2. Significant Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires those responsible for preparing financial statements to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Trust.

2.1. Valuation of Gold

Gold is held by JPMorgan Chase Bank, N.A. (the “Custodian”), on behalf of the Trust, at the Zurich, Switzerland vaulting premises of UBS A.G. (the “Zurich Sub-Custodian”) and is valued, for financial statement purposes, at the lower of cost or market. The cost of gold is determined according to the average cost method and the market value is based on the London PM Fix used to determine the net asset value (“NAV”) of the Trust. Realized gains and losses on transfers of gold to pay the Sponsor’s Fee, or gold distributed for the redemption of Shares, are calculated on a trade date basis using average cost. The price for an ounce of gold is set by five market making members of the London Bullion Market Association at approximately 3:00 PM London Time.

Once the value of gold has been determined, the NAV is computed by the Trustee by deducting all accrued fees and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the gold and all other assets held by the Trust.

The table below summarizes the unrealized gains or losses on the Trust’s gold holdings as of December 31, 2012 and 2011:



	December 31, 2012		December 31, 2011
(Amounts in 000’s of US$)
Investment in gold - average cost	$	1,561,925	$	1,376,845
Unrealized gain on investment in gold		368,762		301,078
Investment in gold - market value	$	1,930,687	$	1,677,923

The Trust recognizes the diminution in value of the investment in gold which arises from market declines on an interim basis. Increases in the value of the investment in gold through market price recoveries in later interim periods of the same fiscal year are recognized in the later interim period. Increases in value recognized on an interim basis may not exceed the previously recognized diminution in value.

The per Share amount of gold exchanged for a purchase or redemption is calculated daily by the Trustee, using the London PM Fix to calculate the gold amount in respect of any liabilities for which covering gold sales have not yet been made, and represents the per-Share amount of gold held by the Trust, after giving effect to its liabilities, to cover expenses and liabilities and any losses that may have occurred.

2.2. Gold Receivable and Payable

Gold receivable or payable represents the quantity of gold covered by contractually binding orders for the creation or redemption of Shares respectively, where the gold has not yet been transferred to or from the Trust’s account. Generally, ownership of the gold is transferred within three days of trade date. There was no gold receivable or payable at December 31, 2012 and 2011



	December 31, 2012		December 31, 2011
(Amounts in 000’s of US$)
Gold receivable	$	-	$	-

Gold payable	$	-	$	-

2.3 Creations and Redemptions of Shares

The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets (a Basket equals a block of 50,000 Shares). The Trust issues Shares in Baskets to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. An Authorized Participant is a person who (1) is a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions; (2) is a participant in The Depository Trust Company; (3) has entered into an Authorized Participant Agreement with the Trustee and the Sponsor; and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian or other gold bullion clearing bank. An Authorized Participant Agreement is an agreement entered into by each Authorized Participant, the Sponsor and the Trustee which provides the procedures for the creation and redemption of Baskets and for the delivery of the gold and any cash required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated gold account, either loco London or loco Zurich, established with the Custodian or a gold bullion clearing bank by an Authorized Participant.

The creation and redemption of Baskets is only 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 is based on the combined NAV of the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received.

Authorized Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. The typical settlement period for Shares is three business days. In the event of a trade date at period end, where a settlement is pending, a respective account receivable and/or payable will be recorded. When gold is exchanged in settlement of redemption, it is considered a sale of gold for financial statement purposes.

The amount of bullion represented by the Baskets created or redeemed can only be settled to the nearest 1/1000^th of an ounce. As a result, the value attributed to the creation or redemption of Shares may differ from the value of bullion to be delivered or distributed by the Trust. In order to ensure that the correct metal is available at all times to back the Shares, the Sponsor accepts an adjustment to its management fees in the event of any shortfall or excess. For each transaction, this amount is not more than 1/1000^th of an ounce.

The Shares of the Trust are classified as “Redeemable Capital Shares” for financial statement purposes, since they are subject to redemption at the option of Authorized Participants. Outstanding Shares are reflected at redemption value, which represents the maximum obligation (based on NAV per Share), with the difference from historical cost recorded as an offsetting amount to retained earnings.

Changes in the Shares for the years ended December 31, 2012, 2011 and 2010 are as follows:



	Year		Year		Year
	Ended		Ended		Ended
(Amounts in 000’s of US$ except for Share and per Share data)	December 31, 2012		December 31, 2011		December 31, 2010
Number of redeemable Shares
Opening balance		10,750,000		8,250,000		3,050,000
Creations		1,600,000		2,950,000		5,250,000
Redemptions		(600,000)		(450,000)		(50,000)
Closing balance		11,750,000		10,750,000		8,250,000

Redeemable Shares
Opening balance	$	1,677,363	$	1,157,505	$	336,294
Creations		268,941		466,053		650,948
Redemptions		(98,455)		(71,329)		(6,114)
Adjustment to redemption value		82,207		125,134		176,377
Closing balance	$	1,930,056	$	1,677,363	$	1,157,505

Redemption value per Share at year end	$	164.26	$	156.03	$	140.30

2.4. Revenue Recognition Policy

Revenues consist of realized gains / losses resulting from the transfer of gold for Share redemptions and / or to pay expenses. Realized gains / losses are recognized on a trade date basis.

The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of gold to the Sponsor. With respect to expenses not otherwise assumed by the Sponsor, the Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s gold as necessary to pay these expenses. When selling gold to pay expenses, the Trustee will endeavor to sell the smallest amounts of gold needed to pay these expenses in order to minimize the Trust’s holdings of assets other than gold.

Unless otherwise directed by the Sponsor, when selling gold the Trustee will endeavor to sell at the price established by the London PM Fix. The Trustee will place orders with dealers (which may include the Custodian) through which the Trustee expects to receive the most favorable price and execution of orders. The Custodian may be the purchaser of such gold only if the sale transaction is made at the London PM Fix used by the Trustee to value the Trust’s gold. A gain or loss is recognized based on the difference between the selling price and the average cost of the gold sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale.

2.5. Income Taxes

The Trust is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Trust itself will not be subject to U.S. federal income tax. Instead, the Trust’s income and expenses will “flow through” to the Shareholders, and the Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis.

The Trust has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. The Sponsor has evaluated the application of ASC 740 to the Trust, to determine whether or not there are uncertain tax positions that require financial statement recognition. Based on this evaluation, the Sponsor has determined no reserves for uncertain tax positions are required to be recorded as a result of the application of ASC 740. As a result, no income tax liability or expense has been recorded in the accompanying financial statements.

2.6. Investment in Gold

Changes in ounces of gold and the respective values for the years ended December 31, 2012, 2011 and 2010 are as follows:



	Year		Year		Year
	Ended		Ended		Ended
(Amounts in 000’s of US$ except for ounces data)	December 31, 2012		December 31, 2011		December 31, 2010
Ounces of gold
Opening balance		1,065,686.5		821,051.2		304,614.4
Creations		158,216.1		292,915.5		523,161.0
Redemptions		(59,341.1)		(44,662.3)		(4,984.6)
Transfers of gold to pay expenses		(4,292.8)		(3,617.9)		(1,739.6)
Closing balance		1,160,268.7		1,065,686.5		821,051.2

Investment in gold (lower of cost or market value)
Opening balance	$	1,376,845	$	971,070	$	327,646
Creations		268,941		466,053		650,947
Redemptions		(78,214)		(55,844)		(5,553)
Transfers of gold to pay expenses		(5,647)		(4,434)		(1,970)
Closing balance	$	1,561,925	$	1,376,845	$	971,070

2.7. Expenses

The Trust will transfer gold to the Sponsor to pay the Sponsor’s Fee that will accrue daily at an annualized rate equal to 0.39% of the adjusted daily NAV of the Trust, paid monthly in arrears.

The Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and out of pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and certain legal expenses.

For the year ended December 31, 2012, the Sponsor’s Fee was $7,200,166 (December 31, 2011: $5,855,861; December 31, 2010: $2,539,882).

At December 31, 2012 $630,835 was payable to the Sponsor (December 31, 2011: $560,620).

2.8 Subsequent Events

In accordance with the provisions set forth in FASB ASC 855-10, Subsequent Events, the Trust’s management has evaluated the possibility of subsequent events existing in the Trust’s financial statements through the issuance date. Management has determined that there are no material events that would require adjustment to or disclosure in the Trust’s financial statements through this date.