World Gold Trust - Quarter Report: 2018 March (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2018

 

☐	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: 001-37996

 

 

WORLD GOLD TRUST

f/k/a World Currency Gold Trust

(SPONSORED BY WGC USA ASSET MANAGEMENT COMPANY, LLC)

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware		36-7650517
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

c/o WGC USA Asset Management Company, LLC

685 Third Avenue 27^th Floor

New York, New York 10017

(Address of Principal Executive Offices)

(212) 317-3800

(Registrant’s Telephone Number, Including Area Code)

 

 

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  ☒    No  ☐

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  ☒    No  ☐

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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☐  (Do not check if a smaller reporting company)		Smaller reporting company		☒

Emerging growth company    ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of May 2, 2018, the Registrant had 140,000 Shares outstanding.

 

 

 

WORLD GOLD TRUST

INDEX

 

				Page
PART I - FINANCIAL INFORMATION					1
Item 1.		Financial Statements (Unaudited)			1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			25
Item 4.		Controls and Procedures			25
PART II - OTHER INFORMATION					25
Item 1.		Legal Proceedings			25
Item 1A.		Risk Factors			25
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			26
Item 3.		Defaults Upon Senior Securities			26
Item 4.		Mine Safety Disclosures			26
Item 5.		Other Information			26
Item 6.		Exhibits			26
SIGNATURES					28

WORLD GOLD TRUST

Table of Contents

 

Part 1.

FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

Index

 

Documents		Page
Unaudited Statements of Financial Condition, Schedules of Investments, Statements of Operations, Statements of Cash Flows and Statements of Changes in Net Assets			2
World Gold Trust and SPDR® Long Dollar Gold Trust (combined)			2
SPDR® Long Dollar Gold Trust			7
Notes to Unaudited Financial Statements			12

 

1

World Gold Trust

Combined Statements of Financial Condition

at March 31, 2018 (unaudited) and September 30, 2017

 

(Amounts in 000’s of US$ except for share and per share data)		Mar-31, 2018				Sep-30, 2017
		(unaudited)
ASSETS
Investment in Gold, at fair value (cost $15,617 and $13,592 at March 31, 2018 and September 30, 2017, respectively)		$	16,666			$	14,406
Gold Delivery Agreement receivable			170				21
Total Assets		$	16,836			$	14,427
LIABILITIES
Accounts payable to Sponsor		$	5			$	4
Gold Delivery Agreement payable			—				50
Total Liabilities		$	5			$	54
Net Assets		$	16,831			$	14,373
Shares issued and outstanding(1)			140,000				120,000
Net asset value per Share		$	120.22			$	119.77

 

(1)	Authorized share capital is unlimited and the par value of the Shares is $0.00.

See notes to the unaudited financial statements.

 

2

World Gold Trust

Combined Schedules of Investments

(All balances in 000’s except percentages)

 

March 31, 2018		Ounces of gold				Cost				Fair Value				% of Net Assets
(unaudited)
Investment in Gold			12.6			$	15,617			$	16,666				99.02	%
Gold Delivery Agreement			—				—				—				0.00	%
Total Investments			12.6			$	15,617			$	16,666				99.02	%
Assets in excess of liabilities											165				0.98	%
Net Assets										$	16,831				100.00	%

Derivatives Contract

at March 31, 2018 (unaudited)

 

Underlying Instrument

Counter-Party

Notional Value

Expiration Date

Unrealized Appreciation/(Depreciation)

Gold Delivery Agreement

Merrill Lynch International

$

16,666

6/28/19

$

—

(All balances in 000’s except percentages)

 

September 30, 2017		Ounces of gold				Cost				Fair Value				% of Net Assets
Investment in Gold			11.2			$	13,592			$	14,406				100.23	%
Gold Delivery Agreement			—				—				—				0.00	%
Total Investments			11.2			$	13,592			$	14,406				100.23	%
Liabilities in excess of other assets											(33	)			(0.23	)%
Net Assets										$	14,373				100.00	%

Derivatives Contract

at September 30, 2017

 

Underlying Instrument

Counter-Party

Notional Value

Expiration Date

Unrealized Appreciation/(Depreciation)

Gold Delivery Agreement

Merrill Lynch International

$

14,406

6/28/19

$

—

See notes to the unaudited financial statements.

 

3

World Gold Trust

Unaudited Combined Statements of Operations

For the three and six months ended March 31, 2018 and 2017

 

(Amounts in 000’s of US$, except per share data)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31, 2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31, 2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
EXPENSES
Sponsor fees		$	15			$	13			$	30			$	13
Gold Delivery Provider fees			8				7				15				7
Total expenses			23				20				45				20
Net investment loss			(23	)			(20	)			(45	)			(20	)
Net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement
Net realized gain/(loss) from investment in gold sold to pay Sponsor fees			1				1				2				1
Net realized gain/(loss) on Gold Delivery Agreement			(415	)			(86	)			(533	)			(86	)
Net realized gain/(loss) on gold transferred to cover Gold Delivery Agreement and Gold Delivery
Provider fees			168				39				229				39
Net realized gain/(loss) from gold distributed for the redemption of shares			149				—				149				—
Net change in unrealized appreciation/(depreciation) on investment in gold			98				812				235				812
Net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement			1				766				82				766
Net Income/(Loss)		$	(22	)		$	746			$	37			$	746
Net income/(loss) per share		$	(0.15	)		$	3.85			$	0.25			$	3.85
Weighted average number of shares (in 000’s)			150				194				149				194

 

(1)	Fund commenced operations on January 27, 2017. See Note 1.

See notes to the unaudited financial statements.

 

4

World Gold Trust

Unaudited Combined Statements of Cash Flows

For the three and six months ended March 31, 2018 and 2017

 

(Amounts in 000’s of US$)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31,  2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31,  2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
INCREASE/DECREASE IN CASH FROM OPERATIONS:
Cash proceeds received from sales of gold		$	15			$	12			$	29			$	12
Cash expenses paid			(15	)			(12	)			(29	)			(12	)
Increase/(Decrease) in cash resulting from operations			—				—				—				—
INCREASE/DECREASE IN CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of stock			—				—				—				1
Cash paid for repurchase of stock			—				(1	)			—				(1	)
Increase/(Decrease) in cash resulting from financing activities			—				(1	)			—				—
Cash and cash equivalents at beginning of period			—				1				—				—
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		$	—			$	26,550			$	4,814			$	26,550
Value of gold distributed for redemption of shares - net of gold payable		$	(2,393	)		$	—			$	(2,393	)		$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
Value of Gold Delivery Agreement inflows - net of Gold Delivery Agreement receivable		$	1,645			$	1,440			$	3,005			$	1,440
Value of Gold Delivery Agreement outflows - net of Gold Delivery Agreement payable		$	(2,365	)		$	(1,686	)		$	(3,710	)		$	(1,686	)

 

(Amounts in 000’s of US$)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31,  2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31,  2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
RECONCILIATION OF NET INCOME/(LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Income/(Loss)		$	(22	)		$	746			$	37			$	746
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Proceeds from sales of gold to pay expenses			23				12				44				12
Net realized (gain)/loss from investment in gold sold to pay Sponsor fees			(1	)			(1	)			(2	)			(1	)
Net realized (gain)/loss from Gold Delivery Agreement			415				86				533				86
Net realized (gain)/loss on gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees			(168	)			(39	)			(229	)			(39	)
Net realized gain/(loss) from gold distributed for the redemption of shares			(149	)			—				(149	)			—
Net change in unrealized (appreciation)/depreciation on investment in gold			(98	)			(812	)			(235	)			(812	)
Increase/(Decrease) in accounts payable to Sponsor			—				8				1				8
Net cash provided by operating activities		$	—			$	—			$	—			$	—

 

(1)	Fund commenced operations on January 27, 2017. See Note 1.

See notes to the unaudited financial statements.

 

5

World Gold Trust

Combined Statements of Changes in Net Assets

For the six months ended March 31, 2018 (unaudited) and Fiscal Period ended September 30, 2017

 

(Amounts in 000’s of US$)		Six Months Ended Mar-31, 2018				Fiscal Period Ended Sep-30, 2017
		(unaudited)
Net Assets - Opening Balance		$	14,373			$	—
Creations			4,814				26,550
Redemptions			(2,393	)			(11,840	)
Repurchase of stock			—				(1	)
Issuance of stock			—				1
Net investment loss			(45	)			(77	)
Net realized gain/(loss) from investment in gold sold to pay Sponsor fees			2				3
Net realized gain/(loss) from Gold Delivery Agreement			(533	)			(1,833	)
Net realized gain/(loss) on gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees			229				270
Net realized gain/(loss) from gold distributed for the redemption of shares			149				486
Net change in unrealized appreciation/(depreciation) on investment in gold			235				814
Net Assets - Closing Balance		$	16,831			$	14,373

See notes to the unaudited financial statements.

 

6

SPDR^® Long Dollar Gold Trust

Statements of Financial Condition

at March 31, 2018 (unaudited) and September 30, 2017

 

(Amounts in 000’s of US$ except for share and per share data)		Mar-31, 2018				Sep-30, 2017
		(unaudited)
ASSETS
Investment in Gold, at fair value (cost $15,617 and $13,592 at March 31, 2018 and September 30, 2017, respectively)		$	16,666			$	14,406
Gold Delivery Agreement receivable			170				21
Total Assets		$	16,836			$	14,427
LIABILITIES
Accounts payable to Sponsor		$	5			$	4
Gold Delivery Agreement payable			—				50
Total Liabilities		$	5			$	54
Net Assets		$	16,831			$	14,373
Shares issued and outstanding(1)			140,000				120,000
Net asset value per Share		$	120.22			$	119.77

 

(1)	Authorized share capital is unlimited and the par value of the Shares is $0.00.

See notes to the unaudited financial statements.

 

7

SPDR^® Long Dollar Gold Trust

Schedules of Investments

(All balances in 000’s except percentages)

 

March 31, 2018		Ounces of gold				Cost				Fair Value				% of Net Assets
(unaudited)
Investment in Gold			12.6			$	15,617			$	16,666				99.02	%
Gold Delivery Agreement			—				—				—				0.00	%
Total Investments			12.6			$	15,617			$	16,666				99.02	%
Assets in excess of liabilities											165				0.98	%
Net Assets										$	16,831				100.00	%

Derivatives Contract

at March 31, 2018 (unaudited)

 

Underlying Instrument

Counter-Party

Notional Value

Expiration Date

Unrealized Appreciation/(Depreciation)

Gold Delivery Agreement

Merrill Lynch International

$

16,666

6/28/19

$

—

(All balances in 000’s except percentages)

 

September 30, 2017		Ounces of gold				Cost				Fair Value				% of Net Assets
Investment in Gold			11.2			$	13,592			$	14,406				100.23	%
Gold Delivery Agreement			—				—				—				0.00	%
Total Investments			11.2			$	13,592			$	14,406				100.23	%
Liabilities in excess of other assets											(33	)			(0.23	)%
Net Assets										$	14,373				100.00	%

Derivatives Contract

at September 30, 2017

 

Underlying Instrument

Counter-Party

Notional Value

Expiration Date

Unrealized Appreciation/(Depreciation)

Gold Delivery Agreement

Merrill Lynch International

$

14,406

6/28/19

$

—

See notes to the unaudited financial statements.

 

8

SPDR^® Long Dollar Gold Trust

Unaudited Statements of Operations

For the three and six months ended March 31, 2018 and 2017

 

(Amounts in 000’s of US$, except per share data)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31, 2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31, 2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
EXPENSES
Sponsor fees		$	15			$	13			$	30			$	13
Gold Delivery Provider fees			8				7				15				7
Total expenses			23				20				45				20
Net investment loss			(23	)			(20	)			(45	)			(20	)
Net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement
Net realized gain/(loss) from investment in gold sold to pay Sponsor fees			1				1				2				1
Net realized gain/(loss) on Gold Delivery Agreement			(415	)			(86	)			(533	)			(86	)
Net realized gain/(loss) on gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees			168				39				229				39
Net realized gain/(loss) from gold distributed for the redemption of shares			149				—				149				—
Net change in unrealized appreciation/(depreciation) on investment in gold			98				812				235				812
Net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement			1				766				82				766
Net Income/(Loss)		$	(22	)		$	746			$	37			$	746
Net income/(loss) per share		$	(0.15	)		$	3.85			$	0.25			$	3.85
Weighted average number of shares (in 000’s)			150				194				149				194

 

(1)	Fund commenced operations on January 27, 2017. See Note 1.

See notes to the unaudited financial statements.

 

9

SPDR^® Long Dollar Gold Trust

Unaudited Statements of Cash Flows

For the three and six months ended March 31, 2018 and 2017

 

(Amounts in 000’s of US$)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31, 2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31, 2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
INCREASE/DECREASE IN CASH FROM OPERATIONS:
Cash proceeds received from sales of gold		$	15			$	12			$	29			$	12
Cash expenses paid			(15	)			(12	)			(29	)			(12	)
Increase/(Decrease) in cash resulting from operations			—				—				—				—
INCREASE/DECREASE IN CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of stock			—				—				—				1
Cash paid for repurchase of stock			—				(1	)			—				(1	)
Increase/(Decrease) in cash resulting from financing activities			—				(1	)			—				—
Cash and cash equivalents at beginning of period			—				1				—				—
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		$	—			$	26,550			$	4,814			$	26,550
Value of gold distributed for redemption of shares - net of gold payable		$	(2,393	)		$	—			$	(2,393	)		$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
Value of Gold Delivery Agreement inflows - net of Gold Delivery Agreement receivable		$	1,645			$	1,440			$	3,005			$	1,440
Value of Gold Delivery Agreement outflows - net of Gold Delivery Agreement payable		$	(2,365	)		$	(1,686	)		$	(3,710	)		$	(1,686	)
(Amounts in 000’s of US$)		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31,2017(1)				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31, 2017(1)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
RECONCILIATION OF NET INCOME/(LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Income/(Loss)		$	(22	)		$	746			$	37			$	746
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Proceeds from sales of gold to pay expenses			23				12				44				12
Net realized (gain)/loss from investment in gold sold to pay Sponsor fees			(1	)			(1	)			(2	)			(1	)
Net realized (gain)/loss from Gold Delivery Agreement			415				86				533				86
Net realized (gain)/loss on gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees			(168	)			(39	)			(229	)			(39	)
Net realized gain/(loss) from gold distributed for the redemption of shares			(149	)			—				(149	)			—
Net change in unrealized (appreciation)/depreciation on investment in gold			(98	)			(812	)			(235	)			(812	)
Increase/(Decrease) in accounts payable to Sponsor			—				8				1				8
Net cash provided by operating activities		$	—			$	—			$	—			$	—

 

(1)	Fund commenced operations on January 27, 2017. See Note 1.

See notes to the unaudited financial statements.

 

10

SPDR^® Long Dollar Gold Trust

Statements of Changes in Net Assets

For the six months ended March 31, 2018 (unaudited) and Fiscal Period ended September 30, 2017

 

(Amounts in 000’s of US$)		Six Months Ended Mar-31, 2018				Fiscal Period Ended Sep-30, 2017
		(unaudited)
Net Assets - Opening Balance		$	14,373			$	—
Creations			4,814				26,550
Redemptions			(2,393	)			(11,840	)
Repurchase of stock			—				(1	)
Issuance of stock			—				1
Net investment loss			(45	)			(77	)
Net realized gain/(loss) from investment in gold sold to pay Sponsor fees			2				3
Net realized gain/(loss) from Gold Delivery Agreement			(533	)			(1,833	)
Net realized gain/(loss) on gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees			229				270
Net realized gain/(loss) from gold distributed for the redemption of shares			149				486
Net change in unrealized appreciation/(depreciation) on investment in gold			235				814
Net Assets - Closing Balance		$	16,831			$	14,373

See notes to the unaudited financial statements.

 

11

WORLD GOLD TRUST

Notes to the Unaudited Financial Statements

 

1.	Organization

World Gold Trust (the “Trust”) was organized as a Delaware statutory trust on August 27, 2014 and is governed by the Fourth Amended and Restated Agreement and Declaration of Trust (“Declaration of Trust”), dated as of April 16, 2018, between WGC USA Asset Management Company, LLC (the “Sponsor”) and the Delaware Trust Company (the “Trustee”). The Trust is authorized to issue an unlimited number of shares of beneficial interest (“Shares”). The beneficial interest in the Trust may be divided into one or more series. The Trust has established six separate series. The accompanying financial statements relate to the Trust and SPDR^® Long Dollar Gold Trust (the “Fund”), currently the only operational series of the Trust, which commenced operations on January 27, 2017. The fiscal year-end of both the Trust and the Fund is September 30.

On November 30, 2017, the Sponsor filed a Form S-1 with the Securities and Exchange Commission for The Gold Trust, a series of the Trust (the “New Fund”), which included an independent registered public accounting firm’s audit report on the statement of financial condition as of September 30, 2017 of the New Fund. As of and for the six months ended March 31, 2018, the New Fund has not commenced operations and as a result, the New Fund continues to not have any Shares outstanding, assets or liabilities, revenue or expenses. Accordingly, no statements have been provided for the New Fund within this quarterly report as there are no balances or relevant footnotes to present.

The investment objective of the Fund is to track the performance of the Solactive GLD^® Long USD Gold Index (the “Index”), less Fund expenses. The Index seeks to track the daily performance of a long position in physical gold, as represented by the London Bullion Market Association (“LBMA”) Gold Price AM, and a short position in a basket of specific non-U.S. currencies (i.e., a long U.S. dollar (“USD”) exposure versus the basket). Those non-U.S. currencies, which are weighted according to the Index, consist of the Euro, Japanese Yen, British Pound Sterling, Canadian Dollar, Swedish Krona, and Swiss Franc (each, a “Reference Currency” and together, the “Reference Currencies”).

BNY Mellon Asset Servicing, a division of The Bank of New York Mellon (“BNYM”), is the Administrator and Transfer Agent of the Fund. BNYM also serves as the custodian of the Fund’s cash, if any. HSBC Bank plc (the “Custodian”) is responsible for custody of the Fund’s gold bullion. Merrill Lynch International is the Gold Delivery Provider to the Fund. State Street Global Advisors Funds Distributors, LLC is the marketing agent of the Fund. Solactive AG (the “Index Provider”) has licensed the Index to the Sponsor for use with the Fund.

The statement of financial condition and schedule of investments at March 31, 2018, the statements of operations and of cash flows for the three and six months ended March 31, 2018 and 2017, and the statement of changes in net assets for the six months ended March 31, 2018 have been prepared on behalf of the Trust and the Fund without audit. In the opinion of management of 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 six months ended March 31, 2018 and for all periods presented have been made. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The results of operations for the three and six months ended March 31, 2018 are not necessarily indicative of the operating results for the full fiscal year.

Capitalized terms used but not defined herein have the meaning as set forth in the Declaration of Trust.

The Trust had no operations with respect to the Fund’s Shares prior to January 27, 2017 other than matters relating to its organization, the registration of the Fund’s Shares under the Securities Act of 1933, as amended, and the sale and issuance by the Fund to WGC (US) Holdings, Inc. of 10 Shares of the Fund for an aggregate purchase price of $1,000.

 

12

2.	Significant Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 Fund and Trust.

 

2.1.	Basis of Accounting

These financial statements present the financial condition, results of operations and cash flows of the Fund and the Fund and Trust combined. For the periods presented, there were no balances or activity for the Trust apart from those from the Fund when combined, and the footnotes accordingly relate to the Fund, unless stated otherwise.

The Fund is an investment company within the scope of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies, and therefore applies the specialized accounting and reporting guidance therein. The Fund is not registered as an investment company under the Investment Company Act of 1940, as amended.

 

2.2.	Basis of Presentation

The financial statements are presented for the Trust, as the SEC registrant, combined with the Fund and for the Fund individually. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Fund shall be enforceable only against the assets of the Fund and not against the assets of the Trust generally or any other fund that the Trust may establish in the future.

 

2.3.	Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments of sufficient credit quality with original maturity of three months or less.

 

2.4.	Solactive GLD® Long USD Gold Index—Gold Delivery Agreement

Pursuant to the terms of the Gold Delivery Agreement, the Fund has entered into a transaction to deliver gold bullion to, or receive gold bullion from, Merrill Lynch International, as Gold Delivery Provider, each Business Day. The amount of gold bullion transferred essentially will be equivalent to the Fund’s profit or loss as if the Fund had exchanged the Reference Currencies comprising the Index (“FX Basket”), in the proportion in which they are reflected in the Index, for USDs in an amount equal to the Fund’s holdings of gold bullion on such day. In general, if there is a currency gain (i.e., the value of the USD against the Reference Currencies comprising the FX Basket increases), the Fund will receive gold bullion. In general, if there is a currency loss (i.e., the value of the USD against the Reference Currencies comprising the FX Basket decreases), the Fund will deliver gold bullion. In this manner, the amount of gold bullion held by the Fund will be adjusted to reflect the daily change in the value of the Reference Currencies comprising the FX Basket against the USD. The Gold Delivery Agreement requires gold bullion ounces calculated pursuant to formulas contained in the Gold Delivery Agreement to be delivered to the custody account of the Fund or Gold Delivery Provider, as applicable. The fee that the Fund pays the Gold Delivery Provider for its services under the Gold Delivery Agreement is accrued daily and reflected in the calculation of the amount of gold bullion to be delivered pursuant to the Gold Delivery Agreement. The realized gain/loss from the Gold Delivery Agreement is disclosed on the Statement of Operations and the Statement of Changes in Net Assets. The realized gain/loss is only shown on the Statement of Financial Condition to the extent not received/paid.

The Index is designed to represent the daily performance of a long position in physical gold, as represented by the LBMA Gold Price AM, and a short position in the basket of Reference Currencies with weightings determined by the FX Basket. The Reference Currencies and their respective weightings in the Index are as

 

13

follows: Euro (EUR/USD) (57.6%), Japanese Yen (USD/JPY) (13.6%), British Pound Sterling (GBP/USD) (11.9%), Canadian Dollar (USD/CAD) (9.1%), Swedish Krona (USD/SEK) (4.2%), and Swiss Franc (USD/CHF) (3.6%).

 

2.5.	Fair Value Measurement

U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund’s policy is to value its investments at fair value.

Various inputs are used in determining the fair value of the Fund’s assets or liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

Level 3 – Inputs that are unobservable for the asset and liability, including the Fund’s assumptions (if any) used in determining the fair value of investments.

The following table summarizes the Fund’s investments at fair value:

 

(Amounts in 000’s of US$) March 31, 2018		Level 1				Level 2				Level 3
Investment in Gold		$	16,666			$	—			$	—
Gold Delivery Agreement			—				—				—
Total		$	16,666			$	—			$	—

 

(Amounts in 000’s of US$) September 30, 2017		Level 1				Level 2				Level 3
Investment in Gold		$	14,406			$	—			$	—
Gold Delivery Agreement			—				—				—
Total		$	14,406			$	—			$	—

There were no transfers between Level 1 and other Levels for the six months ended March 31, 2018 and fiscal period ended September 30, 2017.

The Administrator values the gold held by the Fund on the basis of the price of an ounce of gold as determined by ICE Benchmark Administration Limited (“IBA”), a benchmark administrator, which provides an independently administered auction process, as well as the overall administration and governance for the LBMA Gold Price. In determining the net asset value (“NAV”) of the Fund, the Administrator values the gold held by the Fund on the basis of the price of an ounce of gold determined by the IBA 10:30 AM auction process (“LBMA Gold Price AM”), which is an electronic auction, with the imbalance calculated and the price adjusted in rounds (45 seconds in duration). The auction runs twice daily at 10:30 AM and 3:00 PM London time. The

 

14

Administrator calculates the NAV of the Trust on each day the NYSE Arca is open for regular trading, generally as of 12:00 PM New York time. If no LBMA Gold Price AM is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price AM is used in the determination of the NAV of the Fund, unless the Administrator, in consultation with the Sponsor, determines that such price is inappropriate to use as the basis for such determination.

 

2.6.	Custody of Gold

Gold bullion is held by HSBC Bank plc (the “Custodian”) on behalf of the Fund. During the six-month period ended March 31, 2018, no gold was held by a subcustodian. During the fiscal period ended September 30, 2017, no gold was held by a subcustodian.

 

2.7.	Gold Delivery Agreement Receivable

Gold Delivery Agreement receivable represents the quantity of gold due to be received under the Gold Delivery Agreement. The gold is transferred to the Fund’s allocated gold bullion account at the Custodian two business days after the valuation date.

 

		Mar-31, 2018				Sep-30, 2017
(Amounts in 000’s of US$)
Gold Delivery Agreement receivable		$	170			$	21

 

2.8.	Gold Delivery Agreement Payable

Gold Delivery Agreement payable represents the quantity of gold due to be delivered under the Gold Delivery Agreement. The gold is transferred from the Fund’s allocated gold bullion account at the Custodian two business days after the valuation date.

 

		Mar-31, 2018				Sep-30, 2017
(Amounts in 000’s of US$)
Gold Delivery Agreement payable		$	—			$	50

 

2.9.	Creations and Redemptions of Shares

The Fund creates and redeems Shares from time to time, but only in one or more Creation Units (a Creation Unit equals a block of 10,000 Shares). The Fund issues Shares in Creation Units to certain authorized participants (“Authorized Participants”) on an ongoing basis. The creation and redemption of Creation Units is only made in exchange for the delivery to the Fund or the distribution by the Fund of the amount of gold and any cash represented by the Creation Units 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 Creation Units being created or redeemed determined on the day the order to create or redeem Creation Units is properly received.

 

15

The Fund commenced trading shares in January 2017. As the Shares of the Fund are redeemable at the option of the Authorized Participants, the Fund has classified the Shares as Net Assets. Changes in the Shares for the six months ended March 31, 2018 and fiscal period ended September 30, 2017 are as follows:

 

		Six Months Ended Mar-31, 2018				Fiscal Period Ended Sep-30, 2017
(Amounts in 000’s)
Activity in Number of Shares Issued and Outstanding:
Creations			40				220
Redemptions			(20	)			(100	)
Net change in number of Shares Issued and Outstanding			20				120

 

		Six Months Ended Mar-31, 2018				Fiscal Period Ended Sep-30, 2017
(Amounts in 000’s of US$)
Activity in Value of Shares Issued and Outstanding:
Creations		$	4,814			$	26,500
Redemptions			(2,393	)			(11,840	)
Net change in value of Shares Issued and Outstanding		$	2,421			$	14,710

 

2.10.

Revenue Recognition Policy

The Administrator will, at the direction of the Sponsor, sell the Fund’s gold as necessary to pay the Fund’s expenses. When selling gold to pay expenses, the Administrator will endeavor to sell the smallest amount of gold needed to pay expenses in order to minimize the Fund’s holdings of assets other than gold. Unless otherwise directed by the Sponsor, to meet expenses the Administrator will give a sell order and sell gold to the Custodian at the next LBMA Gold Price AM 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, and such amounts are reported as net realized gain/(loss) from investment in gold sold to pay expenses on the Statement of Operations.

The Fund’s net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement for the six-month period ended March 31, 2018 of $82 is made up of a realized gain of $2 from the sale of gold to pay Sponsor fees, a realized loss of ($533) from the Gold Delivery Agreement, a realized gain of $229 from gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees, a realized gain of $149 from gold distributed for the redemption of shares, and a change in unrealized appreciation of $235 on investment in gold.

The Fund’s net realized and change in unrealized gain/(loss) on investment in gold and Gold Delivery Agreement for the six-month period ended March 31, 2017 of $766 is made up of a realized gain of $1 from the sale of gold to pay Sponsor fees, a realized loss of ($86) from the Gold Delivery Agreement, a realized gain of $39 from gold transferred to cover Gold Delivery Agreement and Gold Delivery Provider fees, and a change in unrealized appreciation of $812 on investment in gold.

 

2.11.

Income Taxes

The Fund is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Fund is not subject to U.S. federal income tax. Instead, the Fund’s income and expenses “flow through” to the Shareholders,

 

16

and the Administrator will report the Fund’s proceeds, income, deductions, gains and losses to the Internal Revenue Service on that basis.

The Sponsor has evaluated whether there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions are required as of March 31, 2018. There are no open tax years or examinations in progress at period end.

 

3.	Related Parties—Sponsor

The Sponsor receives an annual fee equal to 0.33% of NAV of the Fund, calculated on a daily basis.

The Sponsor is responsible for the payment of all ordinary fees and expenses of the Fund, including but not limited to the following: fees charged by the Fund’s administrator, custodian, index provider, marketing agent and trustee; exchange listing fees; typical maintenance and transaction fees of The Depository Trust Company; SEC registration fees; printing and mailing costs; audit fees and expenses; and legal fees not in excess of $100,000 per annum and expenses and applicable license fees. The Sponsor is not, however, required to pay any extraordinary expenses incurred in the ordinary course of the Fund’s business as outlined in the Sponsor’s agreement with the Trust.

 

4.	Fund Expenses

The Fund’s only ordinary recurring operating expenses are expected to be the Sponsor’s annual fee of 0.33% of the NAV of the Fund and the Gold Delivery Provider’s annual fee of 0.17% of the NAV of the Fund, each of which accrue daily. The Sponsor’s fee is payable by the Fund monthly in arrears, while the Gold Delivery Provider’s fee is paid daily with gold bullion in-kind, so that the Fund’s total annual expense ratio is expected to equal to 0.50% of daily net assets. Expenses payable by the Fund will reduce the NAV of the Fund.

 

5.	Concentration of Risk

The Fund’s primary business activities are the investment in gold bullion, the gold delivery agreement, and the issuance and sale of Shares. Various factors could affect the price of gold including: (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 effect on the Fund’s financial position and results of operations.

 

6.	Foreign Currency Risk

The Fund does not hold foreign currency, but it is exposed to foreign currency risk as a result of its transactions under the Gold Delivery Agreement. Foreign currency exchange rates may fluctuate significantly over short periods of time and can be unpredictably affected by political developments or government intervention. The value of the Reference Currencies included in the FX Basket may be affected by several factors, including: monetary policies of central banks within the relevant foreign countries or markets; global or regional economic, political or financial events; inflation or interest rates of the relevant foreign countries and investor expectations concerning inflation or interest rates; and debt levels and trade deficits of the relevant foreign countries.

Currency exchange rates are influenced by the factors identified above and may also be influenced by, among other things: changing supply and demand for a particular currency; monetary policies of governments (including

 

17

exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a country in other countries); changes in balances of payments and trade; trade restrictions; and currency devaluations and revaluations. Also, governments from time to time intervene in the currency markets, and by regulation, in order to influence rates directly. These events and actions are unpredictable. The resulting volatility in the Reference Currency exchange rates relative to the USD could materially and adversely affect the value of the Shares.

 

7.	Counterparty Risk

If the Gold Delivery Provider fails to deliver gold pursuant to its obligations under the Gold Delivery Agreement, such failure would have an adverse effect on the Fund in meeting its investment objective. Moreover, to the extent that the Gold Delivery Provider is unable to honor its obligations under the Agreement, such as due to bankruptcy or default under the Agreement or for any other reason, the Fund would need to find a new entity to act in the same capacity as the Gold Delivery Provider. If the Fund could not quickly find a new entity to act in that capacity, the Fund may not be able to meet its investment objective. The transactions under the Gold Delivery Agreement will terminate on June 28, 2019, unless the parties can agree on extension terms. If the parties cannot agree on extension terms and the Fund is unable to find a new entity to act as Gold Delivery Provider, the Fund may not be able to meet its investment objective.

 

8.	Derivative Contract Information

For the three and six months ended March 31, 2018, the effect of derivative contracts on the Fund’s Statement of Operations was as follows:

 

Risk exposure derivative type

Location of Gain or Loss on Derivatives Recognized in Income

Three months ended Mar-31, 2018

Three months ended Mar-31, 2017

Six months ended Mar-31, 2018

Six months ended Mar-31, 2017

(Amounts in 000’s of US$)

Currency Risk

Net Realized gain/(loss) on Gold Delivery Agreement

$(415)

$(86)

$(533)

$(86)

The table below summarizes the average daily notional value of derivative contracts outstanding during the period:

 

		Three months ended Mar-31, 2018				Fiscal period ended Sep-30, 2017
(Amounts in 000’s of US$)
Average notional		$	18,106			$	22,963

The notional of the contract varies daily based on the value of gold held at the Custodian.

At March 31, 2018, as well as the fiscal period ended September 30, 2017, the Fund’s over-the-counter (“OTC”) derivative assets and liabilities are as follows:

 

		Gross Amounts of Assets and Liabilities Presented in the Statement of Financial Condition
		Assetsa				Liabilitiesa
Derivatives
Gold Delivery Agreement		$	—			$	—

 

a	Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset on the Statement of Financial Condition.

 

18

At March 31, 2018, as well as the fiscal period ended September 30, 2017, the Fund’s OTC derivative assets, which may offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

 

Amounts Not Offset in the Statement of Financial Condition

Gross Amounts of Assets Presented in the Statement of Financial Condition

Financial Instruments Available for Offset

Financial Instruments Collateral Received

Cash Collateral Received

Net Amount

Counterparty

Merrill Lynch International

$

—

$

—

$

—

$

—

$

—

At March 31, 2018, as well as the fiscal period ended September 30, 2017, the Fund’s OTC derivative liabilities, which may offset against the Fund’s OTC derivative assets and collateral pledged from the counterparty, are as follows:

 

Amounts Not Offset in the Statement of Financial Condition

Gross Amounts of Liabilities Presented in the Statement of Financial Condition

Financial Instruments Available for Offset

Financial Instruments Collateral Pledged

Cash Collateral Pledged

Net Amount

Counterparty

Merrill Lynch International

$

—

$

—

$

—

$

—

$

—

 

9.	Indemnification

The Sponsor and each of its shareholders, members, directors, officers, employees, affiliates and subsidiaries will be indemnified by the Trust and held harmless against any losses, liabilities or expenses incurred in the performance of its duties under the Declaration of Trust without gross negligence, bad faith or willful misconduct. The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee’s counsel or by any other person for any matters arising under the Declaration of Trust. The Sponsor shall in no event be deemed to have assumed or incurred any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for in the Declaration of Trust. Such indemnity includes payment from the Trust of the costs of expenses incurred in defending against any indemnified claim or liability under the Declaration of Trust.

The Trustee and each of its officers, affiliates, directors, employees, and agents will be indemnified by the Trust from and against any losses, claims, taxes, damages, reasonable expenses, and liabilities incurred with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Declaration of Trust or the transactions contemplated thereby; provided that the indemnified party acted without willful misconduct, bad faith or gross negligence. The Sponsor will not be liable to the Trust, 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 bullion or other assets held in trust under Declaration of Trust. However, the preceding liability exclusion will not protect the Sponsor against any liability resulting from its own gross negligence, bad faith, or willful misconduct.

 

10.	Financial Highlights

The following presentation includes financial highlights related to investment performance and operations of a Share outstanding for the three and six-month period ended March 31, 2018 and 2017. The net investment loss and total expense ratios have been annualized. The total return at net asset value is based on the change in net asset value of a Share during the period and the total return at market value is based on the change in market

 

19

value of a Share on NYSE Arca during the period. An individual investor’s return and ratios may vary based on the timing of capital transactions.

 

		Three Months Ended Mar-31, 2018				Three Months Ended Mar-31, 2017				Six Months Ended Mar-31, 2018				Six Months Ended Mar-31, 2017
Net Asset Value
Net asset value per Share, beginning of period		$	120.29			$	118.42			$	119.77			$	118.42
Net investment income/(loss)			(0.15	)			(0.10	)			(0.30	)			(0.10	)
Net Realized and Change in Unrealized Gain (Loss)			0.08				5.75				0.75				5.75
Net Income/(Loss)			(0.07	)			5.65				0.45				5.65
Net asset value per Share, end of period		$	120.22			$	124.07			$	120.22			$	124.07
Market value per Share, beginning of period		$	120.87			$	119.53			$	118.89			$	119.53
Market value per Share, end of period		$	120.92			$	124.39			$	120.92			$	124.39
Ratio to average net assets
Net Investment loss(1)			(0.50	)%			(0.50	)%			(0.50	)%			(0.50	)%
Gross expenses(1)			0.50	%			0.50	%			0.50	%			0.50	%
Net expenses(1)			0.50	%			0.50	%			0.50	%			0.50	%
Total Return, at net asset value(2)			(0.06	)%			4.77	%(3)			0.38	%			4.77	%(3)
Total Return, at market value(2)			0.04	%			4.07	%(3)			1.71	%			4.07	%(3)

 

(1)	Percentages are annualized.

(2)	Percentages are not annualized.

(3)	Shares began publicly trading on January 30, 2017; therefore the Total Return, at net asset value and Total Return, at market value are based on the period of January 30, 2017 to March 31, 2017.

 

11.	Subsequent Events

The Trust changed names from World Currency Gold Trust to World Gold Trust effective April 16, 2018.

 

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Item 2.

Management’s 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. This Quarterly Report, including the exhibits hereto and the information incorporated by reference herein, contains “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 such forward-looking statements involve risks and uncertainties. Except for historical information, statements about future gold prices, gold bullion sales, foreign currencies (including the Reference Currencies), foreign currency exchange rates, costs, plans, or objectives are forward-looking statements based on our estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “outlook,” “estimate,” “predict,” and variations on such words, and similar expressions that reflect our current views with respect to future events and Fund performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed. Important factors that could affect performance and cause results to differ materially from our expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as updated from time to time in the Fund’s Securities and Exchange Commission filings.

Organization and Trust Overview

World Gold Trust (the “Trust”) was organized as a Delaware statutory trust on August 27, 2014 and is governed by the Fourth Amended and Restated Agreement and Declaration of Trust (“Declaration of Trust”) dated as of April 16, 2018, between WGC USA Asset Management Company, LLC (the “Sponsor”) and the Delaware Trust Company (the “Trustee”). The Trust is authorized to issue an unlimited number of shares of beneficial interest (“Shares”). The beneficial interest in the Trust may be divided into one or more series. The Trust has established six separate series. The accompanying unaudited financial statements relate to the Trust and SPDR^® Long Dollar Gold Trust (the “Fund”), currently the only operational series of the Trust, which commenced operations in the first calendar quarter of 2017. On November 30, 2017, the Sponsor filed a Form S-1 with the Securities and Exchange Commission for The Gold Trust, a series of the Trust. The fiscal year end of both the Trust and the Fund is September 30. The Fund issues shares of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of only that Fund. The Trust has had no operations prior to January 27, 2017, other than matters relating to its organization, the registration of the Fund’s shares under the Securities Act of 1933, as amended, and the sale and issuance by the Fund on December 19, 2016 to WGC (US) Holdings, Inc., an affiliate of the Sponsor, of 10 Shares of the Fund at an aggregate purchase price of $1,000. The Fund’s Shares began trading on the NYSE Arca on January 30, 2017. As of May 3, 2018, the Fund has 140,000 shares which are currently outstanding.

As of the date of this quarterly report, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co., LLC, UBS Securities LLC and Virtu Financial BD LLC are the Authorized Participants. An updated list of Authorized Participants can be obtained from the Administrator or the Sponsor.

The investment objective of the Fund is to track the performance of the Solactive GLD^® Long USD Gold Index (the “Index”), less Fund expenses. The Index seeks to track the daily performance of a long position in physical gold, as represented by the LBMA Gold Price AM, and a short position in a basket of non-U.S. currencies (i.e., a long U.S. dollar (“USD”) exposure versus the basket (“FX Basket”)). Those non-U.S. currencies, which are weighted according to the Index, consist of the following: Euro, Japanese Yen, British Pound Sterling, Canadian Dollar, Swedish Krona and Swiss Franc (each, a “Reference Currency”).

In general, the USD value of an investment in Shares of the Fund is expected to increase when both the price of gold goes up and the value of the USD increases against the value of the Reference Currencies comprising the

 

21

FX Basket (as weighted in the Index). Conversely, the USD value of an investment in Shares, in general, is expected to decrease when the price of gold goes down and the value of the USD decreases against the value of the Reference Currencies comprising the FX Basket (as weighted in the Index). If the price of gold increases and the value of the USD decreases against the value of the Reference Currencies comprising the FX Basket, or vice versa, the net impact of these changes will determine the NAV of the Fund on a daily basis.

Investing in the Shares does not insulate the investor from certain risks, including price volatility. The following chart illustrates the movement in the market price of the Shares and NAV of the Shares against the Index as well as the corresponding gold price (per 1/10 of an oz. of gold) since the day the Shares first began trading on the NYSE Arca:

NAV& Index v. gold price from January 30, 2017 to March 31, 2018

 

 

 

*

Index and gold price data have been normalized based on GLDW NAV price per share on January 30, 2017 for comparison purposes.

Source: Bloomberg, ICE Benchmark Administration, Solactive AG

Gold Delivery Agreement Activity

The Gold Delivery Agreement is an agreement between the Fund and the Gold Delivery Provider pursuant to which gold is delivered to or from the Fund to reflect the Fund’s gains and losses with respect to the Reference Currencies comprising the FX Basket. The amount of gold bullion transferred under the Gold Delivery Agreement (the “Daily Deliverable Amount”) essentially is equivalent to the Fund’s profit or loss as if the Fund had exchanged the Reference Currencies for USDs in an amount equal to the Fund’s holdings of gold bullion on such day. In general, if there is a currency gain (i.e., the value of the USD against the Reference Currencies comprising the FX Basket increases), the Fund will receive gold bullion. In general, if there is a currency loss (i.e., the value of the USD against the Reference Currencies comprising the FX Basket decreases), the Fund will deliver gold bullion. In this manner, the amount of gold bullion held by the Fund will be adjusted to reflect the daily change in the value of Reference Currencies comprising the FX Basket against the USD. For more information about the Gold Delivery Agreement, see Note 2.4 to the unaudited financial statements.

From January 30, 2017 (the date the shares began trading on the NYSE Arca) to March 31, 2018, the Daily Deliverable Amount (gross less the fee paid to the Gold Delivery Provider) under the Gold Delivery Agreement ranged from 252.515 ounces of gold bullion delivered to 184.49 ounces of gold bullion received, having corresponding market values, respectively, of $334,178 and $246,737. Over that same period, the Fund delivered a net amount of 1,852.033 ounces of gold bullion, having a corresponding market value of $2,392,226.

 

22

Critical Accounting Policy

Valuation of Gold, Definition of NAV

The Fund’s policy is to value the investment in gold bullion at fair value. The Administrator will value the gold held by the Fund on the basis of the price of an ounce of gold as determined by ICE Benchmark Administration Limited (“IBA”), a benchmark administrator, which provides an independently administered auction process, as well as the overall administration and governance for the LBMA Gold Price. The net asset value (“NAV”) of the Fund is the aggregate value of the Fund’s assets, including Gold Delivery Agreement less its liabilities. In determining the NAV of the Fund, the Administrator values the gold held by the Fund on the basis of the price of an ounce of gold determined by the IBA 10:30 AM auction process (“LBMA Gold Price AM”), which is an electronic auction, with the imbalance calculated and the price adjusted in rounds (45 seconds in duration). The auction runs twice daily at 10:30 AM and 3:00 PM London time. The Administrator determines the NAV of the Fund on each day the NYSE Arca is open for regular trading, generally as of 12:00 PM New York time. If no LBMA Gold Price AM is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price AM will be used in the determination of the NAV of the Fund, unless the Administrator, in consultation with the Sponsor, determines that such price is inappropriate to use as the basis for such determination.

Once the value of the gold has been determined, the Administrator subtracts all estimated accrued expenses and other liabilities of the Fund from the total value of the gold and all other assets of the Fund. The resulting figure is the NAV of the Fund. The NAV of the Fund is used to compute the Sponsor’s fee and gold delivery provider fee. The Administrator determines the NAV per Share by dividing the NAV of the Fund by the number of Shares outstanding as of the close of trading on NYSE Arca.

Results of Operations

The Fund commenced operations on January 27, 2017 and in the period from then to March 31, 2018, 260,000 Shares (26 Creation Units) were created in exchange for 25,849.8 ounces of gold, and 58.9 ounces of gold were sold to pay sponsor fees.

At March 31, 2018, the Custodian held 12,588.5 ounces of gold on behalf of the Fund in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars including gold payable, if any, with a market value of $16,665,856 (cost — $15,617,359) based on the LBMA Gold Price AM on March 31, 2018. Through the date of this report, (i) 128.7 ounces of gold were receivable by the Custodian in connection with the settlement of the Gold Delivery Agreement and (ii) the Fund has used no subcustodians.

At September 30, 2017, the Custodian held 11,194.2 ounces of gold on behalf of the Fund, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $14,406,328 (cost $13,592,141).

On March 1, 2018, Inspectorate International Limited, or Inspectorate, concluded the annual random sample count of the Fund’s gold bullion held by the Custodian. The sample count was based on the Fund’s inventory of gold as of February 9, 2018. Inspectorate reported that there were no anomalies identified in the Fund’s gold holding as of such date. The results can be found on www.spdrgoldshares.com.

Cash Resources and Liquidity

At March 31, 2018, the Fund did not have any cash balances. When selling gold to pay expenses, the Administrator endeavors to sell the smallest amount of gold needed to pay expenses in order to minimize the Fund’s holdings of assets other than gold. As a consequence, we expect that the Fund will not record any net cash flow from its operations and that its cash balance will be zero at the end of each reporting period.

 

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Analysis of Movements in the Price of Gold

As movements in the price of gold are expected to directly affect the price of the Fund’s Shares, investors should understand and follow movements in the price of gold. Investors should be aware that past movements in the gold price are not indicators of future movements.

The following chart shows movements in the price of gold based on the LBMA Gold Price AM in U.S. dollars per ounce over the period from January 30, 2017 (the first date Shares began trading on the NYSE Arca) to March 31, 2018.

Daily gold price – January 30, 2017 to March 31, 2018

 

 

The average, high, low and end-of-period gold prices for the periods from January 30, 2017 through March 31, 2018 and for the period from the Date of Inception through March 31, 2018, based on the LBMA Gold Price AM were:

 

Period		Average				High				Date		Low				Date		End of period				Last business day(1)
January 30, 2017 to March 31, 2017		$	1,230.10			$	1,256.90			Mar 27, 2017		$	1,189.85			Jan 30, 2017		$	1,241.70			Mar 31, 2017
April 1, 2017 to June 30, 2017		$	1,257.49			$	1,292.70			Jun 07, 2017		$	1,221.00			May 11, 2017		$	1,243.25			Jun 30, 2017
July 1, 2017 to September 30, 2017		$	1,278.01			$	1,350.90			Sep 08, 2017		$	1,207.55			Jul 10, 2017		$	1,286.95			Sep 29, 2017
October 1, 2017 to December 31, 2017		$	1,276.72			$	1,305.15			Oct 16, 2017		$	1,241.60			Dec 13, 2017		$	1,296.50			Dec 29, 2017
January 1, 2018 to March 31, 2018		$	1,330.70			$	1,360.25			Jan 25, 2018		$	1,311.05			Feb 8, 2018		$	1,323.90			Mar 29, 2018
January 30, 2017 to March 31, 2018		$	1,277.49			$	1,360.25			Jan 25, 2018		$	1,189.85			Jan 30, 2017		$	1,323.90			Mar 29, 2018

 

(1)	The end of period gold price is the LBMA Gold Price AM on the last business day of the period. This is in accordance with the Declaration of Trust and the basis used for calculating the NAV of the Fund.

 

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Fund is a passive investment vehicle. It is not actively managed and is designed to track the Index during periods in which the Index is flat or declining as well as when the Index is rising. Accordingly, fluctuations in the value of gold bullion and/or the value of USD relative to the Reference Currencies will affect the value of the Shares.

 

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

The duly authorized officers of the Sponsor, performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, have evaluated the effectiveness of the Trust’s and the Fund’s disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust and the Fund were effective as of the end of the period covered by this report. Such disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Trust files or submits under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported, within the time period specified in the applicable rules and forms, and that such information is accumulated and communicated to the duly authorized officers of the Sponsor performing functions equivalent to those a principal executive officer and principal financial officer of the Trust would perform if the Trust had any officers, and to the Audit Committee of the Sponsor, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There has been no change in the internal control over financial reporting of the Trust or the Fund that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust’s or Fund’s internal control over financial reporting.

PART II - OTHER INFORMATION:

 

Item 1.

Legal Proceedings

None.

 

Item 1A.

Risk Factors

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2017, which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed in our 2017 Annual Report on Form 10-K, except for the following:

The Trust relies on the information and technology systems of the Administrator and Transfer Agent, the Custodian, the Marketing Agent and, to a lesser degree, the Sponsor, which could be adversely affected by information systems interruptions, cybersecurity attacks or other disruptions which could have a material adverse effect on our record keeping and operations.

The Custodian, the Administrator and Transfer Agent and the Marketing Agent depend upon information technology infrastructure, including network, hardware and software systems to conduct their business as it relates to the Trust. A cybersecurity incident, or a failure to protect their computer systems, networks and information against cybersecurity threats, could result in loss or unintended disclosure of information or loss or theft of Trust assets, and could adversely impact the ability of the Trust’s service providers to conduct their business, including their business on behalf of the Trust. Despite implementation of network and other cybersecurity measures, these security measures may not be adequate to protect against all cybersecurity threats.

 

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