SPDR GOLD TRUST - Quarter Report: 2008 June (Form 10-Q)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
x
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2008 | |
o
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission file number: 001-32356
SPDR®
GOLD TRUST
SPONSORED BY WORLD GOLD TRUST
SERVICES, LLC
(Exact Name of Registrant as
Specified in Its Charter)
New York | 81-6124035 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
c/o World
Gold Trust Services, LLC
424 Madison Avenue, 3rd
Floor
New York, New York
10017
(Address of Principal Executive
Offices)
(212) 317-3800
(Registrants Telephone
Number, Including Area Code)
streetTRACKS®
GOLD TRUST,
c/o World Gold Trust Services, LLC
444 Madison Avenue, 3rd Floor
New York, NY 10022
c/o World Gold Trust Services, LLC
444 Madison Avenue, 3rd Floor
New York, NY 10022
(Former Name, Former Address and
Former Fiscal Year,
if Changed Since Last Report)
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 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):
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(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
As of August 7, 2008 the Registrant had
215,000,000 shares outstanding.
SPDR®
GOLD TRUST
INDEX
i
Table of Contents
SPDR®
GOLD TRUST
PART I -
FINANCIAL INFORMATION:
Item 1. | Financial Statements (Unaudited) |
Unaudited
Condensed Statements of Condition
at June 30, 2008 and September 30, 2007
at June 30, 2008 and September 30, 2007
Jun-30, |
Sep-30, |
|||||||
(Amounts in 000s of US$ except for share data) | 2008 | 2007(1) | ||||||
ASSETS
|
||||||||
Investment in
Gold(2)
|
$ | 13,306,679 | $ | 10,644,489 | ||||
Gold Receivable
|
476,879 | | ||||||
Total Assets
|
$ | 13,783,558 | $ | 10,644,489 | ||||
LIABILITIES | ||||||||
Accounts payable to related parties
|
$ | 5,346 | $ | 3,978 | ||||
Accounts payable
|
406 | 160 | ||||||
Accrued expenses
|
1,995 | 258 | ||||||
Total Liabilities
|
7,747 | 4,396 | ||||||
Redeemable Shares:
|
||||||||
Shares at redemption value to
investors(3)
|
19,258,023 | 13,803,588 | ||||||
Shareholders Deficit
|
(5,482,212 | ) | (3,163,495 | ) | ||||
Total Liabilities, Redeemable Shares &
Shareholders Deficit
|
$ | 13,783,558 | $ | 10,644,489 | ||||
(1) | Derived from audited statement of condition as of September 30, 2007. | |
(2) | The market value of Investment in Gold at June 30, 2008 is $18,788,891 and at September 30, 2007, is $13,807,984. | |
(3) | Authorized share capital is unlimited and shares par value is $0.00. Shares issued and outstanding at June 30, 2008 are 210,000,000 and at September 30, 2007, 187,900,000. |
See notes to the unaudited condensed financial statements
1
Table of Contents
SPDR®
GOLD TRUST
Unaudited
Condensed Statements of Operations
For the three months ended June 30, 2008 and 2007 and the
nine months ended June 30, 2008 and 2007.
Three Months |
Three Months |
Nine Months |
Nine Months |
|||||||||||||
Ended |
Ended |
Ended |
Ended |
|||||||||||||
Jun-30, |
Jun-30, |
Jun-30, |
Jun-30, |
|||||||||||||
(Amounts in 000s of US$, except for share and per share data) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
REVENUES
|
||||||||||||||||
Proceeds from sales of gold
|
$ | 17,506 | $ | 10,282 | $ | 48,370 | $ | 27,428 | ||||||||
Cost of gold sold to pay expenses
|
(12,512 | ) | (8,188 | ) | (34,215 | ) | (22,333 | ) | ||||||||
Gain on gold sold to pay expenses
|
4,994 | 2,094 | 14,155 | 5,095 | ||||||||||||
Gain on gold distributed for the redemption of shares
|
616,014 | 240,829 | 1,344,234 | 332,176 | ||||||||||||
Total Gain on gold
|
621,008 | 242,923 | 1,358,389 | 337,271 | ||||||||||||
EXPENSES
|
||||||||||||||||
Custody fees
|
3,070 | 1,872 | 9,061 | 5,162 | ||||||||||||
Trustee fees
|
499 | 497 | 1,502 | 1,388 | ||||||||||||
Sponsor fees
|
6,347 | 3,811 | 19,175 | 10,253 | ||||||||||||
Marketing agent fees
|
6,347 | 3,811 | 19,175 | 10,253 | ||||||||||||
Other expenses
|
1,247 | 311 | 2,808 | 1,176 | ||||||||||||
Total expenses
|
17,510 | 10,302 | 51,721 | 28,232 | ||||||||||||
Net Gain from Operations
|
$ | 603,498 | $ | 232,621 | $ | 1,306,668 | $ | 309,039 | ||||||||
Gain per share
|
$ | 3.04 | $ | 1.49 | $ | 6.52 | $ | 2.09 | ||||||||
Weighted average number of shares (000s)
|
198,523 | 156,214 | 200,353 | 147,608 | ||||||||||||
See notes to the unaudited condensed financial statements
2
Table of Contents
SPDR®
GOLD TRUST
Unaudited
Condensed Statements of Cash Flows
For the three months ended June 30, 2008 and 2007 and the
nine months ended June 30, 2008 and 2007.
Three Months |
Three Months |
Nine Months |
Nine Months |
|||||||||||||
Ended |
Ended |
Ended |
Ended |
|||||||||||||
Jun-30, |
Jun-30, |
Jun-30, |
Jun-30, |
|||||||||||||
(Amounts in 000s of US$) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
INCREASE / DECREASE IN CASH FROM OPERATIONS:
|
||||||||||||||||
Cash proceeds received from sales of gold
|
$ | 17,506 | $ | 10,282 | $ | 48,370 | $ | 27,428 | ||||||||
Cash expenses paid
|
(17,506 | ) | (10,282 | ) | (48,370 | ) | (27,428 | ) | ||||||||
(Decrease) / Increase 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
|
2,198,516 | 912,632 | 6,286,905 | 3,446,065 | ||||||||||||
Value of gold distributed for redemption of shares - at
average cost
|
1,514,411 | 1,311,479 | 3,113,621 | 1,819,813 | ||||||||||||
Three Months |
Three Months |
Nine Months |
Nine Months |
|||||||||||||
Ended |
Ended |
Ended |
Ended |
|||||||||||||
Jun-30, |
Jun-30, |
Jun-30, |
Jun-30, |
|||||||||||||
(Amount in 000s of US$) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
RECONCILIATION OF NET GAIN/(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
||||||||||||||||
Net Gain from Operations
|
$ | 603,498 | $ | 232,621 | $ | 1,306,668 | $ | 309,039 | ||||||||
Adjustments to reconcile net income to net cash provided by
operating activities
|
||||||||||||||||
(Increase)/decrease in gold assets
|
(434,231 | ) | 87,451 | (2,662,190 | ) | (1,916,782 | ) | |||||||||
(Increase)/decrease in gold receivable
|
(237,362 | ) | 79,025 | (476,879 | ) | (19,314 | ) | |||||||||
Increase in liabilities
|
4 | 20 | 3,351 | 805 | ||||||||||||
Increase/(decrease) in redeemable shares Creations
|
2,198,516 | 912,362 | 6,286,905 | 3,446,065 | ||||||||||||
Redemptions
|
(2,130,425 | ) | (1,311,479 | ) | (4,457,855 | ) | (1,819,813 | ) | ||||||||
Net cash provided by operating activities
|
$ | | $ | | $ | | $ | | ||||||||
See notes to the unaudited condensed financial statements
3
Table of Contents
SPDR®
GOLD TRUST
Unaudited
Condensed Statements of Changes in Shareholders
Deficit
For the nine months ended June 30, 2008 and for the year
ended September 30, 2007
Nine Months |
||||||||
Ended |
Year Ended |
|||||||
(Amounts in 000s of US$) | Jun-30, 2008 | Sep-30, 2007 | ||||||
Shareholders Deficit - Opening Balance
|
$ | (3,163,495 | ) | $ | (1,243,956 | ) | ||
Net Gain for the period
|
1,306,668 | 313,442 | ||||||
Adjustment of Redeemable Shares to redemption value
|
(3,625,385 | ) | (2,232,981 | ) | ||||
Shareholders Deficit - Closing balance
|
$ | (5,482,212 | ) | $ | (3,163,495 | ) | ||
See notes to the unaudited condensed financial statements
4
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed 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 blocks of 100,000 Shares, 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.
Effective at the opening of trading on May 21, 2008, the
names of the Trust and the shares of the Trust were re-named
the
SPDR®
Gold Trust and
SPDR®
Gold Shares, respectively. The name change reflected a
re-branding
initiative of State Street Global Markets, LLC, the marketing
agent, to consolidate its exchange traded fund offerings under
the
SPDR®
brand.
Effective December 13, 2007, the listing of the
SPDR®
Gold Trust and the trading of the
SPDR®
Gold Shares was transferred from the New York Stock Exchange,
Inc. (NYSE) to its affiliated exchange NYSE Arca,
Inc. (NYSE Arca), pursuant to the request of NYSE
Euronext, Inc. to transfer all exchange traded funds trading on
the NYSE to NYSE Arca.
The statements of condition at June 30, 2008 and
September 30, 2007, the statements of changes in
shareholders deficit for the nine months ended
June 30, 2008 and the year ended September 30, 2007,
and the statements of operations and of cash flows for the three
and nine months ended June 30, 2008 and 2007 have been
prepared on behalf of the Trust without audit. In the opinion of
management of the sponsor of the Trust, World Gold
Trust Services, LLC (the Sponsor), all
adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows as of and for the three and nine
months ended June 30, 2008 and for all periods presented
have been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
have been condensed or omitted. These condensed financial
statements should be read in conjunction with the financial
statements and notes thereto included in the Trusts Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2007. The results
of operations for the three and nine months ended June 30,
2008 are not necessarily indicative of the operating results for
the full year.
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 HSBC Bank USA, N.A. (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.
5
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed Financial Statements
2. | Significant accounting policies (continued) |
The table below summarizes the impact of unrealized gains or
losses on the Trusts gold holdings as of June 30,
2008 and September 30, 2007:
Jun-30, |
Sep-30, |
|||||||
(Amounts in 000s of US$) | 2008 | 2007 | ||||||
Investment in gold - average cost
|
$ | 13,306,679 | $ | 10,644,489 | ||||
Unrealized gain on investment in gold
|
5,482,212 | 3,163,495 | ||||||
Investment in gold - market value
|
$ | 18,788,891 | $ | 13,807,984 | ||||
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 through
market price recoveries in later interim periods of the same
fiscal year are recognized in the later interim period.
Increases in value recognized on an interim basis may not exceed
the previously recognized diminution in value.
2.2. Gold
receivable
Gold receivable 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 the trade date. As of June 30, 2008 there was
$476,879 gold receivable and as of September 30, 2007 there
was no gold receivable.
2.3. Creations
and Redemptions of Shares
The Trust will create and redeem Shares from time to time, but
only in one or more Baskets (a Basket equals a block of
100,000 Shares). The Trust issues Shares in Baskets to
certain authorized participants (Authorized
Participants) on an ongoing basis. The creation and
redemption of Baskets will only be made in exchange for the
delivery to the Trust or the distribution by the Trust of the
amount of gold and any cash represented by the Baskets being
created or redeemed, the amount of which will be based on the
combined net asset value of the number of Shares included in the
Baskets being created or redeemed determined on the day the
order to create or redeem Baskets is properly received.
As the Shares of the Trust are redeemable at the option of the
Authorized Participants only in Baskets, the Trust has
classified the Shares as Redeemable Shares on the Statement of
Financial Condition. The Trust records the redemption value,
which represents its maximum obligation, as Redeemable Shares
with the difference from cost as an offsetting amount to
Shareholders Equity/(Deficit). Changes in the shares for
the nine months ended June 30, 2008 and for the year ended
September 30, 2007, are as follows:
Nine Months Ended |
Year Ended |
|||||||
Jun-30, |
Sep-30, |
|||||||
(All amounts are in 000s) | 2008 | 2007 | ||||||
Number of Redeemable Shares:
|
||||||||
Opening Balance
|
187,900 | 125,100 | ||||||
Creations
|
72,700 | 92,100 | ||||||
Redemptions
|
(50,600 | ) | (29,300 | ) | ||||
Closing Balance
|
210,000 | 187,900 | ||||||
6
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed Financial Statements
2. | Significant accounting policies (continued) |
Nine Months Ended |
Year Ended |
|||||||
Jun-30, |
Sep-30, |
|||||||
(Amounts in 000s of US$) | 2008 | 2007 | ||||||
Redeemable shares:
|
||||||||
Opening Balance
|
$ | 13,803,588 | $ | 7,441,489 | ||||
Creations
|
6,286,905 | 6,034,380 | ||||||
Redemptions
|
(4,457,855 | ) | (1,905,262 | ) | ||||
Adjustment to redemption value
|
3,625,385 | 2,232,981 | ||||||
Closing Balance
|
$ | 19,258,023 | $ | 13,803,588 | ||||
Redemption Value per Redeemable Share at Period End
|
$ | 91.70 | $ | 73.46 | ||||
2.4. Revenue
Recognition Policy
BNY Mellon Asset Servicing, a division of The Bank of New York
Mellon, (formerly the Bank of New York) (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 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.
2.5. Income
Taxes
The Trust is classified as a grantor trust for US
federal income tax purposes. As a result, the Trust itself will
not be subject to US 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.
7
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed Financial Statements
3. | Investment in Gold |
The following represents the changes in ounces of gold and the
respective values for the nine months ended June 30, 2008
and for the year ended September 30, 2007:
Nine Months Ended |
Year Ended |
|||||||
Jun-30, |
Sep-30, |
|||||||
(Ounces of gold are in 000s and value of gold is in 000s of US$) | 2008 | 2007 | ||||||
Ounces of Gold:
|
||||||||
Opening Balance
|
18,584.1 | 12,422.5 | ||||||
Creations (excluding gold receivable at June 30,
2008 - 512.6, and at September 30, 2007 - nil)
|
6,663.7 | 9,121.7 | ||||||
Redemptions
|
(4,994.1 | ) | (2,901.7 | ) | ||||
Sales of gold
|
(56.0 | ) | (58.4 | ) | ||||
Closing Balance
|
20,197.7 | 18,584.1 | ||||||
Investment in Gold (lower of cost or market):
|
||||||||
Opening Balance
|
$ | 10,644,489 | $ | 6,200,226 | ||||
Creations (excluding gold receivable at June 30,
2008 - 476,879, and at September 30, 2007 -
nil)
|
5,810,026 | 6,034,380 | ||||||
Redemptions
|
(3,113,621 | ) | (1,559,060 | ) | ||||
Sales of gold
|
(34,215 | ) | (31,057 | ) | ||||
Closing Balance
|
$ | 13,306,679 | $ | 10,644,489 | ||||
4. | 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.
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 gold held
in the Trusts allocated gold account (Trust Allocated
Account) and the Trusts unallocated gold account
(Trust Unallocated Account), payable in monthly
installments in arrears. Effective April 1, 2006, the
Custodians fee is
8
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed Financial Statements
4. | Related Parties - Sponsor, Trustee, Custodian and Marketing Agent Fees (continued) |
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 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 (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 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.
For seven years from the date of the Trust Indenture or
until the earlier termination of the Marketing Agent Agreement,
if at the end of any month during this period 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 fees
payable to the Sponsor and the Marketing Agent from the assets
of the Trust for such month will be reduced by the amount of
such excess in equal shares up to the amount of their fees.
Investors should be aware that if the gross value of the
Trusts assets is less than approximately
$500 million, 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 reduced 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 described in
Business of the Trust
Trust Expenses in the
10-K for the
fiscal year ended September 30, 2007 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 reduced their combined fees of
0.30% per year of the daily ANAV of the Trust.
Upon the end of the seven year period or the earlier termination
of the Marketing Agent Agreement, the fee reduction will expire
and the estimated ordinary expenses of the Trust which are
payable from the assets of the Trust each month may be more than
they would have been during the period when the fee reduction is
in effect, thus reducing the Net Asset Value (NAV)
of the Trust more rapidly than if the fee reduction was in
effect and adversely affecting the value of the Shares.
For the nine months ended June 30, 2008 the fees payable to
the Sponsor and the Marketing Agent from the assets of the Trust
were reduced by $220,084 each. For the year ended
September 30, 2007, the comparable reduction in fees was
$399,922.
9
Table of Contents
SPDR®
GOLD TRUST
Notes to
the Unaudited Condensed Financial Statements
4. | Related Parties - Sponsor, Trustee, Custodian and Marketing Agent Fees (continued) |
Amounts
Payable to Related parties and other accounts payable
Jun-30, |
Sep-30, |
|||||||
(Amounts in 000s of US$) | 2008 | 2007 | ||||||
Payable to Custodian
|
$ | (1,002 | ) | $ | (740 | ) | ||
Payable to Trustee
|
(164 | ) | (164 | ) | ||||
Payable to Sponsor
|
(2,090 | ) | (1,537 | ) | ||||
Payable to Marketing Agent
|
(2,090 | ) | (1,537 | ) | ||||
Accounts Payable to related parties
|
$ | (5,346 | ) | $ | (3,978 | ) | ||
5. | Concentration of Risk |
In accordance with Statement of Position
No. 94-6,
Disclosure of Certain Significant Risks and Uncertainties,
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 South Africa, the United
States and Australia; (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.
6. | 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 Distribution Agreement
with the Purchaser, 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.
10
Table of Contents
SPDR®
GOLD TRUST
7. | Recent Accounting Pronouncements |
In June 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes. The
interpretation clarifies the accounting for uncertainty in
income taxes recognized in a companys financial statements
in accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Specifically,
the pronouncement prescribes a recognition threshold and a
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. The interpretation also provides guidance on
the related derecognition, classification, interest and
penalties, accounting for interim periods, disclosure and
transition of uncertain tax positions. The interpretation is
effective for fiscal years beginning after December 15,
2006. Accordingly, the interpretation will be effective for the
Trusts fiscal year ending September 30, 2008 and was
adopted as of October 1, 2007. The Sponsor has evaluated
the effects of the interpretation and it does not have a
significant effect on the financial position or results of
operations of the Trust.
In September 2006, Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements,
was issued by the FASB and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines
fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosure
about fair value measurements. Accordingly, SFAS 157 will
be effective for the Trusts fiscal year ending
September 30, 2009 and will be adopted as of
October 1, 2008. At this time, the impact to the
Trusts financial statements has not been determined.
In February 2007, SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities, was
issued by the FASB, which allows companies to elect to measure
certain financial assets and liabilities at fair value. The fair
value election can be made on an instrument by instrument basis
but is irrevocable once made. SFAS 159 is effective for
fiscal years beginning after November 15, 2007, with
earlier application permitted. Accordingly, SFAS 159 will
be effective for the Trusts fiscal year ending
September 30, 2009 and will be adopted as of
October 1, 2008. At this time, the impact to the
Trusts financial statements has not been determined.
11
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
This information should be read in conjunction with the
financial statements and notes included in Item 1 of
Part I of this Quarterly Report. The discussion and
analysis which follows may contain trend analysis and other
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 which
reflect our current views with respect to future events and
financial results. Words such as anticipate,
expect, intend, plan,
believe, seek, outlook and
estimate as well as similar words and phrases
signify forward-looking statements.
SPDR®
Gold Trusts forward-looking statements are not
guarantees of future results and conditions and important
factors, risks and uncertainties may cause our actual results to
differ materially from those expressed in our forward-looking
statements.
Trust Overview
SPDR®
Gold 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 chart
illustrates the movement in the price of the Shares against the
corresponding gold price
(per 1/10
of an oz. of gold):
Share
& gold price v. NAV from fund inception to June 30,
2008
![(PERFORMANCE GRAPH)](https://www.sec.gov/Archives/edgar/data/0001222333/000095012308009284/y62773y6277301.gif)
Valuation
of Gold, Definition of Net Asset Value (NAV) and
Adjusted Net Asset Value (ANAV)
As of the London PM Fix on each day that the 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 (the Valuation Time), BNY Mellon Asset
Servicing, a division of The Bank of New York Mellon (formerly
the Bank of New York), the Trustee, values the gold held by the
Trust and determines both the ANAV and the NAV of the Trust.
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
12
Table of Contents
London gold price fix (AM or PM) determined prior to the
Valuation Time will be used, unless the Trustee, in consultation
with World Gold Trust Services, LLC, 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 but unpaid 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 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 State Street Global
Markets, LLC, the Marketing Agent.
To determine the Trusts NAV, the Trustee subtracts from
the ANAV of the Trust the amount of estimated accrued but unpaid
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 HSBC Bank USA, N.A., 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
the NYSE Arca.
Gold acquired, or disposed of, by the Trust is recorded at
average cost. The table below summarizes the impact of
unrealized gains or losses on the Trusts gold holdings at
June 30, 2008 and September 30, 2007:
Jun-30, |
Sep-30, |
|||||||
(Amounts in 000s of US$) | 2008 | 2007 | ||||||
Investment in gold - average cost
|
$ | 13,306,679 | $ | 10,644,489 | ||||
Unrealized gain on investment in gold
|
5,482,212 | 3,163,495 | ||||||
Investment in gold - market value
|
$ | 18,788,891 | $ | 13,807,984 | ||||
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
Three Months |
Three Months |
Nine Months |
Nine Months |
|||||||||||||
(All amounts in the following table and four paragraphs, |
Ended |
Ended |
Ended |
Ended |
||||||||||||
except per share, are in 000s of US$) | Jun-30, 2008 | Jun-30, 2007 | Jun-30, 2008 | Jun-30, 2007 | ||||||||||||
Total Gain on gold
|
621,008 | 242,923 | 1,358,389 | 337,271 | ||||||||||||
Net Gain
|
603,498 | 232,621 | 1,306,668 | 309,039 | ||||||||||||
Gain per share
|
3.04 | 1.49 | 6.52 | 2.09 | ||||||||||||
Net cash flows from operating activities
|
0 | 0 | 0 | 0 |
The Trusts total gain on gold for the three months ended
June 30, 2008 of $621,008 is made up of a gain of $4,994 on
the sale of gold to pay expenses plus a gain of $616,014 on gold
distributed on the redemption of shares.
The Trusts total gain on gold for the three months ended
June 30, 2007 of $242,923 is made up of a gain of $2,094 on
the sale of gold to pay expenses plus a gain of $240,829 on gold
distributed on the redemption of shares.
13
Table of Contents
The Trusts total gain on gold for the nine months ended
June 30, 2008 of $1,358,389 is made up of a gain of $14,155
on the sale of gold to pay expenses plus a gain of $1,344,234 on
gold distributed on the redemption of shares.
The Trusts total gain on gold for the nine months ended
June 30, 2007 of $337,271 is made up of a gain of $5,095 on
the sale of gold to pay expenses plus a gain of $332,176 on gold
distributed on the redemption of shares.
Selected
Supplemental Data - For the nine months ended June 30,
2008 and for the year ended September 30, 2007.
Nine Months |
Year |
|||||||
Ended |
Ended |
|||||||
Jun-30, |
Sep-30, |
|||||||
(All amounts, except per ounce and per share, are in 000s) | 2008 | 2007 | ||||||
Ounces of Gold:
|
||||||||
Opening Balance
|
18,584.1 | 12,422.5 | ||||||
Creations (excluding gold receivable at June 30,
2008 512.6 and at September 30,
2007 nil)
|
6,663.7 | 9,121.7 | ||||||
Redemptions
|
(4,994.1 | ) | (2,901.7 | ) | ||||
Sales of gold
|
(56.0 | ) | (58.4 | ) | ||||
Closing Balance
|
20,197.7 | 18,584.1 | ||||||
Period end Gold price per ounce - London Fix
|
$ | 930.25 | $ | 743.00 | ||||
Market value of gold holdings including gold receivable
|
$ | 19,265,770 | $ | 13,807,984 | ||||
Number of Shares:
|
||||||||
Opening Balance
|
187,900 | 125,100 | ||||||
Creations
|
72,700 | 92,100 | ||||||
Redemptions
|
(50,600 | ) | (29,300 | ) | ||||
Closing Balance
|
210,000 | 187,900 | ||||||
Net Asset Value per share:
|
||||||||
Creations
|
$ | 86.48 | $ | 65.52 | ||||
Redemptions
|
(88.10 | ) | (63.03 | ) | ||||
Shares at redemption value to investors at Period End
|
$ | 19,258,023 | $ | 13,803,588 | ||||
Redemption Value per Redeemable Share at Period End
|
$ | 91.70 | $ | 73.46 | ||||
Change in Net Asset Value through period end
|
39.5 | % | 85.5 | % | ||||
% Difference between Net Asset Value per share and market
value of ounces represented by each share
|
(0.040 | )% | (0.032 | )% | ||||
Results
of Operations
In the nine months ended June 30, 2008,
72,700,000 shares (727 Baskets) were created in exchange
for 7,176,391 ounces of gold including 512,635 ounces of gold
receivable, 50,600,000 shares (506 Baskets) were redeemed
in exchange for 4,994,132 ounces of gold and 56,041 ounces of
gold were sold to pay expenses.
As at June 30, 2008 the amount of gold owned by the Trust
was 20,710,314 ounces including gold receivable, with a market
value of $19,265,769,875 (cost $13,783,558,663)
based on the London PM Fix on June 30, 2008 (in accordance
with the Trust Indenture).
14
Table of Contents
In the year ended September 30, 2007 92,100,000 shares
(921 Baskets) were created in exchange for 9,121,736 ounces of
gold (there was no gold receivable), 29,300,000 shares (293
Baskets) were redeemed in exchange for 2,901,748 ounces of gold
and 58,390 ounces of gold were sold to pay expenses.
As at September 30, 2007 the amount of gold owned by the
Trust was 18,584,096 ounces (there was no gold receivable) with
a market value of $13,807,983,397 (cost
$10,644,489,575).
Cash flow
from operations
The Trust had no net cash flow resulting from operations in the
three and nine months ended June 30, 2008, and 2007. Cash
received in respect of gold sold to pay expenses in the three
and nine months ended June 30, 2008 and 2007 was the same
as those expenses, resulting in zero cash balances at
June 30, 2008 and 2007.
Cash
Resources and Liquidity
At June 30, 2008 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, however, should also be aware that past
movements in the gold price are not indicators of future
movements. This section identifies recent trends in the
movements of the gold price and discusses some of the important
events that have influenced these movements.
The following chart provides historical background on the price
of gold. The chart illustrates movements in the price of gold in
US dollars per ounce over the period from July 1, 2003 to
June 30, 2008, and is based on the London PM Fix.
Daily
gold price - July 1, 2003 to June 30, 2008
![(PERFORMANCE GRAPH)](https://www.sec.gov/Archives/edgar/data/0001222333/000095012308009284/y62773y6277302.gif)
15
Table of Contents
The average, high, low and
end-of-period
gold prices for the period from the inception of the Trust on
November 12, 2004, through June 30, 2008, based on the
London PM Fix, were:
Last |
||||||||||||||||||||||||||||
End of |
business |
|||||||||||||||||||||||||||
Period
|
Average | High | Date | Low | Date | period | day(1) | |||||||||||||||||||||
November 12, 2004 to December 31, 2004
|
$ | 443.59 | $ | 454.20 | Dec 2, 2004 | $ | 434.00 | Dec 10, 2004 | $ | 438.00 | 31 Dec 2004(2 | ) | ||||||||||||||||
Three months to March 31, 2005
|
$ | 427.35 | $ | 443.70 | Mar 11, 2005 | $ | 411.10 | Feb 8, 2005 | $ | 427.50 | 31 Mar 2005 | |||||||||||||||||
Three months to June 30, 2005
|
$ | 427.39 | $ | 440.55 | Jun 24, 2005 | $ | 414.45 | May 31, 2005 | $ | 437.10 | 30 Jun 2005 | |||||||||||||||||
Three months to September 30, 2005
|
$ | 439.72 | $ | 473.25 | Sep 30, 2005 | $ | 418.35 | Jul 15, 2005 | $ | 473.25 | 30 Sep 2005 | |||||||||||||||||
Three months to December 31, 2005
|
$ | 484.20 | $ | 536.50 | Dec 12, 2005 | $ | 456.50 | Nov 7, 2005 | $ | 513.00 | 30 Dec 2005(2 | ) | ||||||||||||||||
Three months to March 31, 2006
|
$ | 554.07 | $ | 584.00 | Mar 30, 2006 | $ | 524.75 | Jan 5, 2006 | $ | 582.00 | 31 Mar 2006 | |||||||||||||||||
Three months to June 30, 2006
|
$ | 627.71 | $ | 725.00 | May 12, 2006 | $ | 567.00 | Jun 20, 2006 | $ | 613.50 | 30 Jun 2006 | |||||||||||||||||
Three months to September 30, 2006
|
$ | 621.67 | $ | 663.25 | Jul 14, 2006 | $ | 573.60 | Sep 15, 2006 | $ | 599.25 | 29 Sep 2006 | |||||||||||||||||
Three months to December 31, 2006
|
$ | 613.21 | $ | 648.75 | Dec 1, 2006 | $ | 560.75 | Oct 6, 2006 | $ | 635.70 | 29 Dec 2006(2 | ) | ||||||||||||||||
Three months to March 31, 2007
|
$ | 649.82 | $ | 685.75 | Feb 26, 2007 | $ | 608.40 | Jan 10, 2007 | $ | 661.75 | 30 Mar 2007 | |||||||||||||||||
Three months to June 30, 2007
|
$ | 666.84 | $ | 691.40 | Apr 20, 2007 | $ | 642.10 | Jun 27, 2007 | $ | 650.50 | 29 Jun 2007 | |||||||||||||||||
Three months to September 30, 2007
|
$ | 680.13 | $ | 743.00 | Sep 28, 2007 | $ | 648.75 | Jul 06, 2007 | $ | 743.00 | 28 Sep 2007 | |||||||||||||||||
Three months to December 31, 2007
|
$ | 787.41 | $ | 841.10 | Nov 08, 2007 | $ | 725.50 | Oct 04, 2007 | $ | 836.50 | 31 Dec 2007(2 | ) | ||||||||||||||||
Three months to March 31, 2008
|
$ | 924.83 | $ | 1,011.25 | Mar 17, 2008 | $ | 846.75 | Jan 02, 2008 | $ | 933.50 | 31 Mar 2008 | |||||||||||||||||
Three months to June 30, 2008
|
$ | 896.29 | $ | 946.00 | Apr 17, 2008 | $ | 853.00 | May 01, 2008 | $ | 930.25 | Jun 30, 2008 | |||||||||||||||||
November 12, 2004 to June 30, 2005
|
$ | 430.82 | $ | 454.20 | Dec 02, 2004 | $ | 411.10 | Feb 08, 2005 | $ | 437.10 | Jun 30, 2005 | |||||||||||||||||
Twelve months ended June 30, 2006
|
$ | 525.24 | $ | 725.00 | May 12, 2006 | $ | 418.35 | Jul 15, 2005 | $ | 613.50 | Jun 30, 2006 | |||||||||||||||||
Twelve months ended June 30, 2007
|
$ | 637.75 | $ | 691.40 | Apr 20, 2007 | $ | 560.75 | Oct 06, 2006 | $ | 650.50 | Jun 29, 2007 | |||||||||||||||||
Twelve months ended June 30, 2008
|
$ | 821.06 | $ | 1,011.25 | Mar 17, 2008 | $ | 648.75 | Jul 06, 2007 | $ | 930.25 | Jun 30, 2008 | |||||||||||||||||
November 12, 2004 to June 30, 2008
|
$ | 621.61 | $ | 1,011.25 | Mar 17, 2008 | $ | 411.10 | Feb 08, 2005 | $ | 930.25 | Jun 30, 2008 |
(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 the last business day of December 2004, 2005, 2006 and 2007. The London AM Fix on the last business day was $438.00, $513.00, $635.70 and $836.50, respectively. The Net Asset Value of the Trust on December 31, 2004, 2005, 2006 and 2007 was calculated using the London AM Fix, in accordance with the Trust Indenture. |
The upward price trend that began in 2001 has continued for much
of the period since the inception of the Trust on
November 12, 2004. After reaching a peak of $725.00 at the
London PM Fix on May 12, 2006, gold corrected down to a low
of $560.75 at the PM Fix on October 6, 2006. The reason
most often cited for the correction was a concern among
investors that monetary authorities, especially in the U.S.,
would move to counter the threat of rising inflation by
aggressively raising interest rates. These concerns quickly
ebbed, however, and as the dollar continued to fall, the gold
price rallied from the October 2006 low. In any event, beginning
in August 2007, the US authorities began to reduce interest
rates in response to the subprime mortgage crisis. The continued
reduction in the fed funds rate helped to drive gold to a fresh
all-time high of $1,011.25 on March 17, 2008. Since then,
gold has been consolidating on either side of the $900 level.
The average for the three months to June 30, 2008, was
$896.29.
Cautionary
Statement Regarding Forward-Looking Information and Risk
Factors
This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements are predictions and actual events or results
may differ materially from those expressed in our
forward-looking statements. Risks and uncertainties may cause
our actual results to differ materially from those expressed in
our forward-looking statements. These uncertainties and other
factors include, but are not limited to, the following:
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
price of gold bullion, and the value of the Shares relates
directly to the value of the gold held by the Trust, less the
Trusts liabilities (including estimated
16
Table of Contents
accrued but unpaid expenses). The price of gold has fluctuated
widely over the past several years. Several factors may affect
the price of gold, including:
| 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; | |
| Investors expectations with respect to the rate of inflation; | |
| Currency exchange rates; | |
| Interest rates; | |
| Investment and trading activities of hedge funds and commodity funds; and | |
| Global or regional political, economic or financial events and situations. |
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 sale of gold by the Trust to pay expenses reduces the
amount of gold represented by each Share on an ongoing basis
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. As the Trust does not
generate any income and as the Trust regularly sells gold over
time to pay for its ongoing expenses, the amount of gold
represented by each Share will gradually decline over time. This
is true even if additional Shares are issued in exchange for
additional deposits of gold into the Trust, as the amount of
gold required to create Shares will proportionately reflect 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. The Shares will only maintain their original
price if the price of gold increases.
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.
Readers are urged to review the Risk Factors section contained
in the Trusts annual report on
Form 10-K
for a description of other risks and uncertainties that may
affect an investment in our shares.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
Item 4. | Controls and Procedures |
Disclosure controls and procedures. Under the
supervision and with the participation of the Sponsor, World
Gold Trust Services, LLC, including its chief executive
officer and chief financial officer, we carried out an
evaluation of the effectiveness of the design and operation of
our companys disclosure controls and procedures. Based
upon that evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by
this quarterly report.
Internal control over financial
reporting. There has been no change in our
internal control over financial reporting that occurred during
our most recent fiscal quarter that has materially affected or
is reasonably likely to materially affect, our internal control
over financial reporting.
17
Table of Contents
PART II -
OTHER INFORMATION:
Item 1. | Legal Proceedings |
Not applicable.
Item 1A. | Risk Factors |
There have been no material changes in our risk factors since we
last reported under Part I, Item 1A, in our Annual
Report on
Form 10-K
for the year ended September 30, 2007.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
As of the date of the formation of the Trust on
November 12, 2004, the NAV of the Trust, which represents
the value of the gold deposited into the Trust, was $13,081,500,
and the NAV per Share was $43.60. Since formation and through
June 30, 2008, 3,082 Baskets (308,200,000 Shares) have
been created. As of August 7, 2008, 215,000,000 Shares
were outstanding and the estimated NAV per Share as
determined by the Trustee for August 7, 2008 was $85.87.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Submission of Matters to a Vote of Security Holders |
None.
Item 5. | Other Information |
None.
Item 6. | Exhibits |
The exhibits listed on the accompanying Exhibit Index, and
such Exhibit Index, are filed or incorporated by reference
as a part of this report.
18
Table of Contents
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 Equity Gold Trust
(Registrant)
/s/ James
E. Burton
James E. Burton
Managing Director
(principal executive officer)
/s/ James
Lowe
James Lowe
Chief Financial Officer and Treasurer
(principal financial officer and
principal accounting officer)
Date: August 11, 2008
* | 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. |
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Table of Contents
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Pursuant to Item 601 of Regulation S-K
Exhibit No.
|
Description of Exhibit | |
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, with respect to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. | |
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, with respect to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. | |
32.1
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. | |
32.2
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. |
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