# VanEck Merk Gold ETF: Form 10-Q for the period ended Jul 31, 2017

- Company: [VanEck Merk Gold ETF](/companies/ounz.md) (CIK 1546652)
- Form: 10-Q
- Filed: 2017-09-06
- Accepted by EDGAR: Sep 6, 2017, 06:03 ET
- Period: 2017-07-31
- Accession: 0001213900-17-009443
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1546652/000121390017009443/f10q0717_vaneckmerkgold.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1546652/000121390017009443/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-07-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 6 months, 2017-02-01 to 2017-07-31 | −$252.9k | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2017-05-01 to 2017-07-31 | $112.5k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2017-02-01 to 2017-07-31 | $5.6m | us-gaap:NetIncomeLoss |
| Total assets | at 2017-07-31 | $129.7m | us-gaap:Assets |
| Total liabilities | at 2017-07-31 | $7 | us-gaap:Liabilities |

## Management's discussion and analysis

As filed, 22,395 characters.

*This information should be read in conjunction with the unaudited financial statements and notes to the unaudited financial statements included in Item 1 of Part 1 of this Form 10-Q. The discussion and analysis that follows may contain forward-looking statements with respect to the VanEck Merk Gold Trust’s financial conditions, operations, future performance and business. These statements can be identified by the use of the words “may,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or similar words and phrases. These statements are based upon certain assumptions and analyses Merk Investments LLC, the Sponsor, has made based on its perception of historical trends, current conditions and expected future developments. Neither the Trust nor the Sponsor is under a duty to update any of the forward looking statements, to conform such statements to actual results or to reflect a change in management’s expectations or predictions.*

### Introduction

The VanEck Merk Gold Trust (the “Trust”; known as the Merk Gold Trust prior to October 26, 2015 and then as the Van Eck Merk Gold Trust prior to April 28, 2016) was formed pursuant to a depositary trust agreement (the “Trust Agreement”) on May 6, 2014 under New York law. The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors, or employees and is administered by The Bank of New York Mellon (the “Trustee”) pursuant to the Trust Agreement. The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended, and is not required to register under such act. It will not hold or trade in commodity futures contracts, nor is it a commodity pool, or subject to regulation as a commodity pool operator or a commodity trading adviser in connection with issuing shares.

The Trust’s primary objective is to provide investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold bullion and gold coins (“physical gold”) in exchange for those shares. The Trust’s secondary objective is for the shares to reflect the performance of the price of gold less the expenses of the Trust’s operations. Each share represents a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets consist principally of gold held on the Trust’s behalf in financial institutions for safekeeping. Physical gold that the Trust will hold includes London Bars and, for the limited purposes described herein, other gold bars and coins, without numismatic value, having a minimum fineness (or purity) of 995 parts per 1,000 (99.5%) or, for American Gold Eagle gold coins, with a minimum fineness of 91.67%.

Shares are issued by the Trust only in blocks of 50,000 shares called “Baskets” in exchange for gold from certain registered broker-dealers or other securities market participants (“Authorized Participants”). See “Creation and Redemption of Shares—*Authorized Participants”* in the notes to our financial statements for requirements to qualify as an Authorized Participant. Baskets may be redeemed by the Trust in exchange for the amount of gold corresponding to their redemption value. The Trust issues and redeems Baskets on an ongoing basis at net asset value to Authorized Participants who have entered into a contract with the Sponsor and the Trustee.

Shares of the Trust trade on the New York Stock Exchange (the “NYSE”) Arca under the symbol “OUNZ”.

### Valuation of Gold and Computation of Net Asset Value

The Trustee determines the net asset value (the “NAV”) of the Trust on each day that NYSE Arca is open for regular trading, as promptly as practical after 4:00 PM New York time. The net asset value of the Trust is the aggregate value of the Trust’s assets less its estimated accrued but unpaid liabilities (which include accrued expenses).

In determining the Trust’s net asset value, the Trustee values the gold held by the Trust based on the afternoon session of the twice daily fix of the price of a Fine Ounce of gold which starts at 3:00 PM London, England time and is performed in London by the ICE Benchmark Administration as an independent third-party administrator (the “LBMA PM Gold Price”). The Trustee also determines the net asset value per share. If on a day when the Trust’s net asset value is being calculated the LBMA PM Gold Price for that day is not available, the Trustee will value the gold held by the Trust based on that day’s morning session of the twice daily fix of the price of a Fine Ounce of gold, which starts at 10:30 AM London, England time and is performed in London by the ICE Benchmark Administration as an independent third-party administrator (the “LBMA AM Gold Price”). If no fix is available for the day, the Trustee will value the Trust’s gold based on the most recently announced LBMA AM Gold Price or LBMA PM Gold Price. Prior to March 20, 2015, the Trustee utilized the daily fix of the price of a Fine Ounce of gold as performed by the five members of the London gold fix, which has now been replaced by the ICE Benchmark Administration as an independent third-party administrator.

If the Sponsor determines that such price is inappropriate to use, it shall identify an alternate basis for evaluation to be employed by the Trustee. The Sponsor may instruct the Trustee to use a different publicly available price which the Sponsor determines to fairly represent the commercial value of the Trust’s gold.

### Recent Events

On October 22, 2015, the Sponsor and the Trustee entered into a First Amendment To Depositary Trust Agreement (the “First Trust Amendment”), amending the Trust Agreement, dated as of May 6, 2014, to effectuate a change in the name of the Trust from “Merk Gold Trust” to “Van Eck Merk Gold Trust,” effective as of October 26, 2015. As a result of the name change, all references to “Merk Gold Trust” in the Trust Agreement were amended to read “Van Eck Merk Gold Trust,” and the shares offered by the Trust were known as the “Van Eck Merk Gold Shares” (“Shares”).

On October 22, 2015, the Sponsor, for the benefit of the Trust, entered into a Marketing Agent Agreement (the “Marketing Agreement”) with Van Eck Securities Corporation (“VanEck” or “Marketing Agent”). Pursuant to the Marketing Agreement, VanEck now provides assistance in the marketing of the Shares. The obligations created by the Marketing Agreement are obligations of the Sponsor of the Trust and any fees payable under the Marketing Agreement to VanEck are payable from the Sponsor’s fee (as calculated and defined in the Trust Agreement). The Trust will not incur additional financial or other performance obligations pursuant to the Marketing Agreement.

The Sponsor entered into the First Trust Amendment and effectuated the name change of the Trust in satisfaction of a term of the Marketing Agreement. The Marketing Agreement further grants VanEck the right to elect to replace Merk as the sponsor of the Trust under specific qualifying circumstances, subject to the execution and consummation of definitive agreements addressing all regulatory requirements applicable to such transaction and satisfaction of such requirements, and announcement and related reporting at such time. Specifically, VanEck has a right of first refusal for the purchase of the sponsorship of the Trust, and all rights attributable thereto, upon the earlier of a commitment for a change of control of Merk or 15 years from the date of the Marketing Agreement. Additionally, VanEck may elect to replace Merk as the sponsor of the Trust upon the earlier of the average daily net assets of the Trust during a calendar quarter not attributable to Shares held by Merk or its affiliates (“Third Party Assets”) equaling $500 million, or VanEck’s compensation under the fee provisions of the Marketing Agreement reaching in aggregate 10% of the gross proceeds from sale of the Shares (the “Maximum Fee”).

Merk further agreed that if the Third Party Assets equal or exceed $500 million, for such period as Merk remains sponsor of the Trust, VanEck may propose the rate of the Sponsor’s fee to Merk, which Merk shall not unreasonably reject and shall timely adopt if reasonable, provided, VanEck acknowledges that only the formal named sponsor of the Trust shall have the right to set the Sponsor’s fee at any time.

On April 28, 2016, the Sponsor and the Trustee entered into a Second Amendment to Depositary Trust Agreement (the “Second Trust Amendment”), amending the Trust Agreement to effectuate a second change in the name of the Trust from “Van Eck Merk Gold Trust” to “VanEck Merk Gold Trust,” at the request of the Marketing Agent to reflect its rebranding as “VanEck”. As a result of the name change, all references to “Van Eck Merk Gold Trust” in the Trust Agreement were amended to read “VanEck Merk Gold Trust,” and the shares offered by the Trust are now known as the “VanEck Merk Gold Shares”. Except for the name change effected pursuant to the Second Trust Amendment, the Trust Agreement remains in full force and effect on its existing terms.

### Change in Settlement Cycle and Amendment to Authorized Participant Agreements

On March 22, 2017, the Securities and Exchange Commission adopted an amendment to reduce by one business day the standard settlement cycle for most broker-dealer securities transactions. Prior to the implementation of the shorter settlement cycle, the standard settlement cycle for such transactions has been three business days, known as T+3. The amended rule shortens the settlement cycle to two business days, or T+2. This change in the settlement cycle will both affect the creation and redemption procedures for Baskets and trading in the shares. Compliance with the new settlement cycle will go into effect on September 5, 2017.

Due to the fact that the aforementioned creation and redemption procedures are addressed in the Authorized Participant Agreements by among the Authorized Participants, the Trustee and the Sponsor, the Trustee and the Sponsor exercised their rights to amend each such agreement to address the new T+2 settlement cycle and executed First Amendments to each of the Authorized Participant Agreements, effective as of September 5, 2017, and provided timely notice of such amendment to the Authorized Participants. Except for the foregoing amendments, the Authorized Participant Agreements remain in full force and effect on their existing terms. See also Item 5 of Part II of this Form 10-Q.

### Results from Operations

The Trust is a trust formed on May 6, 2014 under New York law pursuant to the Trust Agreement. After consideration of Financial Accounting Standards Topic 946, the Sponsor has concluded that for financial statement reporting purposes the Trust meets the fundamental characteristics of an investment company. In addition, while the Trust does not currently possess all of the typical characteristics of an investment company, the Sponsor believes the Trust’s activities are consistent with those of an investment company and will therefore apply the guidance in Financial Accounting Standards Topic 946, including disclosure of the financial support contractually required to be provided by an investment company to any of its investees. The Sponsor is responsible for, among other things, overseeing the performance of The Bank of New York Mellon (the “Trustee”) and the Trust’s principal service providers, including the preparation of financial statements. The Trustee is responsible for the day-to-day administration of the Trust.

#### The Three Months Ended July 31, 2017 Compared to the Three Months Ended July 31, 2016

The Trust’s net asset value, or NAV, grew from $129,537,591 at April 30, 2017 to $129,650,100 at July 31, 2017, a 0.1% increase, compared to a 46% increase from $108,749,690 at April 30, 2016 to $158,773,365 at July 31, 2016. The increase in the Trust’s NAV in the quarter ended July 31, 2017 resulted from an increase in the price of gold as compared to the prior period. The number of outstanding shares rose from 10,350,282 shares at April 30, 2017 to 10,360,629 shares at July 31, 2017 due to the creation of 10,347 shares in the quarter for Sponsor’s fees, as compared to 10,867 shares for such purpose in the quarter ended July 31, 2016. The number of outstanding shares at July 31, 2016 was 11,936,241. The Sponsor’s fees are payable at an annualized rate of 0.40% of the Trust’s NAV, accrued on a daily basis computed on the prior business day’s NAV and paid monthly in arrears. Due to the daily accrual but monthly payment, the number of Sponsor’s fee shares issued can vary, and in this case decrease, even as the number of shares outstanding increases slightly.

The Trust’s NAV per share decreased approximately 0.1% during the quarter ended July 31, 2017, starting at $12.52 per share and ending at $12.51 per share, compared to an increase of 4.2%, from $12.76 to $13.30 during the quarter ended July 31, 2016. The Trust’s NAV per share fell slightly more than the price per ounce of gold on a percentage basis due to the Sponsor’s fees, which were 10,347 shares in total for the quarter ended July 31, 2017, compared with 10,867 shares paid as Sponsor’s fees in the quarter ended July 31, 2016. The NAV per share of $12.78 on June 6, 2017 was the highest during the quarter, compared with a low of $11.96 on July 11, 2017.

The change in net assets from operations for the quarter ended July 31, 2017 was $(16,104), resulting from the Sponsor’s fees of $(128,616) and a net change in unrealized appreciation on investment in gold bullion of $112,512. In comparison, the change in net assets from operations for the quarter ended July 31, 2016 was $7,742,950 resulting from the Sponsor’s fees of $(139,575) and a net change in unrealized appreciation on investments in gold bullion of $7,882,525.

Other than the Sponsor’s fee, the Trust had no expenses during the quarter ended July 31, 2017 or the quarter ended July 31, 2016.

#### The Six Months Ended July 31, 2017 Compared to the Six Months Ended July 31, 2016

The Trust’s net asset value, or NAV, grew from $123,449,684 at January 31, 2017 to $129,650,100 at July 31, 2017, a 5% increase, compared to a 90% increase from $83,657,961 at January 31, 2016 to $158,773,365 at July 31, 2016. The increase in the Trust’s NAV in the six months ended July 31, 2017 resulted from an increase in the price per share tied to the increasing price of gold and an increase in the number of outstanding shares, which rose from 10,290,267 shares at January 31, 2017 to 10,360,629 shares at July 31, 2017; the number of outstanding shares at July 31, 2016 was 11,936,241. Additionally, 20,362 shares were created in the six months ended July 31, 2017 for Sponsor’s fees, compared to 18,680 shares for such purpose in the six months ended July 31, 2016. The increase in Sponsor’s fees shares is a result of the increased NAV of the Trust, as Sponsor’s fees are payable at an annualized rate of 0.40% of the Trust’s NAV, accrued on a daily basis computed on the prior business day’s NAV and paid monthly in arrears.

The Trust’s NAV per share increased approximately 4% during the six months ended July 31, 2017, starting at $12.00 per share and ending at $12.51 per share, compared to an increase of 21%, from $11.04 to $13.30 during the six months ended July 31, 2016.

The Trust’s NAV per share increased slightly less than the price per ounce of gold on a percentage basis due to the Sponsor’s fees, which were 20,362 shares in total for the six months ended July 31, 2017, compared to 18,680 shares for such purpose for the six months ended July 31, 2016. The NAV per share of $12.78 on June 6, 2017 was the highest during the six months ended July 31, 2017, compared with a low of $11.85 on March 15, 2017.

The change in net assets from operations for the six months ended July 31, 2017 was $5,372,751, resulting from the Sponsor’s fees of $(252,863), a net realized gain from gold bullion distributed for redemptions of shares of $27,474 and a net change in unrealized appreciation on investment in gold bullion of $5,598,140. In comparison, the change in net assets from operations for the six months ended July 31, 2016 was $21,254,505 resulting from the Sponsor’s fees of $(236,726), a net realized gain from gold bullion distributed for redemptions of shares of $1,386 and a net change in unrealized appreciation on investments in gold bullion of $21,489,845.

Other than the Sponsor’s fees, the Trust had no expenses during the six months ended July 31, 2017 or the six months ended July 31, 2016.

From October 22, 2015, the date of initiation of the Marketing Agent’s efforts on behalf of the Trust, through December 31, 2016, no fees were earned and payable by the Sponsor to the Marketing Agent. For the calendar quarter ended June 30, 2017, the Marketing Agent did not earn a fee. The total fees earned by and paid to the Marketing Agent since January 1, 2017 are $1,266, which represents 0% of the Maximum Fee potentially payable to the Marketing Agent pursuant to the Marketing Agent Agreement.

### Liquidity and Capital Resources

The Trust is not aware of any trends, demands, commitments, events or uncertainties that are reasonably likely to result in material changes to its liquidity needs. In exchange for the Sponsor’s fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s fee.

The Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s gold as necessary to pay the Trust’s expenses not otherwise assumed by the Sponsor. The Trustee will not sell gold to pay the Sponsor’s fee but will pay the Sponsor’s fee in shares in lieu of cash. At July 31, 2017 and July 31, 2016, the Trust did not have any cash balances.

### Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

### Critical Accounting Policies

The unaudited financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. In addition, please refer to Note 2 to the unaudited financial statements for further discussion of accounting policies.

Effective May 6, 2014, the Trust has adopted the provisions of Topic 946, Investment Companies, and follows specialized accounting.

### Investment by Certain Retirement Plans

Section 408(m) of the Internal Revenue Code, as amended (the “Code”), provides that the purchase of a “collectible” as an investment for an individual retirement account (an “IRA”) or for an individually directed account maintained under a plan that is tax-qualified under Section 401(a) of the Code (a “Tax-Qualified Account”) is treated as a taxable distribution from the account to the owner of the IRA, or to the participant for whom the Tax-Qualified Account is maintained, of an amount equal to the cost to the account of acquiring the collectible. The Trust has received a private letter ruling from the Internal Revenue Service which provides that the acquisition of shares by the trustee or custodian of an IRA or a Tax-Qualified Account will not constitute the acquisition of a collectible, and thus, a Tax-Qualified Account owning shares will not be treated as having made a distribution to the IRA owner or plan participant under Code section 408(m) solely by virtue of owning such shares. However, in the event any redemption of shares results in the distribution of gold coins or gold bullion to an IRA or a Tax-Qualified Account, such distribution would constitute the acquisition of a collectible and therefore a distribution from the account, except to the extent the those gold coins or gold bullion satisfies section 408(m)(3) of the Code.

Investors who are considering exchanging their shares for gold coins or gold bullion should consult with their tax advisors regarding the tax implications thereof before doing so.

### ERISA and Related Considerations

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or section 4975 of the Code impose certain requirements on employee benefit plans and certain other plans and arrangements, including IRAs and individual retirement annuities, Keogh plans, and certain collective investment funds or insurance company general or separate accounts in which such plans or arrangements are invested, that are subject to ERISA and/or the Code (collectively, “Plans”), and on persons who are fiduciaries with respect to the investment of assets treated as “plan assets” of a Plan. Investments by Plans are subject to the fiduciary requirements and the applicability of prohibited transaction restrictions under ERISA.

Government plans and some church plans are not subject to the fiduciary responsibility provisions of ERISA or the provisions of section 4975 of the Code, but may be subject to substantially similar rules under state or other federal law. Fiduciaries of any such plans are advised to consult with their counsel prior to an investment in shares.

In contemplating an investment of a portion of Plan assets in shares, the Plan fiduciary responsible for making such investment should carefully consider, taking into account the facts and circumstances of the Plan, the “Risk Factors” discussed below and whether such investment is consistent with its fiduciary responsibilities, including, but not limited to: (a) whether the fiduciary has the authority to make the investment under the appropriate governing plan instrument; (b) whether the investment would constitute a direct or indirect non-exempt prohibited transaction with a party in interest; (c) the Plan’s funding objectives; and (d) whether under the general fiduciary standards of investment prudence and diversification such investment is appropriate for the Plan, taking into account the overall investment policy of the Plan, the composition of the Plan’s investment portfolio and the Plan’s need for sufficient liquidity to pay benefits when due.

## Market risk

As filed, 255 characters.

The Trust does not engage in transactions in foreign currencies which could expose the Trust or holders of shares to any foreign currency related market risk. The Trust does not invest in any derivative financial instruments or long-term debt instruments.

## Controls and procedures

As filed, 1,389 characters.

The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the principal executive officer and principal financial officer of the Sponsor, and to the auditor, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the principal executive officer and principal financial officer of the Sponsor, the Sponsor conducted an evaluation of the Trust’s disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, the principal executive officer and principal financial officer of the Sponsor concluded that, as of July 31, 2017, the Trust’s disclosure controls and procedures were effective.

There have been no changes in the Trust’s or Sponsor’s internal control over financial reporting that occurred during the Trust’s fiscal quarter ended July 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Trust’s or Sponsor’s internal control over financial reporting.

## Risk factors

As filed, 456 characters.

You should carefully consider the factors discussed under the caption “Risk Factors” beginning on page 19 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2017 (the “Annual Report”), filed with the Securities and Exchange Commission on April 14, 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 the Annual Report.

Filed Sep 6, 2017.
Source: SEC EDGAR, the filing index for accession 0001213900-17-009443. Last ingested by Listed: Oct 29, 2026, 15:11 ET. No prices; not investment advice.