Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Vaulted Gold Bullion Trust | ex32_1.htm |
| EX-31.1 - EXHIBIT 31.1 - Vaulted Gold Bullion Trust | ex31_1.htm |
| EX-10.1 - EXHIBIT 10.1 - Vaulted Gold Bullion Trust | ex10_1.htm |
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 April 30, 2016
Or
For the Transition Period from ___________ to _____________
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Commission File Number: 001-_________
VAULTED GOLD BULLION TRUST
(Exact name of registrant as specified in its charter)
|
Delaware
|
46-7176227
|
|
(State or other jurisdiction of incorporation or
|
(I.R.S. Employer Identification No.)
|
|
organization)
|
c/o Bank of Montreal
3 Times Square
New York, New York 10036
Attention: Legal Department
(Address of principal executive offices)
(212) 885-4000
(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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark 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.
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
|
Non accelerated filer
|
x
|
Smaller reporting company
|
o
|
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 April 30, 2016, there were no Gold Deposit Receipts outstanding.
VAULTED GOLD BULLION TRUST
FORM 10-Q
FOR THE QUARTER ENDED April 30, 2016
INDEX
|
Page No.
|
||
|
PART I.
|
FINANCIAL INFORMATION
|
|
|
Item 1.
|
Condensed Financial Statements (Unaudited)
|
4
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
4
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
7
|
|
Item 4.
|
Controls and Procedures
|
7
|
|
PART II.
|
OTHER INFORMATION
|
|
|
Item 1.
|
Legal Proceedings
|
8
|
|
Item 1A.
|
Risk Factors
|
8
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
8
|
|
Item 3.
|
Defaults Upon Senior Securities
|
8
|
|
Item 4.
|
Mine Safety Disclosures
|
8
|
|
Item 5.
|
Changes in and Disagreements with Accounting and Financial Disclosure
|
8
|
|
Item 6.
|
Directors, Executive Officers and Corporate Governance
|
8
|
|
Item 7.
|
Executive Compensation
|
8
|
|
Item 8.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
8
|
|
Item 9.
|
Certain Relationships and Related Transactions, and Director Independence
|
8
|
|
Item 10.
|
Principal Accounting Fees and Services
|
8
|
|
Item 11.
|
Other Information
|
8
|
|
Item 12.
|
Exhibits
|
9
|
|
Signatures
|
10
|
|
2
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
The statements contained in this report that are not purely historical are forward-looking statements. The Vaulted Gold BullionTrust's forward-looking statements include, but are not limited to, statements regarding its expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:
|
|
·
|
The gold industry, sources of and demand for gold bullion, and the performance of the gold market; and
|
|
|
·
|
The development of a secondary market for the Gold Deposit Receipts.
|
The forward-looking statements contained in this report are based on the Trust's current expectations and beliefs concerning future developments and their potential effects on the Trust. There can be no assurance that future developments affecting the Trust will be those that it has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Trust's control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include those factors described under the heading “Risk Factors” in the Trust’s Form 10-K for the year ended October 31, 2015, which was filed with the Securities and Exchange Commission on November 24, 2015. Should one or more of these risks or uncertainties materialize, or should any of the Trust's assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Trust undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below, the Vaulted Gold Bullion Trust (the “Trust”) has not conducted any activities. As a result, the Trust has omitted financial statements from this Quarterly Report on Form 10-Q.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Trust is a business trust formed under the laws of the state of Delaware on December 10, 2013 pursuant to an interim trust agreement that was amended and restated by the Depositary Trust Agreement, dated December 1, 2014, by and among Bank of Montreal, as “Initial Depositor,” BMO Capital Markets Corp., as “Placement Agent,” The Bank of New York Mellon, as “Trustee,” and BNY Mellon Trust of Delaware, as “Delaware Trustee” (the “Depositary Trust Agreement”).
The Trust filed a final prospectus on February 4, 2015 relating to a proposed offering of up to $500 million of gold deposit receipts (“Gold Deposit Receipts”), each representing an undivided beneficial ownership in a fixed quantity of unencumbered, allocated, physical gold bullion (“Gold Bullion”). However, in light of certain anticipated changes to the terms of the proposed offering, the Trust formally withdrew its Registration Statement on Form S-1 (No. 333-194144), of which the prospectus dated February 4, 2015 formed a part, together with all exhibits and amendments thereto (the “Registration Statement”), on April 8, 2016 (the “Withdrawal Request”). Prior to having submitted the Withdrawal Request, the Trust had not conducted any activities and no Gold Deposit Receipts were offered or sold under the now withdrawn Registration Statement. The Trust intends to revise the terms of an offer of Gold Deposit Receipts.
The Trust will hold Gold Bullion for the benefit of holders of Gold Deposit Receipts in an account operated by Bank of Montreal at the Royal Canadian Mint (the “Mint”).The Gold Deposit Receipts are separate from the Gold Bullion. One receipt represents the undivided beneficial ownership of one troy ounce of gold bullion. The Trustee performs only administrative and ministerial acts. The property of the Trust will consist of the gold bullion and all monies or other property, if any, received by the trustee. The Initial Depositor will sell Gold Bullion to the Trust and arrange custodial services through its gold storage account. There were no Gold Deposit Receipts outstanding during the three-month period covered by this report.
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 Trustee pursuant to the Depositary Trust Agreement. The expenses of the Trust are borne by the Initial Depositor.
The Trust is newly formed. The Trust is not an investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and is not required to register under the 1940 Act. The Trust is not a commodity pool for purposes of the Commodity Exchange Act (the “CEA”), and the initial depositor is not subject to regulation by the Commodity Futures Trading Commission (the “CFTC”) as a commodity pool operator, or a commodity trading advisor. The Trust has no assets or liabilities.
The fiscal year end for the Trust is October 31.
Gold Industry
The participants in the gold market may be classified in the following sectors: (1) mining and producer; (2) banking; (3) official; (4) investment; and (5) manufacturing. The following is a brief description of each of the sectors.
4
Mining and Producer Sector. This group includes mining companies that specialize in gold and silver production; mining companies that produce gold as a byproduct of other production (such as a copper or silver producer); scrap merchants; and recyclers.
Banking Sector. Bullion banks provide a variety of services to the gold market and its participants, thereby facilitating interactions between other parties. Services provided by the bullion banking community include traditional banking products as well as mine financing, physical gold purchases and sales, hedging and risk management, inventory management for industrial users and consumers, and gold deposit and loan instruments.
The Official Sector. The official sector encompasses the activities of the various central banking operations of gold-holding countries. In September 1999, a group of 15 central banks acting to clarify their intentions with respect to their gold holdings signed the Central Bank Gold Agreement commonly called the “Washington Agreement on Gold.” The signatories included the European Central Bank and the central banks of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, Switzerland, and England. The original agreement limited incremental sales by the 15 signatories to 400 tonnes per annum over the ensuing five-year period. The original Washington Agreement on Gold expired in September 2004, and was renewed by almost all of the original signatories for a second five-year period (England did not renew in 2004). The second Washington Accord Agreement expired in September 2009 and was renewed again by all signatories of the second agreement for a third five-year period. In addition, the central banks of Cyprus, Greece, Malta, Slovakia and Slovenia signed in 2009. The current per annum limit on gold sales is 400 tonnes, with total sales not to exceed 2,000 tonnes in the five-year period.
The Investment Sector. This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges and retail-level coin collectors.
The Manufacturing Sector. The fabrication and manufacturing sector represents all the commercial and industrial users of gold for whom gold is a daily part of their business. The jewelry industry is a large user of gold. Other industrial users of gold include the electronics and dental industries.
World Gold Supply and Demand (2005-2015)
The following table sets forth a summary of the world gold supply and demand from 2005-2015:
|
WORLD GOLD SUPPLY AND
DEMAND
(tonnes)
|
2005*
|
2006*
|
2007*
|
2008*
|
2009*
|
2010*
|
2011*
|
2012*
|
2013*
|
2014*
|
2015**
|
|
Supply
|
|||||||||||
|
Mine Production
|
2,561
|
2,496
|
2,499
|
2,429
|
2,612
|
2,742
|
2,846
|
2,875
|
3,061
|
3,133
|
3,126
|
|
Scrap
|
903
|
1,133
|
1,006
|
1,352
|
1,728
|
1,713
|
1,675
|
1,677
|
1,287
|
1,125
|
1,161
|
|
Net Hedging Supply
|
-92
|
-434
|
-432
|
-357
|
-234
|
-106
|
18
|
-40
|
-39
|
103
|
-14
|
|
Total Supply
|
3,372
|
3,195
|
3,072
|
3,424
|
4,106
|
4,349
|
4,539
|
4,513
|
4,310
|
4,362
|
4,273
|
|
Demand
|
|||||||||||
|
Jewelry
|
2,722
|
2,302
|
2,426
|
2,308
|
1,819
|
2,033
|
2,034
|
2,008
|
2, 439
|
2,213
|
2,062
|
|
Industrial Fabrication
|
449
|
480
|
487
|
471
|
422
|
476
|
468
|
426
|
419
|
400
|
376
|
|
…of which Electronics
|
294
|
325
|
331
|
318
|
283
|
333
|
330
|
295
|
289
|
279
|
268
|
|
…of which Dental & Medical
|
62
|
61
|
58
|
56
|
53
|
48
|
43
|
39
|
36
|
34
|
32
|
|
…of which Other Industrial
|
92
|
94
|
98
|
97
|
86
|
95
|
95
|
92
|
93
|
87
|
76
|
|
Net Official Sector
|
-663
|
-365
|
-484
|
-235
|
-34
|
77
|
457
|
544
|
409
|
466
|
482
|
|
Retail Investment
|
416
|
428
|
436
|
916
|
830
|
1,221
|
1,556
|
1,343
|
1,775
|
1,079
|
1,053
|
|
…of which Bars
|
261
|
236
|
236
|
659
|
548
|
934
|
1,230
|
1,039
|
1,394
|
829
|
794
|
|
…of which Coins
|
155
|
192
|
200
|
257
|
283
|
287
|
326
|
304
|
380
|
251
|
259
|
|
Physical Demand
|
2,923
|
2,845
|
2,864
|
3,460
|
3,038
|
3,807
|
4,515
|
4,321
|
5,041
|
4,158
|
4,076
|
|
Physical Surplus/Deficit
|
448
|
350
|
208
|
-36
|
1,068
|
542
|
25
|
192
|
-732
|
204
|
197
|
|
ETF Inventory Build
|
208
|
260
|
253
|
321
|
623
|
382
|
185
|
279
|
-880
|
-160
|
-125
|
|
Exchange Inventory Build
|
29
|
32
|
-10
|
34
|
39
|
54
|
-6
|
-10
|
-98
|
1
|
-49
|
|
Net Balance
|
212
|
58
|
-35
|
-391
|
406
|
106
|
-154
|
-78
|
246
|
363
|
370
|
|
Gold Price (London PM, US$/oz)
|
444.45
|
603.77
|
695.39
|
871.96
|
972.35
|
1,224.52
|
1,571.52
|
1,668.98
|
1,411.23
|
1,266.40
|
1,160.00
|
|
Note:
|
Totals may not add due to independent rounding. Net producer hedging is the change in the physical market impact of mining companies’ gold loans, forwards and options positions. Implied net investment is the residual from combining all other Thomson Reuters GFMS data on the gold supply/demand as shown in the Summary Table. As such, it captures the net physical impact of all transactions not covered by the other supply/demand variables.
|
5
|
(1)
|
“Tonne” refers to one metric ton. This is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
|
* Source: Gold Survey 2015, Thomson Reuters GFMS
** Source: Gold Survey 2015 Q4 Update & Outlook, Thomson Reuters GFMS
Historic Movements in the Price of Gold
As movements in the price of gold are expected to directly affect the price of the Gold Deposit Receipts, 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.
The following chart provides historical background on the price of gold. The chart illustrates movements in the price of gold in U.S. dollars per ounce over the period from October 2005 to May 2016, and is based on the London PM gold fix price.
Source: The London Bullion Market Association (accessed May 2016)
After a rapid rise starting in the second half of 2005 through mid-2006, there was a period of short decline and volatility in the price of gold lasting through the end of that year. In May 2006, the peak was $725 per ounce. Until about August of 2007, prices were below that high, but since have moved up strongly, reaching a new high of $1,011.25 on March 17, 2008, and ending at $869.75 per ounce on December 30, 2008. Gold prices were quite volatile between the March 2008 high and the end of December 2008 with run-ups and falls of over $150 in each direction. The significant price movements reflect the battles between inflationary and deflationary pressures, U.S. Dollar strengthening against many major currencies and global economic uncertainty going into 2009.
The price of gold continued its upward trend in 2009. After rallying to $1,212.50 per ounce in early December 2009, it fell back down to $1,087.50 per ounce to close the 2009 year. This still resulted in a gain of over 25% for the year. Upward price movement for gold price continued in 2010, reaching a new pre-inflation adjusted record high of $1,421.00 per ounce on November 9, 2010 and closing at $1,405.50 per ounce on December 30, 2010. On December 29, 2011, the price of gold was $1,531.00 per ounce, and on December 28, 2012, the price of gold was $1,657.50 per ounce. In 2013, the twelve-year bull run of gold ended. 2013 opened near the annual high, and the price declined approximately 29% over the year to $1,204.50 per ounce on December 30, 2013. During 2014, gold prices fluctuated between a low of $1,132 and a high of $1,392. Gold prices deteriorated throughout 2015, but have rebounded during the first half of 2016, reaching a high of $1,294.00 on May 3, 2016.
6
As of May 17, 2016, the price of gold was $1,277.00 per ounce.
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 Initial Depositor’s fee, the Initial Depositor has agreed to assume the expenses incurred by the Trust.
Off-Balance Sheet Arrangements
The Trust has no off-balance sheet arrangements.
Critical Accounting Policies
The Trust will prepare its financial statements in accordance with accounting principles generally accepted in the United States of America.
The Trust intends to adopt the provisions of Topic 946, Investment Companies, and follow specialized accounting. As a result of the adoption of this provision, the Trust will record its investment in gold at fair value and expects that there will be fluctuations in the value of investments based on changes in the price of gold.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Trust does not engage in transactions in foreign currencies which could expose the Trust or holders of Gold Deposit Receipts to any foreign currency related market risk. The Trust does not invest in any derivative financial instruments or long-term debt instruments.
Item 4. Controls and Procedures
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 rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to an executive or senior officer of the Initial Depositor familiar with and responsible for supervising the Trust and its operations, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of an executive or senior officer of the Initial Depositor, the Initial Depositor 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 designated officer of the Initial Depositor concluded that, as of April 30, 2016, the Trust’s disclosure controls and procedures were effective.
There have been no changes in the Trust’s or Initial Depositor’s internal control over financial reporting that occurred during the Trust’s fiscal quarter ended April 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Trust’s or Initial Depositor’s internal control over financial reporting.
7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in the Trust’s Annual Form 10-K filed with the SEC for the year ended October 31, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Changes in and Disagreements with Accounting and Financial Disclosure
There have been no changes in auditors and no disagreements with auditors during the Trust’s fiscal quarter ended April 30, 2016.
Item 6. Directors, Executive Officers and Corporate Governance
Not applicable.
Item 7. Executive Compensation
Not applicable.
Item 8. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Not applicable.
Item 9. Certain Relationships and Related Transactions, and Director Independence
Not applicable.
Item 10. Principal Accounting Fees and Services
Not applicable.
Item 11. Other Information
Not applicable.
8
Item 12. Exhibits
|
Exhibit
No.
|
Description
|
|
1.2
|
Depositary Trust Agreement by and among Bank of Montreal, BMO Capital Markets Corp., The Bank of New York Mellon, as Trustee and BNY Mellon Trust of Delaware, as Delaware Trustee, and included as an exhibit thereto, form of Gold Deposit Receipt, filed as an exhibit to the Registrant’s current report on Form 8-K dated December 12, 2014.
|
|
10.1
|
Form of Gold Carrier Agreement by and among Bank of Montreal and [________].
|
|
31.1
|
Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
9
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 thereunto duly authorized.
|
BANK OF MONTREAL
Initial Depositor of the Vaulted Bullion Gold Trust
(Registrant)
|
|
|
Date: May 19, 2016
|
/s/ Deland Kamanga
|
|
*Managing Director and co-Head, Global Structured
Products
|
|
Date: May 19, 2016
|
/s/ Vandra Goedvolk
|
|
*Assistant Corporate Secretary
|
* The Registrant is a trust and the persons are signing in their capacities as officers of Bank of Montreal, the Initial Depositor of the Registrant.
10