|
|
$
|
42,736,696
|
|
|
$
|
37,736,064
|
|
Gold receivable
|
|
|
|
|
|
|
255,409
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
42,736,696
|
|
|
$
|
37,991,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Gold payable
|
|
$
|
520,297
|
|
|
$
|
76,622
|
|
Accounts payable to related parties
|
|
|
21,500
|
|
|
|
16,065
|
|
Accounts payable
|
|
|
4,201
|
|
|
|
2,192
|
|
Accrued expenses
|
|
|
1,017
|
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
547,015
|
|
|
|
95,304
|
|
|
|
|
|
|
|
|
|
|
Redeemable Shares:
|
|
|
|
|
|
|
|
|
Shares at redemption value to
investors(2)
|
|
|
64,137,833
|
|
|
|
54,809,779
|
|
|
|
|
|
|
|
|
|
|
Shareholders Deficit
|
|
|
(21,948,152
|
)
|
|
|
(16,913,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Redeemable Shares &
Shareholders Deficit
|
|
$
|
42,736,696
|
|
|
$
|
37,991,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The market value of Investment in Gold at September 30,
2011 is $64,684,848 and at September 30, 2010 is
$54,649,674. |
|
(2) |
|
Authorized share capital is unlimited and shares par value is
$0.00. Shares issued and outstanding at September 30, 2011
is 406,800,000 and at September 30, 2010 is 429,200,000. |
See notes to the financial statements.
F-4
SPDR®
GOLD TRUST
Statements
of Operations
For the
years ended September 30, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
(Amounts in 000s of US$ except for share and per share
data)
|
|
Sept 30, 2011
|
|
|
Sept 30, 2010
|
|
|
Sept 30, 2009
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
230,696
|
|
|
$
|
170,598
|
|
|
$
|
108,235
|
|
Cost of gold sold to pay expenses
|
|
|
(147,576
|
)
|
|
|
(124,764
|
)
|
|
|
(93,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
83,120
|
|
|
|
45,834
|
|
|
|
14,741
|
|
Gain on gold distributed for the redemption of shares
|
|
|
7,495,893
|
|
|
|
1,339,420
|
|
|
|
493,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
7,579,013
|
|
|
|
1,385,254
|
|
|
|
508,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
39,054
|
|
|
|
29,030
|
|
|
|
18,863
|
|
Trustee fees
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
Sponsor fees
|
|
|
89,517
|
|
|
|
66,249
|
|
|
|
41,946
|
|
Marketing agent fees
|
|
|
89,517
|
|
|
|
66,249
|
|
|
|
41,946
|
|
Other expenses
|
|
|
18,644
|
|
|
|
13,594
|
|
|
|
8,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
238,732
|
|
|
|
177,122
|
|
|
|
113,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
7,340,281
|
|
|
$
|
1,208,132
|
|
|
$
|
394,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
17.87
|
|
|
$
|
3.10
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (000s)
|
|
|
410,730
|
|
|
|
389,968
|
|
|
|
319,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the financial statements.
F-5
SPDR®
GOLD TRUST
Statements
of Cash Flow
For the
years ended September 30, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
(Amounts in 000s of US$)
|
|
Sept 30, 2011
|
|
|
Sept 30, 2010
|
|
|
Sept 30, 2009
|
|
|
INCREASE/DECREASE IN CASH FROM OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds received from sales of gold
|
|
$
|
230,696
|
|
|
$
|
170,598
|
|
|
$
|
108,235
|
|
Cash expenses paid
|
|
|
(230,696
|
)
|
|
|
(170,598
|
)
|
|
|
(108,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash resulting from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of gold received for creation of
shares net of gold receivable
|
|
$
|
17,521,097
|
|
|
$
|
12,968,179
|
|
|
$
|
14,369,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of gold distributed for redemption of
shares net of gold payable
|
|
$
|
12,729,649
|
|
|
$
|
3,631,238
|
|
|
$
|
3,588,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
Year ended
|
|
(Amounts in 000s of US$)
|
|
Sept 30, 2011
|
|
|
Sept 30, 2010
|
|
|
Sept 30, 2009
|
|
|
RECONCILIATION OF NET GAIN/(LOSS) FROM OPERATIONS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
7,340,281
|
|
|
$
|
1,208,132
|
|
|
$
|
394,863
|
|
Adjustments to reconcile net gain to net cash provided by
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in investment in gold
|
|
|
(5,000,632
|
)
|
|
|
(9,272,395
|
)
|
|
|
(11,585,115
|
)
|
(Increase)/decrease in gold receivable
|
|
|
255,409
|
|
|
|
(216,341
|
)
|
|
|
858,116
|
|
Increase in gold payable
|
|
|
443,675
|
|
|
|
76,622
|
|
|
|
|
|
Increase in liabilities
|
|
|
8,036
|
|
|
|
6,525
|
|
|
|
5,375
|
|
Increase/(decrease) in redeemable shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Creations
|
|
|
17,521,097
|
|
|
|
13,221,048
|
|
|
|
14,408,547
|
|
Redemptions
|
|
|
(20,567,866
|
)
|
|
|
(5,023,591
|
)
|
|
|
(4,081,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the financial statements.
F-6
SPDR®
GOLD TRUST
Statements
of Changes in Shareholders Deficit
For the
years ended September 30, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Shareholders deficit opening balance
|
|
$
|
(16,913,610
|
)
|
|
$
|
(6,563,463
|
)
|
|
$
|
(3,702,128
|
)
|
Net gain/(loss) from operations
|
|
|
7,340,281
|
|
|
|
1,208,132
|
|
|
|
394,863
|
|
Adjustment of redeemable shares to redemption value
|
|
|
(12,374,823
|
)
|
|
|
(11,558,279
|
)
|
|
|
(3,256,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders deficit closing balance
|
|
$
|
(21,948,152
|
)
|
|
$
|
(16,913,610
|
)
|
|
$
|
(6,563,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the financial statements.
F-7
SPDR®
GOLD TRUST
Notes to
the Financial Statements
1 Organization
The
SPDR®
Gold Trust (the Trust) is an investment trust formed
on November 12, 2004 (Date of Inception) under New York law
pursuant to a trust indenture. The fiscal year end for the Trust
is September 30th. The Trust holds gold and is expected
from time to time to issue shares (Shares) (in
minimum denominations of 100,000, also referred to as
Baskets) in exchange for deposits of gold and to
distribute gold in connection with redemption of Baskets. The
investment objective of the Trust is for the Shares to reflect
the performance of the price of gold bullion, less the
Trusts expenses.
2 Significant
accounting policies
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of
America requires those responsible for preparing financial
statements to make estimates and assumptions that affect the
reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies followed by the Trust.
2.1 Valuation
of Gold
Gold is held by the Custodian on behalf of the Trust and is
valued, for financial statement purposes, at the lower of cost
or market. The cost of gold is determined according to the
average cost method and the market value is based on the London
fix used to determine the Net Asset Value of the Trust. Realized
gains and losses on sales of gold, or gold distributed for the
redemption of shares, are calculated on a trade date basis using
average cost.
The table below summarizes the impact of unrealized gains on the
Trusts gold holdings as of September 30, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$)
|
|
2011
|
|
|
2010
|
|
|
Investment in gold cost
|
|
$
|
42,736,696
|
|
|
$
|
37,736,064
|
|
Unrealized gain on investment in gold
|
|
|
21,948,152
|
|
|
|
16,913,610
|
|
|
|
|
|
|
|
|
|
|
Investment in gold market value
|
|
$
|
64,684,848
|
|
|
$
|
54,649,674
|
|
|
|
|
|
|
|
|
|
|
The Trust recognizes the diminution in value of the investment
in gold which arises from market declines on an interim basis.
Increases in the value of the same investment in gold in later
interim periods through market price recoveries are recognized
in the later interim period. Increases in value recognized on an
interim basis do not exceed the previously recognized diminution
in value.
2.2 Gold
receivable
Gold receivable, when recorded, represents the quantity of gold
covered by contractually binding orders for the creation of
shares where the gold has not yet been transferred to the
Trusts account. Generally, ownership of the gold is
transferred within three days of trade date.
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$)
|
|
2011
|
|
|
2010
|
|
|
Gold receivable
|
|
$
|
|
|
|
$
|
255,409
|
|
F-8
SPDR®
GOLD TRUST
Notes to
the Financial Statements
2.3 Gold
Payable
Gold payable represents the quantity of gold covered by
contractually binding orders for the redemption of shares where
the gold has not yet been transferred out of the Trusts
account. Generally, ownership of the gold is transferred within
three days of the trade date.
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
Sept 30,
|
(Amounts in 000s of US$)
|
|
2011
|
|
2010
|
|
Gold payable
|
|
$
|
520,297
|
|
|
$
|
76,622
|
|
2.4 Creations
and Redemptions of Shares
The Trust creates and redeems Shares from time to time, but only
in one or more Baskets (a Basket equals a block of
100,000 Shares). The creation and redemption of Baskets
will only be made in exchange for the delivery to the Trust or
the distribution by the Trust of the amount of gold and any cash
represented by the Baskets being created or redeemed, the amount
of which will be based on the combined net asset value of the
number of Shares included in the Baskets being created or
redeemed determined on the day the order to create or redeem
Baskets is properly received.
As the Shares of the Trust are redeemable at the option of the
Authorized Participants only in Baskets, the Trust has
classified the Shares as Redeemable Shares on the Statements of
Condition. The Trust records the redemption value, which
represents its maximum obligation, as Redeemable Shares with the
difference from cost as an offsetting amount to
Shareholders Equity. Changes in the Shares for the years
ended September 30, 2011, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Number of Redeemable Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
429,200
|
|
|
|
358,900
|
|
|
|
246,500
|
|
Creations
|
|
|
115,600
|
|
|
|
114,000
|
|
|
|
159,000
|
|
Redemptions
|
|
|
(138,000
|
)
|
|
|
(43,700
|
)
|
|
|
(46,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
|
406,800
|
|
|
|
429,200
|
|
|
|
358,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$ except for per share data)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Redeemable Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
54,809,779
|
|
|
$
|
35,054,043
|
|
|
$
|
21,471,084
|
|
Creations
|
|
|
17,521,097
|
|
|
|
13,221,048
|
|
|
|
14,408,547
|
|
Redemptions
|
|
|
(20,567,866
|
)
|
|
|
(5,023,591
|
)
|
|
|
(4,081,786
|
)
|
Adjustment to redemption value
|
|
|
12,374,823
|
|
|
|
11,558,279
|
|
|
|
3,256,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
$
|
64,137,833
|
|
|
$
|
54,809,779
|
|
|
$
|
35,054,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption value per redeemable share at period end
|
|
$
|
157.66
|
|
|
$
|
127.70
|
|
|
$
|
97.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share represents basic net gain/(loss) per
share because there are no dilutive equity instruments
authorized or outstanding.
2.5 Revenue
Recognition Policy
The Trustee will at the direction of the Sponsor or in its own
discretion sell the Trusts gold as necessary to pay the
Trusts expenses. When selling gold to pay expenses, the
Trustee will endeavor to sell the smallest
F-9
SPDR®
GOLD TRUST
Notes to
the Financial Statements
2.5 Revenue
Recognition Policy (continued)
amounts of gold needed to pay expenses in order to minimize the
Trusts holdings of assets other than gold. Unless
otherwise directed by the Sponsor, when selling gold the Trustee
will endeavor to sell at the price established by the London PM
fix. The Trustee will place orders with dealers (which may
include the Custodian) through which the Trustee expects to
receive the most favorable price and execution of orders. The
Custodian may be the purchaser of such gold only if the sale
transaction is made at the next London gold price fix (either AM
or PM) following the sale order. A gain or loss is recognized
based on the difference between the selling price and the
average cost of the gold sold.
2.6 Income
Taxes
The Trust is classified as a grantor trust for U.S.
federal income tax purposes. As a result, the Trust itself will
not be subject to U.S. federal income tax. Instead, the
Trusts income and expenses will flow through
to the Shareholders, and the Trustee will report the
Trusts proceeds, income, deductions, gains, and losses to
the Internal Revenue Service on that basis.
3 Investment
in Gold
The following represents the changes in ounces of gold and the
respective values for the years ended September 30, 2011,
2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Ounces of gold are in 000s and value of gold is in
000s of US$)
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Ounces of Gold:
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
|
41,813.1
|
|
|
|
35,176.6
|
|
|
|
23,268.2
|
|
Creations (excluding gold receivable at September 30,
2011 0, at September 30, 2010 195.4 and at
September 30, 2009 39.2)
|
|
|
11,463.0
|
|
|
|
11,001.2
|
|
|
|
16,607.2
|
|
Redemptions (excluding gold payable at September 30,
2011 321.2, at September 30, 2010 58.6 and at
September 30, 2009 nil)
|
|
|
(13,192.2
|
)
|
|
|
(4,218.0
|
)
|
|
|
(4,578.9
|
)
|
Sales of gold
|
|
|
(155.0
|
)
|
|
|
(146.7
|
)
|
|
|
(119.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
|
39,928.9
|
|
|
|
41,813.1
|
|
|
|
35,176.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Gold (lower of cost or market):
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
37,736,064
|
|
|
$
|
28,463,669
|
|
|
$
|
16,878,554
|
|
Creations (excluding gold receivable at September 30,
2011 $0, at September 30, 2010 $255,409 and
at September 30, 2009 - $39,068)
|
|
|
17,776,506
|
|
|
|
13,004,707
|
|
|
|
15,266,663
|
|
Redemptions (excluding gold payable at September 30,
2011 $520,297, at September 30, 2010 $76,622
and at September 30, 2009 nil)
|
|
|
(12,628,298
|
)
|
|
|
(3,607,548
|
)
|
|
|
(3,588,054
|
)
|
Sales of gold
|
|
|
(147,576
|
)
|
|
|
(124,764
|
)
|
|
|
(93,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance
|
|
$
|
42,736,696
|
|
|
$
|
37,736,064
|
|
|
$
|
28,463,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-10
SPDR®
GOLD TRUST
Notes to
the Financial Statements
4 Quarterly
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year to
|
|
(Amounts in 000s of US$ except for share and per share
data)
|
|
Dec-31, 2010
|
|
|
Mar-31, 2011
|
|
|
Jun-30, 2011
|
|
|
Sep-30, 2011
|
|
|
Sep-30, 2011
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
56,073
|
|
|
$
|
53,427
|
|
|
$
|
56,886
|
|
|
$
|
64,310
|
|
|
$
|
230,696
|
|
Cost of gold sold to pay expenses
|
|
|
(37,288
|
)
|
|
|
(36,035
|
)
|
|
|
(36,240
|
)
|
|
|
(38,013
|
)
|
|
|
(147,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
18,785
|
|
|
|
17,392
|
|
|
|
20,646
|
|
|
|
26,297
|
|
|
|
83,120
|
|
Gain on gold distributed for the redemption of shares
|
|
|
1,160,478
|
|
|
|
1,676,026
|
|
|
|
1,194,268
|
|
|
|
3,465,121
|
|
|
|
7,495,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
1,179,263
|
|
|
|
1,693,418
|
|
|
|
1,214,914
|
|
|
|
3,491,418
|
|
|
|
7,579,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
9,346
|
|
|
|
8,881
|
|
|
|
9,587
|
|
|
|
11,240
|
|
|
|
39,054
|
|
Trustee fees
|
|
|
504
|
|
|
|
493
|
|
|
|
499
|
|
|
|
504
|
|
|
|
2,000
|
|
Sponsor fees
|
|
|
21,458
|
|
|
|
20,321
|
|
|
|
21,946
|
|
|
|
25,792
|
|
|
|
89,517
|
|
Marketing agent fees
|
|
|
21,458
|
|
|
|
20,321
|
|
|
|
21,946
|
|
|
|
25,792
|
|
|
|
89,517
|
|
Other expenses
|
|
|
4,472
|
|
|
|
4,172
|
|
|
|
4,546
|
|
|
|
5,454
|
|
|
|
18,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
57,238
|
|
|
|
54,188
|
|
|
|
58,524
|
|
|
|
68,782
|
|
|
|
238,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
1,122,025
|
|
|
$
|
1,639,230
|
|
|
$
|
1,156,390
|
|
|
$
|
3,422,636
|
|
|
$
|
7,340,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
2.64
|
|
|
$
|
4.04
|
|
|
$
|
2.89
|
|
|
$
|
8.32
|
|
|
$
|
17.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (000s)
|
|
|
425,404
|
|
|
|
406,074
|
|
|
|
399,736
|
|
|
|
411,484
|
|
|
|
410,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
SPDR®
GOLD TRUST
Notes to
the Financial Statements
4 Quarterly
Statements of Operations (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year to
|
|
(Amounts in 000s of US$ except for share and per share
data)
|
|
Dec-31, 2009
|
|
|
Mar-31, 2010
|
|
|
Jun-30, 2010
|
|
|
Sep-30, 2010
|
|
|
Sep-30, 2010
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of gold
|
|
$
|
37,288
|
|
|
$
|
37,685
|
|
|
$
|
42,780
|
|
|
$
|
52,845
|
|
|
$
|
170,598
|
|
Cost of gold sold to pay expenses
|
|
|
(27,348
|
)
|
|
|
(27,664
|
)
|
|
|
(30,894
|
)
|
|
|
(38,858
|
)
|
|
|
(124,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on gold sold to pay expenses
|
|
|
9,940
|
|
|
|
10,021
|
|
|
|
11,886
|
|
|
|
13,987
|
|
|
|
45,834
|
|
Gain on gold distributed for the redemption of shares
|
|
|
245,452
|
|
|
|
315,102
|
|
|
|
53,934
|
|
|
|
724,932
|
|
|
|
1,339,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain/(loss) on gold
|
|
|
255,392
|
|
|
|
325,123
|
|
|
|
65,820
|
|
|
|
738,919
|
|
|
|
1,385,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Custody fees
|
|
|
6,544
|
|
|
|
6,452
|
|
|
|
7,612
|
|
|
|
8,422
|
|
|
|
29,030
|
|
Trustee fees
|
|
|
504
|
|
|
|
493
|
|
|
|
499
|
|
|
|
504
|
|
|
|
2,000
|
|
Sponsor fees
|
|
|
14,833
|
|
|
|
14,606
|
|
|
|
17,461
|
|
|
|
19,349
|
|
|
|
66,249
|
|
Marketing agent fees
|
|
|
14,833
|
|
|
|
14,606
|
|
|
|
17,461
|
|
|
|
19,349
|
|
|
|
66,249
|
|
Other expenses
|
|
|
3,024
|
|
|
|
2,959
|
|
|
|
3,622
|
|
|
|
3,989
|
|
|
|
13,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
39,738
|
|
|
|
39,116
|
|
|
|
46,655
|
|
|
|
51,613
|
|
|
|
177,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) from operations
|
|
$
|
215,654
|
|
|
$
|
286,007
|
|
|
$
|
19,165
|
|
|
$
|
687,306
|
|
|
$
|
1,208,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/(loss) per share
|
|
$
|
0.59
|
|
|
$
|
0.78
|
|
|
$
|
0.05
|
|
|
$
|
1.61
|
|
|
$
|
3.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (000s)
|
|
|
365,974
|
|
|
|
365,749
|
|
|
|
400,502
|
|
|
|
427,237
|
|
|
|
389,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 Related
Parties - Sponsor, Trustee, Custodian and Marketing
Agent Fees
Fees are paid to the Sponsor as compensation for services
performed under the Trust Indenture and for services
performed in connection with maintaining the Trusts
website and marketing the Shares. The Sponsors fee is
payable monthly in arrears and is accrued daily at an annual
rate equal to 0.15% of the adjusted net asset value
(ANAV) of the Trust, subject to reduction as
described below. The Sponsor will receive reimbursement from the
Trust for all of its disbursements and expenses incurred in
connection with the Trust.
Fees are paid to the Trustee as compensation for services
performed under the Trust Indenture. The Trustees fee
is payable monthly in arrears and is accrued daily at an annual
rate equal to 0.02% of the ANAV of the Trust, subject to a
minimum fee of $500,000 and a maximum fee of $2 million per
year. The Trustees fee is subject to modification as
determined by the Trustee and the Sponsor in good faith to
account for significant changes in the Trusts
administration or the Trustees duties. The Trustee will
charge the Trust for its expenses and disbursements incurred in
connection with the Trust (including the expenses of the
Custodian paid by the Trustee), exclusive of fees of agents for
services to be performed by the Trustee, and for any
extraordinary services performed by the Trustee for the Trust.
Affiliates of the Trustee may from time to time act as
Authorized Participants or purchase or sell gold or Shares for
their own account, as agent for their customers and for accounts
over which they exercise investment discretion.
F-12
SPDR®
GOLD TRUST
Notes to
the Financial Statements
5 Related
Parties - Sponsor, Trustee, Custodian and Marketing
Agent Fees (continued)
Fees are paid to the Custodian under the Allocated Bullion
Account Agreement as compensation for its custody services.
Under the Allocated Bullion Account Agreement, the Custodian is
entitled to a fee that is accrued daily at an annual rate equal
to 0.10% of the average daily aggregate value of the first 4.5
million ounces of gold held in the Trusts allocated gold
account (Trust Allocated Account) and the Trusts
unallocated gold account (Trust Unallocated Account) and
0.06% of the average daily aggregate value of all gold held in
the Trust Allocated Account and the Trust Unallocated Account in
excess of 4.5 million ounces, payable in monthly installments in
arrears. The Custodian does not receive a fee under the
Unallocated Bullion Account Agreement.
The Custodian and its affiliates may from time to time act as
Authorized Participants or purchase or sell gold or Shares for
their own account, as agent for their customers and for accounts
over which they exercise investment discretion.
Fees are paid to the marketing agent for the Trust, State Street
Global Markets, LLC (the Marketing Agent) by the
Trustee from the assets of the Trust as compensation for
services performed pursuant to the agreement between the Sponsor
and the Marketing Agent (Marketing Agent Agreement). The
Marketing Agents fee is payable monthly, in arrears, and
is accrued daily at an annual rate equal to 0.15% of the ANAV of
the Trust, subject to reduction as described below.
The Marketing Agent and its affiliates may from time to time act
as Authorized Participants or purchase or sell gold or Shares
for their own account, as agent for their customers and for
accounts over which they exercise investment discretion.
Under the Marketing Agent Agreement, as amended, if at the end
of any month, the estimated ordinary expenses of the Trust
exceed an amount equal to 0.40% per year of the daily ANAV of
the Trust for such month, the Sponsor and the Marketing Agent
will waive the amount of such excess from the fees payable to
them from the assets of the Trust for such month in equal shares
up to the amount of their fees. Investors should be aware that,
based on current expenses, if the gross value of the Trust
assets is less than approximately $1.2 billion, the
ordinary expenses of the Trust will be accrued at a rate greater
than 0.40% per year of the daily ANAV of the Trust, even after
the Sponsor and the Marketing Agent have completely waived their
combined fees of 0.30% per year of the daily ANAV of the Trust.
This amount is based on the estimated ordinary expenses of the
Trust and may be higher if the Trusts actual ordinary
expenses exceed those estimates. Additionally, if the Trust
incurs unforeseen expenses that cause the total ordinary
expenses of the Trust to exceed 0.70% per year of the daily ANAV
of the Trust, the ordinary expenses will accrue at a rate
greater than 0.40% per year of the daily ANAV of the Trust, even
after the Sponsor and the Marketing Agent have completely waived
their combined fees of 0.30% per year of the daily ANAV of the
Trust.
For the years ended September 30, 2011, 2010 and 2009 the
fees payable to the Sponsor and the Marketing Agent from the
assets of the Trust were each reduced by $6,865, $175,823 and
$657,248 respectively.
Amounts
Payable to Related Parties
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|
|
|
|
|
|
|
|
|
|
Sept 30,
|
|
|
Sept 30,
|
|
(Amounts in 000s of US$)
|
|
2011
|
|
|
2010
|
|
|
Payable to custodian
|
|
$
|
3,816
|
|
|
$
|
2,841
|
|
Payable to trustee
|
|
|
164
|
|
|
|
164
|
|
Payable to sponsor
|
|
|
8,760
|
|
|
|
6,530
|
|
Payable to marketing agent
|
|
|
8,760
|
|
|
|
6,530
|
|
|
|
|
|
|
|
|
|
|
Accounts payable to related parties
|
|
$
|
21,500
|
|
|
$
|
16,065
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|
|
|
|
|
|
|
|
|
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F-13
SPDR®
GOLD TRUST
Notes to
the Financial Statements
6 Concentration
of Risk
The Trusts sole business activity is the investment in
gold. Several factors could affect the price of gold: (i) global
gold supply and demand, which is influenced by such factors as
forward selling by gold producers, purchases made by gold
producers to unwind gold hedge positions, central bank purchases
and sales, and production and cost levels in major
gold-producing countries such as China, Australia, South Africa
and the United States; (ii) investors expectations with
respect to the rate of inflation; (iii) currency exchange rates;
(iv) interest rates; (v) investment and trading activities of
hedge funds and commodity funds; and (vi) global or regional
political, economic or financial events and situations. In
addition, there is no assurance that gold will maintain its
long-term value in terms of purchasing power in the future. In
the event that the price of gold declines, the Sponsor expects
the value of an investment in the Shares to decline
proportionately. Each of these events could have a material
affect on the Trusts financial position and results of
operations.
7 Indemnification
The Sponsor and its shareholders, members, directors, officers,
employees, affiliates and subsidiaries are indemnified from the
Trust and held harmless against certain losses, liabilities or
expenses incurred in the performance of its duties under the
Trust Indenture without gross negligence, bad faith,
willful misconduct, willful malfeasance or reckless disregard of
the indemnified partys obligations and duties under the
Trust Indenture. Such indemnity includes payment from the
Trust of the costs and expenses incurred in defending against
any claim or liability under the Trust Indenture. Under the
Trust Indenture, the Sponsor may be able to seek
indemnification from the Trust for payments it makes in
connection with the Sponsors activities under the
Trust Indenture to the extent its conduct does not
disqualify it from receiving such indemnification under the
terms of the Trust Indenture. The Sponsor will also be
indemnified from the Trust and held harmless against any loss,
liability or expense arising under the Marketing Agent Agreement
or any agreement entered into with an Authorized Participant
which provides the procedures for the creation and redemption of
Baskets and for the delivery of gold and any cash required for
creations and redemptions insofar as such loss, liability or
expense arises from any untrue statement or alleged untrue
statement of a material fact contained in any written statement
provided to the Sponsor by the Trustee. Any amounts payable to
the Sponsor are secured by a lien on the Trust.
The Sponsor has agreed to indemnify certain parties against
certain liabilities and to contribute to payments that such
parties may be required to make in respect of those liabilities.
The Trustee has agreed to reimburse such parties, solely from
and to the extent of the Trusts assets, for
indemnification and contribution amounts due from the Sponsor in
respect of such liabilities to the extent the Sponsor has not
paid such amounts when due. The Sponsor has agreed that, to the
extent the Trustee pays any amount in respect of the
reimbursement obligations described in the preceding sentence,
the Trustee, for the benefit of the Trust, will be subrogated to
and will succeed to the rights of the party so reimbursed
against the Sponsor.
The Trust evaluates events subsequent to the end of the
Trusts fiscal year through the date of filing of this Form
10-K.
F-14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned in the capacities* indicated
thereunto duly authorized.
WORLD GOLD TRUST SERVICES, LLC
Sponsor of the
SPDR®
Gold Trust
(Registrant)
Jason Toussaint
Managing Director
(principal executive officer)
Robin Lee
Chief Financial Officer and Treasurer
(principal financial officer and
principal accounting officer)
Date: November 22, 2011
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* |
|
The Registrant is a trust and the persons are signing in their
capacities as officers of World Gold Trust Services, LLC,
the Sponsor of the Registrant. |