Item
1. Financial Statements (Unaudited)
VanEck
Merk Gold Trust
Statements
of Assets and Liabilities
| |
October
31, 2022 | | |
January
31, 2022 | |
| |
(unaudited) | | |
| |
Assets | |
| | |
| |
Investments in gold bullion (cost $538,965,489 and $533,769,944, respectively) | |
$ | 529,960,066 | | |
$ | 586,245,778 | |
Total assets | |
| 529,960,066 | | |
| 586,245,778 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Sponsor’s fee
payable | |
| 12 | | |
| 6 | |
Total liabilities | |
| 12 | | |
| 6 | |
| |
| | | |
| | |
Net assets | |
$ | 529,960,054 | | |
$ | 586,245,772 | |
| |
| | | |
| | |
Net assets consists of: | |
| | | |
| | |
Paid-in-capital | |
$ | 537,885,391 | | |
$ | 532,684,047 | |
Accumulated earnings | |
| (7,925,337 | ) | |
| 53,561,725 | |
| |
$ | 529,960,054 | | |
$ | 586,245,772 | |
| |
| | | |
| | |
Shares issued and outstanding (no par value) | |
| 33,332,198 | | |
| 33,599,843 | |
Net asset value per share | |
$ | 15.90 | | |
$ | 17.45 | |
See notes
to unaudited financial statements.
VanEck
Merk Gold Trust
Statements
of Operations
| |
For
the Three Months Ended October 31, 2022 | | |
For
the Three Months Ended October 31, 2021 | | |
For
the Nine Months Ended October 31, 2022 | | |
For
the Nine Months Ended October 31, 2021 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
Expenses | |
| | |
| | |
| | |
| |
Sponsor’s
fees | |
$ | 380,901 | | |
$ | 329,573 | | |
$ | 1,184,211 | | |
$ | 901,813 | |
Total
expenses | |
| 380,901 | | |
| 329,573 | | |
| 1,184,211 | | |
| 901,813 | |
Net
investment loss | |
| (380,901 | ) | |
| (329,573 | ) | |
| (1,184,211 | ) | |
| (901,813 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
realized and unrealized gain (loss) | |
| | | |
| | | |
| | | |
| | |
Net
realized gain (loss) from gold bullion distributed for redemptions | |
| (141,249 | ) | |
| 11,912 | | |
| 1,178,406 | | |
| 921,833 | |
Net
change in unrealized appreciation (depreciation) on investment in gold bullion | |
| (40,058,528 | ) | |
| (15,451,298 | ) | |
| (61,481,257 | ) | |
| (25,739,142 | ) |
Net
realized and unrealized gain (loss) from operations | |
| (40,199,777 | ) | |
| (15,439,386 | ) | |
| (60,302,851 | ) | |
| (24,817,309 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
increase (decrease) in net assets resulting from operations | |
$ | (40,580,678 | ) | |
$ | (15,768,959 | ) | |
$ | (61,487,062 | ) | |
$ | (25,719,122 | ) |
See notes
to unaudited financial statements.
VanEck
Merk Gold Trust
Statements
of Changes in Net Assets
| |
For
the Three Months Ended October 31, 2022 | | |
For
the Three Months Ended October 31, 2021 | | |
For
the Nine Months Ended October 31, 2022 | | |
For
the Nine Months Ended October 31, 2021 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
| |
| | |
| | |
| | |
| |
Net
assets, beginning of period | |
$ | 623,229,731 | | |
$ | 502,216,306 | | |
$ | 586,245,772 | | |
$ | 442,483,105 | |
Creations | |
| 21,693,449 | | |
| 79,365,152 | | |
| 103,950,729 | | |
| 157,443,950 | |
Redemptions | |
| (74,382,448 | ) | |
| (129,603 | ) | |
| (98,749,385 | ) | |
| (8,525,037 | ) |
Net
investment loss | |
| (380,901 | ) | |
| (329,573 | ) | |
| (1,184,211 | ) | |
| (901,813 | ) |
Net
realized gain (loss) from gold bullion distributed for redemptions | |
| (141,249 | ) | |
| 11,912 | | |
| 1,178,406 | | |
| 921,833 | |
Net
change in unrealized appreciation (depreciation) on investment in gold bullion | |
| (40,058,528 | ) | |
| (15,451,298 | ) | |
| (61,481,257 | ) | |
| (25,739,142 | ) |
Net
assets, end of period | |
$ | 529,960,054 | | |
$ | 565,682,896 | | |
$ | 529,960,054 | | |
$ | 565,682,896 | |
See notes
to unaudited financial statements.
VanEck
Merk Gold Trust
Financial
Highlights
Per
Share Performance (for a share outstanding throughout each period)
| |
For
the Three Months Ended October 31, 2022 | | |
For
the Three Months Ended October 31, 2021 | | |
For
the Nine Months Ended October 31, 2022 | | |
For
the Nine Months Ended October 31, 2021 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
| |
| | |
| | |
| | |
| |
Net
asset value per share, beginning of period | |
$ | 17.02 | | |
$ | 17.77 | | |
$ | 17.45 | | |
$ | 18.16 | |
Net
investment loss(a) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.03 | ) | |
| (0.03 | ) |
Net
realized and unrealized gain (loss) on investment in gold bullion | |
| (1.11 | ) | |
| (0.55 | ) | |
| (1.52 | ) | |
| (0.92 | ) |
Net
change in net assets from operations | |
| (1.12 | ) | |
| (0.56 | ) | |
| (1.55 | ) | |
| (0.95 | ) |
Net
asset value per share, end of period | |
$ | 15.90 | | |
$ | 17.21 | | |
$ | 15.90 | | |
$ | 17.21 | |
| |
| | | |
| | | |
| | | |
| | |
Total
return, at net asset value(b) | |
| (6.58 | )% | |
| (3.15 | )% | |
| (8.88 | )% | |
| (5.23 | )% |
| |
| | | |
| | | |
| | | |
| | |
Ratio
to average net assets(c) | |
| | | |
| | | |
| | | |
| | |
Net
investment loss | |
| (0.25 | )% | |
| (0.25 | )% | |
| (0.25 | )% | |
| (0.25 | )% |
Net
expenses | |
| 0.25 | % | |
| 0.25 | % | |
| 0.25 | % | |
| 0.25 | % |
(a) |
Calculated using average
shares outstanding |
(b) |
Not annualized |
(c) |
Annualized |
See notes
to unaudited financial statements.
VanEck
Merk Gold Trust
Schedules
of Investment
October
31, 2022 (unaudited)
| |
Fine Ounces | | |
Cost | | |
Value | | |
% of Net Assets | |
Gold bullion | |
| 323,344 | | |
$ | 538,965,489 | | |
$ | 529,960,066 | | |
| 100.00 | % |
Total investments | |
| 323,344 | | |
$ | 538,965,489 | | |
$ | 529,960,066 | | |
| 100.00 | % |
Liabilities in excess of other assets | |
| | | |
| | | |
| (12 | ) | |
| (0.00 | )%(a) |
Net assets | |
| | | |
| | | |
$ | 529,960,054 | | |
| 100.00 | % |
January
31, 2022
| |
Fine
Ounces | | |
Cost | | |
Value | | |
%
of Net Assets | |
Gold bullion | |
| 326,554 | | |
$ | 533,769,944 | | |
$ | 586,245,778 | | |
| 100.00 | % |
Total investments | |
| 326,554 | | |
$ | 533,769,944 | | |
$ | 586,245,778 | | |
| 100.00 | % |
Liabilities in excess of other assets | |
| | | |
| | | |
| (6 | ) | |
| (0.00 | )%(a) |
Net assets | |
| | | |
| | | |
$ | 586,245,772 | | |
| 100.00 | % |
(a) | Amount is less than 0.005% |
See notes
to unaudited financial statements.
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
1.
ORGANIZATION
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) is an investment trust formed on May 6, 2014 under New York law pursuant to a depositary trust agreement.
After consideration of Financial Accounting Standards Topic 946, Merk Investments LLC (the “Sponsor”) has concluded 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, it believes its 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.
Virtu
Financial, also known as the Lead Market Maker, was the Initial Purchaser and contributed 1,000 Ounces of Gold in exchange for 100,000
shares on May 6, 2014. At contribution, the value of the gold deposited with the Trust was based on the price of an Ounce of Gold of
$1,306.25. The Initial Purchaser is not affiliated with the Sponsor or the Trustee.
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 their 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. The Trust is not
actively managed.
The
fiscal year end of the Trust is January 31st.
2.
SIGNIFICANT ACCOUNTING POLICIES
In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”),
management makes estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements, as well as the reported amount of revenue and expenses reported during the period.
Actual results could differ from these estimates.
The
accompanying audited and unaudited financial statements were prepared in accordance with GAAP and with the instructions for the Form
10-Q and the rules and regulations of the United States Securities and Exchange Commission. In the opinion of the Trust’s management,
all adjustments (which consists of normal recurring adjustments) necessary to present fairly the financial position and the results of
operations, as presented, have been made.
The
following is a summary of significant accounting policies followed by the Trust.
2.1.
Valuation of Gold
Financial
Accounting Standards Board Accounting Standards Codification 820, “Fair Value Measurements and Disclosures” (“ASC 820”),
provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value adjustments.
Various
inputs are used in determining the fair value of the Trust’s assets or liabilities. These inputs are categorized into three broad
levels. Level 1 includes unadjusted prices in active markets for identical assets or liabilities. Level 2 includes other significant
observable market based inputs (including prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3
includes unobservable inputs, which may include management’s own assumptions in determining the fair value of investments. The
Trust does not hold any derivative instruments, and its assets only consist of allocated gold bullion and gold receivable; representing
gold covered by contractually binding orders for the creation of shares where the gold has not yet been transferred to the Trust’s
account and, from time to time, cash, which is used to pay expenses.
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
(continued)
The
following table summarizes the inputs used as of October 31, 2022 in determining the Trust’s investments at fair value for purposes
of ASC 820:
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Investment in gold | |
$ | 529,960,066 | | |
$ | — | | |
$ | — | |
Total | |
$ | 529,960,066 | | |
$ | — | | |
$ | — | |
The
following table summarizes the inputs used as of January 31, 2022 in determining the Trust’s investments at fair value for purposes
of ASC 820:
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Investment in gold | |
$ | 586,245,778 | | |
$ | — | | |
$ | — | |
Total | |
$ | 586,245,778 | | |
$ | — | | |
$ | — | |
London
Gold Delivery Bars are held by JPMorgan Chase Bank, N.A. (the “Custodian”), on behalf of the Trust, at the London, United
Kingdom vaulting premises. All gold is valued based on its Fine Ounce content, calculated by multiplying the weight of gold by its purity;
the same methodology is applied independent of the type of gold held by the Trust; similarly, the value of up to 430 Fine Ounces of unallocated
gold the Trust may hold is calculated by multiplying the number of Fine Ounces with the price of gold determined by the Trustee as follows.
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 NAV of the Trust is the aggregate value of the Trust’s assets less its
estimated accrued but unpaid liabilities (which include accrued expenses). The Trustee computes the NAV per Share by dividing the net
assets of the Trust by the number of the shares outstanding on the date the computation is made.
In
determining the Trust’s NAV, 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 NAV per Share. If
on a day when the Trust’s NAV 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.
2.2.
Expenses
The Trustee
issues shares to pay the Sponsor’s fee; the Sponsor pays the Trust’s ordinary expenses. The NAV of the Trust is used to compute
the Sponsor’s fee, and the Trustee subtracts from the NAV of the Trust the amount of accrued Sponsor’s fee. To the extent
the Trust issues additional shares to pay the Sponsor’s fee or sells gold to cover expenses or liabilities, the amount of gold
represented by each share will decrease. New deposits of gold, received in exchange for new shares issued by the Trust, would not reverse
this trend.
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
(continued)
2.3.
Creations and Redemptions of Shares
Shares
are issued and redeemed by the Trust in blocks of 50,000 shares called “Baskets” in exchange for gold from certain registered
broker-dealers or other securities market participants (“Authorized Participants”). Investors that are not Authorized Participants
may also take delivery of physical gold in exchange for their shares (“Delivery Applicants”).
Authorized
Participants
The
Trust issues and redeems Baskets only to Authorized Participants. The creation and redemption of Baskets will only be made in exchange
for the delivery to the Trust or the distribution by the Trust of the amount of gold represented by the Baskets being created or redeemed,
the amount of which will be based on the combined Fine Ounces represented by the number of shares included in the Baskets being created
or redeemed determined on the day the order to create or redeem Baskets is properly received.
Orders
to create and redeem Baskets may be placed only by Authorized Participants. An Authorized Participant must: (1) be a registered broker-dealer
or other securities market participant, such as a bank or other financial institution, which, but for an exclusion from registration,
would be required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) must have
an agreement with the Custodian establishing an unallocated account in London or have an existing unallocated account meeting the standards
described herein. To become an Authorized Participant, a person must enter into an Authorized Participant Agreement with the Sponsor
and the Trustee. The Authorized Participant Agreement provides the procedures for the creation and redemption of Baskets and for the
delivery of the gold required for such creations and redemptions. The Authorized Participant Agreement and the related procedures attached
thereto may be amended by the Trustee and the Sponsor, without the consent of any investor or Authorized Participant. A transaction fee
of $500 will be assessed on all creation and redemption transactions. Multiple Baskets may be created on the same day, provided each
Basket meets the requirements described below and that the Custodian is able to allocate gold to the Trust Allocated Account such that
the Trust Unallocated Account holds no more than 430 Fine Ounces of gold at the close of a business day.
Authorized
Participants who make deposits with the Trust in exchange for Baskets will receive no fees, commissions or other form of compensation
or inducement of any kind from either the Sponsor or the Trust, and no such person has any obligation or responsibility to the Sponsor
or the Trust to effect any sale or resale of shares.
Delivery
Applicants
In
exchange for its shares and payment of a processing fee, a Delivery Applicant will be entitled to one or more bars or coins of physical
gold having approximately the total Fine Ounces represented by the shares on the day on which the Delivery Applicant’s broker-dealer
submits his or her shares to the Trust in exchange for physical gold. As it is unlikely that the total Fine Ounces of physical gold will
exactly correspond to the Fine Ounces represented by a specific number of shares, a Delivery Applicant will likely receive some cash
representing the net sale proceeds of any excess Fine Ounces (the “Cash Proceeds”). To minimize the Cash Proceeds of any
exchange, the delivery application requires that the number of shares submitted closely correspond in Fine Ounces to the Fine Ounces
of physical gold that is held or that is to be acquired by the Trust for which the delivery is sought. Share submissions are processed
in the order approved.
Changes
in the shares for the nine-month period ended October 31, 2022 are as follows:
| |
Shares | | |
Amount | |
Shares, beginning of period at
February 1, 2022 | |
| 33,599,843 | | |
$ | 532,684,047 | |
Shares issued | |
| 5,767,892 | | |
| 103,950,729 | |
Shares redeemed | |
| (6,035,537 | ) | |
| (98,749,385 | ) |
Shares, end of period at October 31, 2022 | |
| 33,332,198 | | |
$ | 537,885,391 | |
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
(continued)
Changes
in the shares for the year ended January 31, 2022 are as follows:
| |
Shares | | |
Amount | |
Shares, beginning of period at
February 1, 2021 | |
| 24,366,372 | | |
$ | 370,737,948 | |
Shares issued | |
| 10,223,025 | | |
| 179,243,246 | |
Shares redeemed | |
| (989,554 | ) | |
| (17,297,147 | ) |
Shares, end of period at January 31, 2022 | |
| 33,599,843 | | |
$ | 532,684,047 | |
2.4.
Income Taxes
The
Trust is treated as a “grantor trust” for U.S. federal tax purposes. As a result, the Trust itself is not subject to U.S.
federal income tax. Instead, the Trust’s income and expenses “flow through” to the shareholders and the Trustee reports
the Trust’s income, gains, losses and deductions to the Internal Revenue Service on that basis.
The
Sponsor has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined
that no reserves for uncertain tax positions are required as of October 31, 2022.
2.5.
Revenue Recognition Policy
A
gain or loss is recognized based on the difference between the selling price and the average cost method of the gold sold on a trade
date basis.
3.
INVESTMENT IN GOLD
The
following represents the changes in Ounces of gold and the respective fair value at October 31, 2022:
| |
Ounces | | |
Fair
Value | |
Beginning balance as of February
1, 2022 | |
| 326,554 | | |
$ | 586,245,778 | |
Gold bullion contributed | |
| 55,354 | | |
| 102,766,509 | |
old bullion distributed | |
| (58,564 | ) | |
| (98,749,370 | ) |
Realized gain (loss) from gold distributed
from in-kind | |
| — | | |
| 1,178,406 | |
Change in unrealized appreciation (depreciation) | |
| — | | |
| (61,481,257 | ) |
Ending balance as of October 31, 2022 | |
| 323,344 | | |
$ | 529,960,066 | |
The
following represents the changes in Ounces of gold and the respective fair value at January 31, 2022:
| |
Ounces | | |
Fair
Value | |
Beginning balance as of February
1, 2021 | |
| 237,409 | | |
$ | 442,483,116 | |
Gold bullion contributed | |
| 98,772 | | |
| 177,971,942 | |
Gold bullion distributed | |
| (9,627 | ) | |
| (17,297,123 | ) |
Realized gain (loss) from gold distributed
from in-kind | |
| — | | |
| 1,756,856 | |
Change in unrealized appreciation (depreciation) | |
| — | | |
| (18,669,013 | ) |
Ending balance as of January 31, 2022 | |
| 326,554 | | |
$ | 586,245,778 | |
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
(continued)
4.
RELATED PARTIES—SPONSOR, TRUSTEE, CUSTODIAN AND MARKETING FEES
Fees
paid are to the Sponsor as compensation for services performed under the Trust Agreement. Effective July 24, 2020, the Sponsor’s
fee is payable at an annualized rate of 0.25% of the Trust’s NAV, accrued on a daily basis computed on the prior Business Day’s
NAV and paid monthly in arrears. Prior to July 24, 2020, the Sponsor’s fee accrued at an annualized rate of 0.40% of the Trust’s
NAV.
The
Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustee’s monthly fee
and out-of-pocket expenses; the Custodian’s fee; the marketing support fees and expenses (including the fees and expenses of Foreside
Fund Services, LLC); expenses reimbursable under the Custody Agreement; the precious metals dealer’s fees and expenses reimbursable
under its agreement with the Sponsor; exchange listing fees; Securities and Exchange Commission registration fees; printing and mailing
costs; maintenance expenses for the Trust’s website; audit fees; and up to $100,000 per annum in legal expenses.
Affiliates
of the Trustee, as well as affiliates of the Custodian may from time to time act as Authorized Participants to purchase or sell gold
or shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion.
On
October 22, 2015, the Sponsor, for the benefit of the Trust, entered into a Marketing Agent Agreement (as amended to date, the “Marketing
Agreement”) with Van Eck Securities Corporation (“VanEck” or “Marketing Agent”). Pursuant to the Marketing
Agreement, VanEck 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.
5.
CONCENTRATION OF RISK
The
Trust’s sole business activity is the investment in gold bullion. Several factors could affect the price of gold: (i) global gold
supply and demand, which is influenced by such factors as forward selling by gold producers, purchases made by gold producers to unwind
gold hedge positions, central bank purchases and sales, and production and cost levels in major gold-producing countries; (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 adverse effect on the Trust’s financial position and results of operations.
VanEck
Merk Gold Trust
Notes
to Unaudited Financial Statements
(continued)
6.
UNCERTAINTY REGARDING THE EFFECT OF COVID-19
The
price of the Shares could be adversely affected by the effects of COVID-19.
COVID-19
has not had a significant impact on the Trust. There have been some signs of increased demand for physical gold as well as some supply
constraints for certain coins at times during the pandemic. As a result, precious metals dealers have increased coin and bar premiums
at times. The Sponsor regularly updates available coins and Processing Fees on merkgold.com/fees.
7.
INDEMNIFICATION
Under
the Trust’s organizational documents, each of the Trustee (and its directors, employees and agents) and the Sponsor (and its members,
managers, directors, officers, employees, affiliates) is indemnified against any liability, cost or expense it incurs without gross negligence,
bad faith or willful misconduct on its part and without reckless disregard on its part of its obligations and duties under the Trust’s
organizational documents. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. However, based on industry experience, management believes the risk of
loss is remote.
8.
SUBSEQUENT EVENTS
Management
has evaluated the events and transactions that have occurred through the date the financial statements were issued and noted no items
requiring adjustment of the financial statements or additional disclosures.
*
* *
This report
is submitted for the general information of the shareholders. It is not authorized for distribution to prospective investors unless preceded
or accompanied by an effective prospectus, which includes information regarding the Trust’s risks, objectives, fees and expenses
and other information.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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”), formerly 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, is an investment trust formed on May 6, 2014 under New York law pursuant to a depositary
trust agreement (as amended, the “Trust Agreement”). 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
On
each business day that the NYSE Arca is open for regular trading, as promptly as practicable after 4:00 PM (New York time) the Trustee
will value the gold held by the Trust and will determine the net asset value (“NAV”) of the Trust, as described below.
The
NAV of the Trust is the aggregate value of gold and other assets, if any, of the Trust (other than any amounts credited to the Trust’s
reserve account, if any) and cash, if any, less liabilities of the Trust, which include estimated accrued but unpaid fees, expenses and
other liabilities.
All
gold is valued based on its Fine Ounce content, calculated by multiplying the weight of gold by its purity; the same methodology is applied
independent of the type of gold held by the Trust; similarly, the value of up to 430 Fine Ounces of unallocated gold the Trust may hold
is calculated by multiplying the number of Fine Ounces with the price of gold determined by the Trustee as follows. 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 NAV per Share. If on a day when the Trust’s NAV 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.
Material
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 (as amended to date, 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.
Effective
July 24, 2020, the Sponsor exercised its rights under the Trust Agreement to adjust the Sponsor’s fee upon written notice to the
Trustee and publication of the proposed change on its website. Prior to July 24, 2020, the Sponsor’s fee accrued at an annualized
rate of 0.40% of the Trust’s NAV. Effective July 24, 2020, the Sponsor’s fee is payable at an annualized rate of 0.25% of
the Trust’s NAV, accrued on a daily basis computed on the prior Business Day’s NAV and paid monthly in arrears.
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 was 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 affects both the creation and redemption procedures for Baskets and trading in the Shares.
Compliance with the new settlement cycle went 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.
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, however, 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 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 October 31, 2022 Compared to the Three Months Ended October 31, 2021
The
Trust’s NAV decreased from $623,229,731 at July 31, 2022 to $529,960,054 at October 31, 2022, a 15% decrease, compared to an 12.6
% increase from $502,216,306 at July 31, 2021 to $565,682,896 at October 31, 2021. The decrease in the Trust’s NAV in the quarter
ended October 31, 2022 resulted from a decrease in the value of investments in gold bullion as compared to the prior period. The number
of outstanding Shares decreased from 36,617,439 Shares at July 31, 2022 to 33,332,198 Shares at October 31, 2022 due to the redemption
of Shares by Authorized Participants and offset slightly by the creation of 23,418 Shares in the quarter for Sponsor’s fees, as
compared to 19,092 Shares for such purpose in the quarter ended October 31, 2021. The number of outstanding Shares on October 31, 2021
was 32,878,894. Effective July 24, 2020, the Sponsor’s fees are payable at an annualized rate of 0.25% of the Trust’s NAV,
accrued on a daily basis computed on the prior Business Day’s NAV and paid monthly in arrears. Prior to July 24, 2020, the Sponsor’s
fees accrued at an annualized rate of 0.40% of the Trust’s NAV. Due to the daily accrual but monthly payment, the number of Sponsor’s
fee Shares issued can vary and possibly decrease, even as the number of Shares outstanding increases slightly.
The
Trust’s NAV per Share decreased 6.6% during the quarter ended October 31, 2022, starting at $17.02 per Share and ending at $15.90
per Share, compared to a decrease of 3.2%, from $17.77 to $17.21 during the quarter ended October 31, 2021. The Trust’s NAV per
share decreased slightly more than the price per ounce of gold on a percentage basis due to the Sponsor’s fees, which were 23,418
Shares in total for the quarter ended October 31, 2022, compared with 19,092 Shares paid as Sponsor’s fees in the quarter ended
October 31, 2021. The NAV per share of $17.44 on August 11, 2022 was the highest during the quarter, compared with a low of $15.83 on
October 19, 2022.
The
change in net assets from operations for the quarter ended October 31, 2022 was $(40,580,678), resulting from the Sponsor’s fees
of $(380,901), a net realized loss from gold bullion distributed for redemptions of $(141,249) and a net change in unrealized depreciation
on investment in gold bullion of $(40,058,528). In comparison, the change in net assets from operations for the quarter ended October
31, 2021 was $(15,768,959), resulting from the Sponsor’s fees of $(329,573), a net realized gain from gold bullion distributed
for redemptions of $11,912, offset by a net change in unrealized depreciation on investment in gold bullion of $(15,451,298).
Other
than the Sponsor’s fee, the Trust had no expenses during the quarter ended October 31, 2022 or the quarter ended October 31, 2021.
The Nine
Months Ended October 31, 2022 Compared to the Nine Months Ended October 31, 2021
The
Trust’s NAV decreased from $586,245,772 at January 31, 2022 to $529,960,054 at October 31, 2022, a 9.6% decrease, compared to a
27.8% increase from $442,483,105 at January 31, 2021 to $565,682,896 at October 31, 2021. The decrease in the Trust’s NAV in the
nine months ended October 31, 2022 resulted from a decrease in the value of investments in gold bullion as compared to the prior period.
The number of outstanding Shares decreased from 33,599,843 Shares at January 31, 2022 to 33,332,198 Shares at October 31, 2022 due to
the redemption of Shares by Authorized Participants and offset slightly by the creation of 67,892 Shares for Sponsor’s fees, as
compared to 52,076 Shares for such purpose in the nine months ended October 31, 2021. The number of outstanding Shares at October 31,
2021 was 32,878,894. Effective July 24, 2020, the Sponsor’s fees are payable at an annualized rate of 0.25% of the Trust’s
NAV, accrued on a daily basis computed on the prior Business Day’s NAV and paid monthly in arrears. Prior to July 24, 2020, the
Sponsor’s fees accrued at an annualized rate of 0.40% of the Trust’s NAV. Due to the daily accrual but monthly payment, the
number of Sponsor’s fee Shares issued can vary and possibly decrease, even as the number of Shares outstanding increases slightly.
The
Trust’s NAV per Share decreased 8.9% during the nine months ended October 31, 2022, starting at $17.45 per Share and ending at
$15.90 per Share, compared to a decrease of 5.2%, from $18.16 to $17.21 during the nine months ended October 31, 2021. The Trust’s
NAV per share decreased slightly more than the price per ounce of gold on a percentage basis due to the Sponsor’s fees, which were
67,892 Shares in total for the nine months ended October 31, 2022, compared with 52,076 Shares paid as Sponsor’s fees in the nine
months ended October 31, 2021. The NAV per share of $19.81 on March 8, 2022 was the highest during the nine months ended October 31,
2022, compared with a low of $15.83 on October 19, 2022.
The
change in net assets from operations for the nine months ended October 31, 2022 was $(61,487,062), resulting from the Sponsor’s
fees of $(1,184,211), a net realized gain from gold bullion distributed for redemptions of $1,178,406 and a net change in unrealized
depreciation on investment in gold bullion of $(61,481,257). In comparison, the change in net assets from operations for the nine months
ended October 31, 2021 was $(25,719,122), resulting from the Sponsor’s fees of $(901,813), a net realized gain from gold bullion
distributed for redemptions of $921,833 and a net change in unrealized depreciation on investment in gold bullion of $(25,739,142).
Other
than the Sponsor’s fee, the Trust had no expenses during the nine months ended October 31, 2022 or the nine months ended October
31, 2021.
For
the calendar quarter ended September 30, 2022, the Marketing Agent earned a fee of $80,229 which was paid by the Sponsor on November
22, 2022; since the initiation of the Marketing Agent’s efforts on behalf of the Trust on October 22, 2015, a total of $658,895
in Fees has been paid, representing 0.90% of the Maximum Fee potentially payable to the Marketing Agent pursuant to the Marketing Agent
Agreement. Effective July 24, 2020, the Sponsor and the Marketing Agent amended the fee structure under the Marketing Agent Agreement,
however the financial obligations created thereunder remain the obligations of the Sponsor of the Trust, any fees payable thereunder
remain payable from the Sponsor’s fee and the cap on the fees payable to the Marketing Agent remains unchanged.
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 October 31, 2022 and October 31, 2021, 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 Financial Accounting Standards 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 a participant-directed account maintained under any
plan that is tax-qualified under Code section 401(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, through the Sponsor, has received a private letter ruling from the Internal
Revenue Service that provides that (1) the acquisition of Shares by an IRA or a Tax-Qualified Account will not constitute the acquisition
of a collectible and (2) an IRA or such an account’s 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 those Shares. If a redemption of Shares results in the
delivery of gold to an IRA or Tax-Qualified Account, however, that exchange would constitute the acquisition of a collectible to the
extent provided under that section. See also “ERISA and Related Considerations.”
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 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, accounts, annuities or arrangements
are invested, that are subject to ERISA or the Code, respectively (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 Code section 4975
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 (1) whether the fiduciary has the authority to make the investment
under the appropriate governing Plan instrument, (2) whether the investment would constitute a direct or indirect non-exempt prohibited
transaction with a “party in interest” or “disqualified person,” (3) the Plan’s funding objectives, and
(4) whether under the general fiduciary standards of investment prudence and diversification such investment is appropriate for the Plan,
taking into account the Plan’s overall investment policy, the composition of its investment portfolio and its need for sufficient
liquidity to pay benefits when due.