Item 1. Financial Statements
iShares
®
S&P GSCI Commodity-Indexed Trust
Statements of Financial Condition
At September 30, 2012 (Unaudited) and December 31, 2011
|
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September 30,
2012
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December 31,
2011
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Assets
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Current Assets
|
|
Investment in iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
|
|
$
|
1,325,611,094
|
|
|
$
|
1,313,291,939
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|
|
|
|
|
|
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|
Total Assets
|
|
$
|
1,325,611,094
|
|
|
$
|
1,313,291,939
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|
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|
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|
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Liabilities and Shareholders Capital
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Current Liabilities
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Commitments and Contingent Liabilities (Note 7)
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$
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|
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|
$
|
|
|
Redeemable capital Shares, no par value, unlimited amount authorized (at redemption value) - 38,950,000 issued and outstanding at
September 30, 2012 and 39,750,000 issued and outstanding at December 31, 2011
|
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1,325,611,094
|
|
|
|
1,313,291,939
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|
|
|
|
|
|
|
|
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Total Shareholders Capital
|
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1,325,611,094
|
|
|
|
1,313,291,939
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Capital
|
|
$
|
1,325,611,094
|
|
|
$
|
1,313,291,939
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|
|
|
|
|
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|
|
|
See notes to financial statements.
1
iShares
®
S&P GSCI Commodity-Indexed Trust
Statements of Operations (Unaudited)
For the three and nine months ended September 30, 2012 and 2011
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2012
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2011
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2012
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|
2011
|
|
Investment Income Allocated from iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
|
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|
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Interest
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$
|
317,614
|
|
|
$
|
262,341
|
|
|
$
|
685,021
|
|
|
$
|
1,593,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
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|
317,614
|
|
|
|
262,341
|
|
|
|
685,021
|
|
|
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1,593,253
|
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Expenses Allocated from iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
|
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Management fee
|
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2,440,656
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|
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2,789,149
|
|
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|
7,431,062
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|
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9,692,786
|
|
Brokerage commissions and fees
|
|
|
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1,320
|
|
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|
3,630
|
|
|
|
759,846
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|
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|
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|
|
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|
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Total expenses
|
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2,440,656
|
|
|
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2,790,469
|
|
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|
7,434,692
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10,452,632
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Net investment loss
|
|
|
(2,123,042
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)
|
|
|
(2,528,128
|
)
|
|
|
(6,749,671
|
)
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|
|
(8,859,379
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)
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Realized and Unrealized Gain (Loss) Allocated from iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
|
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Net realized gain (loss) on short-term investments
|
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25,268
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|
(1,604
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)
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183,325
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Net realized gain (loss) on futures contracts
|
|
|
(55,078
|
)
|
|
|
(7,899,285
|
)
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|
|
(9,755,133
|
)
|
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|
173,197,510
|
|
Net change in unrealized appreciation/depreciation on futures contracts
|
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|
136,069,574
|
|
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|
(149,211,673
|
)
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|
48,686,331
|
|
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|
(311,566,496
|
)
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|
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|
|
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|
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|
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Net realized and unrealized gain (loss)
|
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136,014,496
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(157,085,690
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)
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38,929,594
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|
(138,185,661
|
)
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|
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|
|
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|
|
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|
Net gain (loss)
|
|
$
|
133,891,454
|
|
|
$
|
(159,613,818
|
)
|
|
$
|
32,179,923
|
|
|
$
|
(147,045,040
|
)
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Net gain (loss) per Share
|
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$
|
3.45
|
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|
$
|
(5.10
|
)
|
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$
|
0.81
|
|
|
$
|
(3.01
|
)
|
Weighted-average Shares outstanding
|
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|
38,782,065
|
|
|
|
31,321,196
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|
|
|
39,547,993
|
|
|
|
48,844,322
|
|
See notes to financial statements.
2
iShares
®
S&P GSCI Commodity-Indexed Trust
Statements of Changes in Shareholders Capital
For the nine months ended September 30, 2012 (Unaudited)
and the year ended December 31, 2011
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Nine Months
Ended
September 30, 2012
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Year Ended
December 31, 2011
|
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Shareholders Capital, Beginning of Period
|
|
$
|
1,313,291,939
|
|
|
$
|
1,799,879,995
|
|
Contributions
|
|
|
53,845,870
|
|
|
|
90,651,034
|
|
Redemptions
|
|
|
(73,706,638
|
)
|
|
|
(539,534,773
|
)
|
Net investment loss
|
|
|
(6,749,671
|
)
|
|
|
(11,297,295
|
)
|
Net realized gain (loss) on short-term investments
|
|
|
(1,604
|
)
|
|
|
184,876
|
|
Net realized gain (loss) on futures contracts
|
|
|
(9,755,133
|
)
|
|
|
165,820,763
|
|
Net change in unrealized appreciation/ depreciation on futures contracts
|
|
|
48,686,331
|
|
|
|
(192,412,661
|
)
|
|
|
|
|
|
|
|
|
|
Shareholders Capital, End of Period
|
|
$
|
1,325,611,094
|
|
|
$
|
1,313,291,939
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value per Share, End of Period
|
|
$
|
34.03
|
|
|
$
|
33.04
|
|
See notes to financial statements.
3
iShares
®
S&P GSCI Commodity-Indexed Trust
Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2012 and 2011
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Nine Months
Ended
September 30,
|
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2012
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|
2011
|
|
Cash Flows from Operating Activities
|
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|
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|
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Net gain (loss)
|
|
$
|
32,179,923
|
|
|
$
|
(147,045,040
|
)
|
Adjustments to reconcile net gain (loss) to net cash provided by operating activities:
|
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|
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|
(Increase) decrease in investment in iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
|
|
|
(12,319,155
|
)
|
|
|
535,909,342
|
|
|
|
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Net cash provided by operating activities
|
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19,860,768
|
|
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|
388,864,302
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Cash Flows from Financing Activities
|
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Contributions
|
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|
53,845,870
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|
|
|
90,651,034
|
|
Redemptions
|
|
|
(73,706,638
|
)
|
|
|
(479,515,336
|
)
|
|
|
|
|
|
|
|
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|
Net cash used in financing activities
|
|
|
(19,860,768
|
)
|
|
|
(388,864,302
|
)
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Net increase in cash and cash equivalents
|
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Cash and Cash Equivalents
|
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Beginning of period
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|
|
|
|
|
|
|
|
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End of period
|
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$
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|
|
|
$
|
|
|
|
|
|
|
|
|
|
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|
See notes to financial statements.
4
iShares
®
S&P GSCI Commodity-Indexed Trust
Notes to Financial Statements (Unaudited)
At September 30, 2012
1 - Organization
The iShares
®
S&P GSCI Commodity-Indexed Trust (the Trust) was organized as a Delaware statutory trust on July 7, 2006 and commenced operations on
July 10, 2006. Prior to May 9, 2007, the Trust was known as the iShares
®
GSCI
®
Commodity-Indexed Trust. BlackRock Asset Management International Inc. (BAMII) is the
Sponsor of the Trust and Manager of the iShares
®
S&P GSCI Commodity-Indexed
Investing Pool LLC (the Investing Pool). BlackRock Institutional Trust Company, N.A. is the Trustee of the Trust. The Trust is governed by the Amended and Restated Trust Agreement, dated as of September 12, 2007 (the
Trust Agreement), among the Sponsor, the Trustee and Wilmington Trust Company (the Delaware Trustee). The Trust issues units of beneficial interest (Shares) representing fractional undivided beneficial interests
in its net assets. Substantially all of the net assets of the Trust consist of its holdings of the limited liability company interests of a commodity pool. That commodity pool, iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC, holds long positions in futures contracts on the S&P GSCI Excess Return Index listed on the Chicago
Mercantile Exchange called Commodity Excess Return Futures (CERFs) and posts margin in the form of cash or short-term or similar securities, referred to as Short-Term Securities, to collateralize its CERF positions. Margin is
required to be posted at the time the CERF position is established.
It is the objective of the Trust that the performance of the Shares will
correspond generally to the performance of the S&P GSCI Total Return Index before payment of the Trusts and the Investing Pools expenses.
The Trust and the Investing Pool are each commodity pools, as defined in the regulations of the Commodity Futures Trading Commission (the CFTC) and are operated by BAMII, a commodity pool
operator registered with the CFTC. BAMII is an indirect subsidiary of BlackRock, Inc.
The accompanying unaudited financial statements were
prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S.
Securities and Exchange Commission (the SEC). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements
have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trusts financial statements included in its Annual
Report on Form 10-K for the year ended December 31, 2011 as filed with the SEC on February 29, 2012.
The Trust is not an investment
company registered under the Investment Company Act of 1940, as amended.
2 - Summary of Significant Accounting Policies
The following is a
summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements in conformity with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to
make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates and these differences could be material.
B.
|
Investment in the Investing Pool
|
The
Trusts investment in the Investing Pool is valued at an amount equal to the value of the Trusts capital account in the Investing Pool, which is measured at fair value.
The financial statements of the Investing Pool should be read in conjunction with the Trusts financial statements.
At September 30, 2012, the Trust owned 99.99% of the Investing Pools net assets. Because the Trust invests substantially all of its assets in the Investing Pool, the accounting policies of the
Investing Pool, including the Investing Pools security valuation policies, will directly affect the recorded value of the Trusts investment in the Investing Pool. The Trust also receives a daily allocation of its respective income,
expenses and net realized and unrealized gains and losses in proportion to its investment in the Investing Pool.
5
iShares
®
S&P GSCI Commodity-Indexed Trust
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
Financial Accounting Standards
Board (FASB) Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosures
defines fair value as the price the Trust would receive to sell an asset or pay to transfer a liability in an orderly transaction
between market participants at the measurement date. The Trusts policy is to value its investments at fair value.
The Trust records its
investment in the Investing Pool at fair value based on the Trusts proportionate interest in the net assets of the Investing Pool. Disclosure regarding valuation of the Investing Pools investment portfolio can be found in Note 10 of the
Investing Pools Notes to Financial Statements.
The Trust is not an
association taxable as a corporation for federal, state and local income tax purposes.
No provision for federal, state, and local income
taxes has been made in the accompanying financial statements because the Trust is not subject to income taxes. Shareholders are individually responsible for their own tax payments on their proportionate share of gains, losses, credits, or
deductions.
E.
|
Calculation of Net Asset Value
|
The net
asset value of the Trust on any given day is obtained by subtracting the Trusts accrued expenses and other liabilities on that day from the value of (1) the Trusts equity investment in the Investing Pool and (2) any other
assets of the Trust, as of 4:00 p.m. (New York time) that day. The Trustee determines the net asset value per Share (the NAV) by dividing the net asset value of the Trust on a given day by the number of Shares outstanding or deemed to be
outstanding at 4:00 p.m. (New York time) that day. The NAV is calculated each day on which NYSE Arca, Inc. (NYSE Arca) is open for regular trading, as soon as practicable after 4:00 p.m. (New York time).
Interest and
distributions received by the Investing Pool on the assets posted as margin may be used to acquire additional CERFs or, in the discretion of the Sponsor, distributed to Shareholders. The Trust is under no obligation to make periodic distributions to
Shareholders.
G.
|
Recent Accounting Standard
|
In December
2011, the FASB issued guidance to enhance current disclosure requirements on offsetting of certain assets and liabilities and enable financial statement users to compare financial statements prepared under U.S. GAAP and International Financial
Reporting Standards (IFRS). The new disclosures are required for investments and derivative financial instruments subject to master netting agreements or similar agreements and require an entity to disclose both gross and net information about such
investments and transactions eligible for offset in the statement of assets and liabilities. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar agreements. The
guidance is effective for financial statements for fiscal years beginning after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Trusts financial statements and
disclosures.
3 - Offering of the Shares
Shares are issued and redeemed continuously in one or more blocks of 50,000 Shares in exchange for a combination of CERFs and cash (or,
in the discretion of the Sponsor, Short-Term Securities in lieu of cash). The baskets of CERFs and cash (or, in the discretion of the Sponsor, Short-Term Securities in lieu of cash) are transferred to or from the Investing Pool in exchange for
limited liability company interests in the Investing Pool. In addition, the Investing Pool is required to deposit cash margin with its futures commission merchant with a value equal to 100% of the value of each CERF position at the time it is
established.
6
iShares
®
S&P GSCI Commodity-Indexed Trust
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. The Trust
transacts only with registered broker-dealers that have entered into a contractual arrangement with the Trust and the Sponsor governing, among other matters, the creation and redemption of Shares (such authorized broker-dealers are the
Authorized Participants). Authorized Participants may redeem their Shares (as well as Shares on behalf of other investors) at any time on any business day in one or more blocks of 50,000 Shares. Redemptions of Shares in exchange for
baskets of CERFs and cash (or, in the discretion of the Sponsor, Short-Term Securities in lieu of cash) are treated as sales for financial statement purposes.
On September 30, 2012, the Trust had 38,950,000 Shares outstanding.
4 - Trust Expenses
The Trust is not expected to directly bear any ordinary recurring expenses. The Sponsor has agreed to pay the following administrative,
operational and marketing expenses: (1) the fees of the Trustee, Delaware Trustee, Trust administrator and processing agent, (2) NYSE Arca listing fees, (3) printing and mailing costs, (4) audit fees, (5) tax reporting
costs, (6) license fees, and (7) up to $100,000 per annum in legal fees. The Sponsor has also paid the costs of the Trusts organization and the initial sales of the Shares, including applicable SEC registration fees.
5 - Related Parties
The Sponsor, the Manager and the Trustee are considered to be related parties to the Trust. The Trustees fee is paid by the
Sponsor and is not a separate expense of the Trust. The Manager is paid by the Investing Pool and that fee is an indirect expense of the Trust.
6 - Indemnification
The Sponsor and its shareholders, directors, officers, employees, affiliates (as such term is defined under the United States
Securities Act of 1933, as amended) and subsidiaries are entitled to be indemnified by the Trust and held harmless against any loss, liability or expense arising out of or in connection with the performance of their obligations under the Trust
Agreement or any actions taken in accordance with the provisions of the Trust Agreement and incurred without their (1) negligence, bad faith, willful misconduct or willful malfeasance or (2) reckless disregard of their obligations and
duties under the Trust Agreement.
7 - Commitments and Contingent Liabilities
In the normal course of business, the Trust may enter into contracts with service providers that contain general indemnification
clauses. The Trusts 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.
8 - Net Asset Value and Financial Highlights
The Trust is presenting the following net asset values and financial highlights related to investment performance and operations for a
Share outstanding for the period from January 1, 2012 to September 30, 2012. The net investment income (loss) and total expense ratios are calculated using average net assets. The net asset value presentation is calculated using daily
Shares outstanding. The net investment income (loss) and total expense ratios have been annualized and include the allocation of net investment income (loss) and expenses from the Investing Pool. The total return is based on the change in net asset
value of a Share during the period. An investors return and ratios may vary based on the timing of capital transactions.
7
iShares
®
S&P GSCI Commodity-Indexed Trust
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
|
|
|
|
|
Net asset value per Share, beginning of period
|
|
$
|
33.04
|
|
|
|
Net investment loss
|
|
|
(0.17
|
)
|
Realized and unrealized gain
|
|
|
1.16
|
|
|
|
|
|
|
Net increase in net assets from operations
|
|
|
0.99
|
|
|
|
|
|
|
Net asset value per Share, end of period
|
|
$
|
34.03
|
|
|
|
|
|
|
|
|
Ratio to average net assets:
|
|
|
|
|
Net investment loss
(a)
|
|
|
(0.68
|
)%
|
Expenses
(a)
|
|
|
0.75
|
%
|
|
|
Total return, at net asset value
(b)
|
|
|
3.00
|
%
|
(a)
|
Percentage is annualized.
|
(b)
|
Percentage is not annualized.
|
9 - Subsequent Events
In connection with the preparation of the financial statements of the Trust as of and for the period ended September 30, 2012,
management has evaluated the impact of all subsequent events on the Trust through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
8
iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
Statements of Financial Condition
At September 30, 2012 (Unaudited) and December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
September 30,
2012
|
|
|
December 31,
2011
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
953,250
|
|
|
$
|
94,645
|
|
Cash and cash equivalents held at FCM (restricted)
|
|
|
19,647,647
|
|
|
|
27,248,073
|
|
Short-term investments held at FCM (restricted)
|
|
|
1,296,695,093
|
|
|
|
1,287,357,438
|
|
Receivable for variation margin on open futures contracts (Note 9)
|
|
|
9,156,880
|
|
|
|
|
|
Interest receivable
|
|
|
129
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,326,452,999
|
|
|
$
|
1,314,700,216
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Members Equity
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Payable for variation margin on open futures contracts (Note 9)
|
|
$
|
|
|
|
$
|
552,020
|
|
Management fee payable
|
|
|
824,684
|
|
|
|
839,539
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
824,684
|
|
|
|
1,391,559
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingent Liabilities (Note 7)
|
|
|
|
|
|
|
|
|
Members Equity
|
|
|
|
|
|
|
|
|
General member
|
|
|
17,221
|
|
|
|
16,718
|
|
Limited member
|
|
|
1,325,611,094
|
|
|
|
1,313,291,939
|
|
|
|
|
|
|
|
|
|
|
Total Members Equity
|
|
|
1,325,628,315
|
|
|
|
1,313,308,657
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Members Equity
|
|
$
|
1,326,452,999
|
|
|
$
|
1,314,700,216
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
9
iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
Statements of Operations (Unaudited)
For the three and nine months ended September 30, 2012 and 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
317,616
|
|
|
$
|
262,345
|
|
|
$
|
685,028
|
|
|
$
|
1,593,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
|
|
317,616
|
|
|
|
262,345
|
|
|
|
685,028
|
|
|
|
1,593,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee
|
|
|
2,440,689
|
|
|
|
2,789,182
|
|
|
|
7,431,158
|
|
|
|
9,692,887
|
|
Brokerage commissions and fees
|
|
|
|
|
|
|
1,320
|
|
|
|
3,630
|
|
|
|
759,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,440,689
|
|
|
|
2,790,502
|
|
|
|
7,434,788
|
|
|
|
10,452,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
|
|
|
(2,123,073
|
)
|
|
|
(2,528,157
|
)
|
|
|
(6,749,760
|
)
|
|
|
(8,859,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on short-term investments
|
|
|
|
|
|
|
25,269
|
|
|
|
(1,604
|
)
|
|
|
183,327
|
|
Net realized gain (loss) on futures contracts
|
|
|
(55,079
|
)
|
|
|
(7,899,380
|
)
|
|
|
(9,755,259
|
)
|
|
|
173,199,100
|
|
Net change in unrealized appreciation/depreciation on futures contracts
|
|
|
136,071,359
|
|
|
|
(149,213,471
|
)
|
|
|
48,687,049
|
|
|
|
(311,570,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
136,016,280
|
|
|
|
(157,087,582
|
)
|
|
|
38,930,186
|
|
|
|
(138,187,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss)
|
|
$
|
133,893,207
|
|
|
$
|
(159,615,739
|
)
|
|
$
|
32,180,426
|
|
|
$
|
(147,047,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
10
iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
Statements of Changes in Members Equity
For the nine months ended September 30, 2012 (Unaudited)
and the year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Member
|
|
|
Limited
Member
|
|
|
Total
Members
Equity
|
|
Members Equity, December 31, 2011
|
|
$
|
16,718
|
|
|
$
|
1,313,291,939
|
|
|
$
|
1,313,308,657
|
|
Contributions
|
|
|
|
|
|
|
53,845,870
|
|
|
|
53,845,870
|
|
Redemptions
|
|
|
|
|
|
|
(73,706,638
|
)
|
|
|
(73,706,638
|
)
|
Net investment loss
|
|
|
(89
|
)
|
|
|
(6,749,671
|
)
|
|
|
(6,749,760
|
)
|
Net realized loss on short-term investments
|
|
|
|
|
|
|
(1,604
|
)
|
|
|
(1,604
|
)
|
Net realized loss on futures contracts
|
|
|
(126
|
)
|
|
|
(9,755,133
|
)
|
|
|
(9,755,259
|
)
|
Net change in unrealized appreciation/ depreciation on futures contracts
|
|
|
718
|
|
|
|
48,686,331
|
|
|
|
48,687,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Equity, September 30, 2012
|
|
$
|
17,221
|
|
|
$
|
1,325,611,094
|
|
|
$
|
1,325,628,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Member
|
|
|
Limited
Member
|
|
|
Total
Members
Equity
|
|
Members Equity, December 31, 2010
|
|
$
|
17,393
|
|
|
$
|
1,799,879,995
|
|
|
$
|
1,799,897,388
|
|
Contributions
|
|
|
|
|
|
|
90,651,034
|
|
|
|
90,651,034
|
|
Redemptions
|
|
|
|
|
|
|
(539,534,773
|
)
|
|
|
(539,534,773
|
)
|
Net investment loss
|
|
|
(115
|
)
|
|
|
(11,297,295
|
)
|
|
|
(11,297,410
|
)
|
Net realized gain on short-term investments
|
|
|
2
|
|
|
|
184,876
|
|
|
|
184,878
|
|
Net realized gain on futures contracts
|
|
|
1,497
|
|
|
|
165,820,763
|
|
|
|
165,822,260
|
|
Net change in unrealized appreciation/ depreciation on futures contracts
|
|
|
(2,059
|
)
|
|
|
(192,412,661
|
)
|
|
|
(192,414,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Equity, December 31, 2011
|
|
$
|
16,718
|
|
|
$
|
1,313,291,939
|
|
|
$
|
1,313,308,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
11
iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
Statements of Cash Flows (Unaudited)
For the nine months ended September 30, 2012 and 2011
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Cash Flows from Operating Activities
|
|
Net gain (loss)
|
|
$
|
32,180,426
|
|
|
$
|
(147,047,077
|
)
|
Adjustments to reconcile net gain (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
(4,144,911,857
|
)
|
|
|
(4,680,371,464
|
)
|
Sales/maturities of short-term investments
|
|
|
4,136,191,524
|
|
|
|
5,116,541,500
|
|
Accretion of discount
|
|
|
(618,926
|
)
|
|
|
(1,542,504
|
)
|
Net realized (gain) loss on short-term investments
|
|
|
1,604
|
|
|
|
(183,327
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents held at FCM (restricted)
|
|
|
7,600,426
|
|
|
|
36,352,741
|
|
Receivable for variation margin on open futures contracts
|
|
|
(9,156,880
|
)
|
|
|
35,184,200
|
|
Interest receivable
|
|
|
(69
|
)
|
|
|
226
|
|
Payable for variation margin on open futures contracts
|
|
|
(552,020
|
)
|
|
|
28,703,070
|
|
Management fee payable
|
|
|
(14,855
|
)
|
|
|
(250,472
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
20,719,373
|
|
|
|
387,386,893
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
Contributions
|
|
|
53,845,870
|
|
|
|
90,651,034
|
|
Redemptions
|
|
|
(73,706,638
|
)
|
|
|
(479,515,336
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(19,860,768
|
)
|
|
|
(388,864,302
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
858,605
|
|
|
|
(1,477,409
|
)
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
Beginning of period
|
|
|
94,645
|
|
|
|
1,662,838
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
953,250
|
|
|
$
|
185,429
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
12
iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC
Schedule of Investments (Unaudited)
At
September 30, 2012
|
|
|
|
|
|
|
|
|
Face Amount
|
|
|
Security Description
|
|
Fair Value
|
|
|
|
|
|
United States Treasury bills:
|
|
|
|
|
|
$550,000,000
|
|
|
0.08% - 0.10% due 12/06/12
|
|
$
|
549,901,000
|
|
|
259,500,000
|
|
|
0.10% due 12/20/12
|
|
|
259,442,333
|
|
|
487,446,000
|
|
|
0.08% due 12/27/12
|
|
|
487,351,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total United States Treasury bills -
97.82%
(a)
|
|
$
|
1,296,695,093
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Percentage is based on members equity.
|
|
As of September 30, 2012, the open CERFs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
|
|
Expiration Date
|
|
|
|
Current Notional Amount
|
|
|
|
|
Net Unrealized Loss
|
|
26,932
|
|
|
|
March 2014
|
|
|
|
$
|
1,324,246,440
|
|
|
|
|
$
|
25,174,580
|
|
See notes to financial statements.
13
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited)
At September 30, 2012
1 - Organization
The iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC (the Investing Pool) is a limited liability company organized under the laws of the State of
Delaware on July 7, 2006 and commenced operations on July 10, 2006. Prior to May 9, 2007, the Investing Pool was known as the iShares
®
GSCI
®
Commodity-Indexed
Investing Pool LLC. BlackRock Asset Management International Inc. (the Manager) is responsible for the administration of the Investing Pool. The Investing Pool holds long positions in futures contracts on the S&P GSCI Excess
Return Index (S&P GSCI-ER) listed on the Chicago Mercantile Exchange (the CME) called Commodity Excess Return Futures (CERFs) and posts margin in the form of cash or short-term or similar securities, referred
to as Short-Term Securities, to collateralize its CERF positions.
It is the objective of the Investing Pool that its performance
will correspond generally to the performance of the S&P GSCI Total Return Index (the Index) before payment of the Investing Pools expenses.
The Investing Pool is a commodity pool, as defined in the regulations of the Commodity Futures Trading Commission (the CFTC) and is operated by the Manager, a commodity pool operator
registered with the CFTC. The Manager is an indirect subsidiary of BlackRock, Inc. BlackRock Fund Advisors (the Advisor), an indirect subsidiary of BlackRock, Inc., serves as the commodity trading advisor of the Investing Pool and is
registered with the CFTC.
The Investing Pool is not an investment company registered under the Investment Company Act of 1940, as amended.
2 - Summary of Significant Accounting Policies
The following is a
summary of significant accounting policies consistently followed by the Investing Pool in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (U.S.
GAAP). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and these differences could be material.
CERFs are futures
contracts listed on the CME whose settlement at expiration is based on the value of the S&P GSCI-ER at that time. The terms of the CERFs require the Investing Pool to deposit initial margin with a value equal to 100% of the value of each CERF
position at the time the position is established, thereby making those positions unleveraged. Because of this, additional variation margin payments are not required. Although daily variation margins are not required, daily fluctuations in the value
of the CERFs are recorded as an unrealized gain or loss. When a CERF is closed, the Investing Pool records a realized gain or loss based on the difference between the value of the CERF at the time it was opened and the value at the time it was
closed. The Investing Pool will deposit with the clearing futures commission merchant (FCM) the required margin for the CERFs in the form of cash or Short-Term Securities. CERFs are derivative instruments valued at fair value, which the
Manager has determined to be that days announced CME settlement price for the CERF. If there is no announced CME settlement price for the CERF on that day, the Manager will use the most recently announced CME settlement price unless the
Manager determines that the price is inappropriate as a basis for the valuation of the CERFs. The Investing Pools investment in the CERFs has not been designated as a hedging instrument. As a result, all changes in the fair value are reflected
in the Statements of Operations.
14
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited) (Continued)
At September 30,
2012
The investment objective of the Investing Pool is to seek investment results that correspond generally
to the performance of the Index before payment of the Investing Pools expenses through holdings of long positions in CERFs.
For futures
contracts, counterparty credit risk is mitigated because futures contracts are exchange-traded and the exchanges clearing house acts as central counterparty to all exchange-traded futures contracts (although customers continue to have credit
exposure to the clearing member who holds their account).
Please refer to Note 9 for additional disclosures regarding the Investing
Pools investments in CERFs.
C.
|
Cash and Cash Equivalents
|
The Investing
Pool defines cash and cash equivalents to be highly liquid investments with original maturities of three months or less.
As of
September 30, 2012 and December 31, 2011, the Investing Pool had cash and cash equivalents held at its clearing FCM of $19,647,647 and $27,248,073 respectively, which were posted as margin to collateralize its CERF positions.
D.
|
Short-Term Investments
|
Short-term
investments on the Statements of Financial Condition consist principally of short-term fixed income securities with original maturities of one year or less. These investments are valued at fair value.
As of September 30, 2012 and December 31, 2011, the Investing Pool had short-term investments held at its clearing FCM of $1,296,695,093 and
$1,287,357,438 respectively, which were posted as margin to collateralize its CERF positions.
E.
|
Securities Transactions, Income and Expense Recognition
|
Securities transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined using the specific identification method. Other income and expenses are
recognized on the accrual basis.
The Investing Pool is not
an association taxable as a corporation and is treated as a partnership for federal, state and local income tax purposes.
No provision for
federal, state, and local income taxes has been made in the accompanying financial statements because the Investing Pool is not subject to income taxes. Holders of interests in the Investing Pool are individually responsible for their own tax
payments on their proportionate share of gains, losses, credits, or deductions.
G.
|
Calculation of Net Asset Value
|
The net
asset value of the Investing Pool on any given day is obtained by subtracting the Investing Pools accrued expenses and other liabilities on that day from the value of the assets of the Investing Pool, calculated as of 4:00 p.m. (New York time)
on each day on which NYSE Arca, Inc. (NYSE Arca) is open for regular trading, as soon as practicable after that time.
15
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited) (Continued)
At September 30,
2012
H.
|
Recent Accounting Standard
|
In December
2011, the Financial Accounting Standards Board (FASB) issued guidance to enhance current disclosure requirements on offsetting of certain assets and liabilities and enable financial statement users to compare financial statements
prepared under U.S. GAAP and International Financial Reporting Standards (IFRS). The new disclosures are required for investments and derivative financial instruments subject to master netting agreements or similar agreements and require an entity
to disclose both gross and net information about such investments and transactions eligible for offset in the statement of assets and liabilities. In addition, the standard requires disclosure of collateral received and posted in connection with
master netting agreements or similar agreements. The guidance is effective for financial statements for fiscal years beginning after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this
guidance on the Investing Pools financial statements and disclosures.
3 - Offering of the Investing Pool Interests
Interests in the Investing Pool (Investing Pool Interests) are issued only to and redeemable only by
the iShares
®
S&P GSCI Commodity-Indexed Trust (the Trust) in exchange for a combination of
CERFs and cash or Short-Term Securities in lieu of cash. The baskets of CERFs and cash or Short-Term Securities in lieu of cash are transferred to or from the Trust in exchange for Investing Pool Interests. Individual investors cannot purchase or
redeem Investing Pool Interests. The Investing Pool transacts only with the Trust and the Manager.
Redemptions of Investing Pool Interests in
exchange for CERFs and cash or Short-Term Securities in lieu of cash are treated as sales for financial statement purposes.
4 - Investing Pool Expenses
The Manager pays the amounts that would otherwise be considered the ordinary operating expenses, if any, of the Investing Pool. The
Manager receives an allocation from the Investing Pool that accrues daily at an annualized rate equal to 0.75% of the net asset value of the Investing Pool.
5 - Related Parties
BlackRock Institutional Trust Company, N.A. is the Administrator of the Investing Pool. The Manager and the Administrator
are considered to be related parties to the Trust and Investing Pool. The Advisor is considered to be a related party to the Investing Pool. The Administrators and Advisors fees are paid by the Manager from the Investing Pools
expense allocation to the Manager and are not a separate expense of the Investing Pool.
6 - Indemnification
The Trust, the Manager and any officers, agents and delegates of the Investing Pool (the Indemnitees) are entitled to
indemnification from the Investing Pool for any loss, damage, claim or expense (including reasonable attorneys fees) incurred by any Indemnitee by reason of any act or omission performed or omitted by such Indemnitee on behalf of the Investing
Pool, unless such act or omission is the result of such Indemnitees gross negligence, bad faith or willful misconduct, and provided that such indemnity shall be provided out of, and only to the extent of, the Investing Pools assets.
16
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
7 - Commitments and Contingent Liabilities
In the normal course of business, the Investing Pool may enter into contracts with service providers that contain general
indemnification clauses. The Investing Pools maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Investing Pool that have not yet occurred.
8 - Financial Highlights
The Investing Pool is presenting the following financial highlights related to investment performance and operations for the period
from January 1, 2012 to September 30, 2012. The net investment income (loss) and total expense ratios are calculated using average net assets and have been annualized. The total return is based on the change in the net asset value during
the period.
|
|
|
|
|
Ratio to average net assets:
|
|
|
|
|
Net investment loss
(a)
|
|
|
(0.68
|
)%
|
Expenses
(a)
|
|
|
0.75
|
%
|
|
|
Total return
(b)
|
|
|
2.76
|
%
|
(a)
|
Percentage is annualized.
|
(b)
|
Percentage is not annualized.
|
9 - Investing in CERFs
Substantially all of the Investing Pools assets are invested in CERFs. The CERFs settlement value at expiration is based on
the value of S&P GSCI-ER at that time. Therefore, the value of the Investing Pool will fluctuate based upon the value of the S&P GSCI-ER and the prices of the commodities underlying the S&P GSCI-ER. The commodities markets have
historically been extremely volatile. For the nine months ended September 30, 2012 and the year ended December 31, 2011, the average month-end notional amount of open CERFs were $1,332,376,635 and $1,634,239,228, respectively.
The following table shows the variation margin on open futures contracts, by risk exposure category, on the Statements of Financial Condition for as of
September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Fair Value
|
|
|
Liability Derivatives
|
|
Fair Value
|
|
September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Receivable for variation margin on open futures contracts
|
|
$
|
9,156,880
|
|
|
Payable for variation margin on open futures contracts
|
|
$
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Receivable for variation margin on open futures contracts
|
|
$
|
|
|
|
Payable for variation margin on open futures contracts
|
|
$
|
552,020
|
|
17
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
The following table shows the effect of the futures contracts, by risk exposure category, on the
Statements of Operations for the nine months ended September 30, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2012
|
|
Statements of
Operations Location
|
|
Realized Gain (Loss)
|
|
|
Change
in
Unrealized
Appreciation / Depreciation
|
|
Commodity contracts
|
|
Net realized loss on futures contracts
|
|
$
|
(9,755,259
|
)
|
|
$
|
|
|
|
|
Net change in unrealized appreciation/depreciation on futures contracts
|
|
|
|
|
|
|
48,687,049
|
|
|
|
|
|
Nine Months Ended September 30, 2011
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Net realized gain on futures contracts
|
|
$
|
173,199,100
|
|
|
$
|
|
|
|
|
Net change in unrealized appreciation/depreciation on futures contracts
|
|
|
|
|
|
|
(311,570,041
|
)
|
10 Investment Valuation
FASB Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosures
defines fair value as the price the
Investing Pool would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Investing Pools policy is to value its investments at fair value.
Investments in CERFs are measured at fair value using the last reported CME settlement price for CERFs.
U.S. Treasury bills are valued at the last available bid price received from independent pricing services. In determining the value of a fixed income
investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between
investments and calculated yield measures.
Various inputs are used in determining the fair value of financial investments. Inputs may be
based on independent market data (observable inputs) or they may be internally developed (unobservable inputs). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting
purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value
hierarchy are as follows:
|
|
|
|
|
Level 1
|
|
|
|
Unadjusted quoted prices in active markets for identical assets or liabilities;
|
|
|
|
Level 2
|
|
|
|
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets
or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are
derived principally from or corroborated by observable market data by correlation or other means; and
|
|
|
|
Level 3
|
|
|
|
Unobservable inputs that are unobservable for the asset or liability, including the Investing Pools assumptions used in determining the fair value of
investments.
|
18
iShares
®
S&P GSCI Commodity-Indexed Pool LLC
Notes to Financial Statements (Unaudited) (Continued)
At September 30, 2012
Fair value pricing could result in a difference between the prices used to calculate the Investing
Pools net asset value and the prices used by the Investing Pools underlying index, which in turn could result in a difference between the Investing Pools performance and the performance of the Investing Pools underlying
index.
The following table summarizes the valuation of the Investing Pools investments by the fair value hierarchy levels as of
September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERFs
(a)
|
|
$
|
(25,174,580
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(25,174,580
|
)
|
U.S. Treasury bills
|
|
|
|
|
|
|
1,296,695,093
|
|
|
|
|
|
|
|
1,296,695,093
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERFs
(a)
|
|
$
|
(73,861,629
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(73,861,629
|
)
|
U.S. Treasury bills
|
|
|
|
|
|
|
1,287,357,438
|
|
|
|
|
|
|
|
1,287,357,438
|
|
(a)
|
CERFs are valued at unrealized appreciation (depreciation). As of September 30, 2012 and December 31, 2011 current notional amounts of open
CERFs were $1,324,246,440 and $1,310,495,480, respectively.
|
11 - Subsequent Events
In connection with the preparation of the financial statements of the Investing Pool as of and for the period ended September 30,
2012, management has evaluated the impact of all subsequent events on the Investing Pool through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or disclosure in the
financial statements.
19
Item
2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
This information should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of Part I of this Form 10-Q. The discussion and analysis that
follows may contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified by terminology such as may, should, expect, plan,
anticipate, believe, estimate, predict, potential or the negative of these terms or other comparable terminology. None of the Trust, the Sponsor, the Manager, the Trustee or the Delaware
Trustee assumes responsibility for the accuracy or completeness of any forward-looking statements. None of the Trust, the Sponsor, the Manager, the Trustee or the Delaware Trustee is under a duty to update any of the forward-looking statements to
conform such statements to actual results or to a change in expectations or predictions.
Introduction
The
iShares
®
S&P GSCI Commodity-Indexed Trust (the Trust) is a Delaware statutory trust that
issues units of beneficial interest ( Shares) representing fractional undivided beneficial interests in its net assets. Substantially all of the assets of the Trust consist of interests in the iShares
®
S&P GSCI Commodity-Indexed Investing Pool LLC (the Investing Pool). The Investing Pool holds
long positions in futures contracts ( CERFs) on the S&P GSCI Excess Return Index (S&P GSCI-ER) listed on the Chicago Mercantile Exchange, (the CME), and posts margin in the form of cash or short-term
or similar securities, referred to as Short-Term Securities, to collateralize its CERF positions. It is the objective of the Trust that the performance of the Shares will correspond generally to the performance of the S&P GSCI
Total Return Index (the Index) before payment of the Trusts and the Investing Pools expenses and liabilities. The Index is intended to reflect the performance of a diversified group of commodities. BlackRock Asset Management
International Inc. (BAMII) is the Sponsor of the Trust and the Manager of the Investing Pool. BlackRock Institutional Trust Company, N.A. is the Trustee of the Trust. The Trust and the Investing Pool
are commodity pools, as defined in the regulations of the Commodity Futures Trading Commission (the CFTC) and are operated by BAMII, a commodity pool operator registered with the CFTC. The Trust and the Investing Pool have delegated some
of the administration to State Street Bank and Trust Company (the Trust Administrator or Investing Pool Administrator). Wilmington Trust Company, a Delaware banking corporation, serves as the Delaware Trustee of
the Trust. Neither the Trust nor the Investing Pool is an investment company registered under the Investment Company Act of 1940, as amended.
The Trust intends to offer Shares on a continuous basis but is not required to do so and may suspend the offering of Shares at any time. The Trust issues
and redeems Shares only in one or more blocks of 50,000 Shares ( Baskets). These transactions are generally in exchange for consideration (or redemption proceeds) consisting of CERFs and cash (or, at the discretion of the Sponsor,
Short-Term Securities in lieu of cash) with a value equal to the net asset value per Basket on the date the creation or redemption order is received in proper form. Only certain institutions, called Authorized Participants, that enter
into an agreement with the Trust may purchase or redeem Baskets. Owners of beneficial interests in Shares (Shareholders) who are not Authorized Participants have no right to redeem their Shares; they may redeem their Shares only through
an Authorized Participant and only in Baskets.
Shares of the Trust trade on NYSE Arca, Inc. (NYSE Arca) under the symbol
GSG.
Valuation of CERFs; Computation of Trusts Net Asset Value
The Trustee determines the net asset value of the Trust and the net asset value per Share, or NAV, as of 4:00 p.m. (New York time), on each Business Day
on which NYSE Arca is open for regular trading, as soon as practicable after that time. A Business Day is
20
defined as a day (1) on which none of the following occurs: (a) NYSE Arca is closed for regular trading, (b) the CME is closed for regular trading or (c) the Federal Reserve
wire transfer system is closed for cash wire transfers, or (2) that the Trustee determines that it is able to conduct business. The Trustee values the Trusts assets based upon the determination by the Manager, which may act through the
Investing Pool Administrator, of the net asset value of the Investing Pool. The Manager determines the net asset value of the Investing Pool as of the same time that the Trustee determines the net asset value of the Trust.
The Manager values the Investing Pools long position in CERFs on the basis of that days announced CME settlement price for the CERF. The
value of the Investing Pools CERF position (including any related margin) equals the product of (a) the number of CERF contracts owned by the Investing Pool and (b) the settlement price on the date of calculation. If there is no
announced CME settlement price for the CERF on a Business Day, the Manager uses the most recently announced CME settlement price unless the Manager determines that such price is inappropriate as a basis for valuation. The daily settlement price for
the CERF is established by the CME shortly after the close of trading in Chicago on each trading day.
The Manager values all other property
of the Investing Pool at (a) its current market value, if quotations for such property are readily available, or (b) its fair value, as reasonably determined by the Manager, if the current market value cannot be determined.
Once the value of the CERFs and interest earned on any assets posted as margin and any other assets of the Investing Pool have been determined, the
Manager subtracts all accrued expenses and liabilities of the Investing Pool as of the time of calculation in order to calculate the net asset value of the Investing Pool. The Manager, or the Investing Pool Administrator on its behalf, then
calculates the value of the Trusts interests in the Investing Pool (Investing Pool Interests) and provides this information to the Trustee.
Once the value of the Trusts Investing Pool Interests has been determined and provided to the Trustee, the Trustee subtracts all accrued expenses and other liabilities of the Trust from the total
value of the assets of the Trust, in each case as of the calculation time. The resulting amount is the net asset value of the Trust. The Trustee determines the NAV by dividing the net asset value of the Trust by the number of Shares outstanding at
the time the calculation is made. Shares to be delivered under a creation order are considered to be outstanding for purposes of determining the NAV if the applicable creation order was received by the Trustee prior to 2:40 p.m. (New York time) (or,
on any day on which the CME is scheduled to close early, prior to the close of trading of CERFs on the CME on such day), on the date of calculation. Shares to be delivered under a redemption request are not considered to be outstanding for purposes
of calculating the NAV if the applicable redemption request was received by the Trustee prior to 2:40 p.m. (New York time) (or, on any day on which the CME is scheduled to close early, prior to the close of trading of CERFs on the CME on such day),
on the date of calculation.
Results of Operations
The Quarter Ended September 30, 2012
The Trusts net asset value increased from
$1,181,472,461 at June 30, 2012 to $1,325,611,094 at September 30, 2012. The increase in the Trusts net asset value was primarily due to an increase in the price of CERFs during the quarter from $440.80 at June 30, 2012 to
$491.70 at September 30, 2012, an 11.55% increase. The Trusts net asset value also benefitted from an increase in outstanding Shares, which rose from 38,650,000 at June 30, 2012 to 38,950,000 at September 30, 2012 due to 400,000
Shares (8 Baskets) being created and 100,000 Shares (2 Baskets) being redeemed during the quarter.
The Nine Months Ended
September 30, 2012
The Trusts net asset value increased from $1,313,291,939 at December 31, 2011 to $1,325,611,094 at
September 30, 2012. The increase in the Trusts net asset value was primarily due to an increase in the price of CERFs during the period from $474.80 at December 31, 2011 to $491.70 at September 30, 2012, a 3.56% increase. The
increase in the Trusts net asset value was offset by a decrease in outstanding Shares, which decreased from 39,750,000 at December 31, 2011 to 38,950,000 at September 30, 2012 due to 1,550,000 Shares (31 Baskets) being created
and 2,350,000 Shares (47 Baskets) being redeemed during the period.
21
Liquidity and Capital Resources
The Trusts sole asset as of September 30, 2012 was its investment in the Investing Pool. The Investing Pools assets consist of CERFs, cash and Short-Term Securities that are posted as
collateral for the Investing Pools CERF positions. The Trust and the Investing Pool do not anticipate any further need for liquidity because creations and redemptions of Shares generally occur in kind and ordinary expenses are met by cash on
hand. Interest earned on the assets posted as collateral is paid to the Investing Pool and is used to pay the fixed fee to the Manager and purchase additional CERFs, or, in the discretion of the Sponsor, distributed to Shareholders. In exchange for
a fee based on the net asset value of the Investing Pool, the Sponsor and the Manager have assumed most of the ordinary expenses incurred by the Trust and the Investing Pool. In the case of an extraordinary expense and/or insufficient interest
income to cover ordinary expenses, however, the Investing Pool could be forced to liquidate its CERF positions to pay such expenses. As of September 30, 2012, the market for CERFs had not developed significant liquidity and the Investing Pool
represented substantially all of the long-side open interest in CERFs. In addition, it is expected that Goldman, Sachs & Co. or its accountholders may represent, directly or indirectly, a substantial portion of the short-side interest in
such market. The existence of such a limited number of market participants could cause or exacerbate losses to the Trust if the Trust were required to liquidate its CERF positions.
The Sponsor is unaware of any other trends, demands, conditions or events that are reasonably likely to result in material changes to the Trusts or the Investing Pools liquidity needs.
Because the Investing Pool trades CERFs, its capital is at risk due to changes in the value of the CERFs or other assets (market risk) or the
inability of counterparties to perform (credit risk).
Market Risk
The Investing Pool holds CERF positions and posts cash and Short-Term Securities as margin to collateralize the CERF positions. Because of this limited diversification of the Investing Pools assets,
fluctuations in the value of the CERFs are expected to directly affect the value of the Shares. The value of the CERFs is expected to track generally the S&P GSCI-ER, although this correlation may not be exact. The S&P GSCI-ER, in turn,
reflects the value of a diversified group of commodities. The market risk associated with the Investing Pools CERF positions is limited to the amount of cash and Short-Term Securities posted as margin. The Investing Pools exposure to
market risk will be influenced by a number of factors, including the lack of liquidity of the CERF market and activities of other market participants.
Credit Risk
When the Investing Pool purchases or holds CERFs, it is exposed to the credit
risk of a default by the CME Clearing House, which serves as the counterparty to each CERF position, and of a default by its clearing futures commission merchant. In the case of such a default, the Investing Pool could be unable to recover amounts
due to it on its CERF positions and assets posted as margin. The Investing Pool is also exposed to the credit risk of the obligors of any Short-Term Securities posted as margin.
Off-Balance Sheet Arrangements and Contractual Obligations
The Trust and the Investing
Pool have not used, nor do they expect to use, special purpose entities to facilitate off-balance sheet financing arrangements. The Trust and the Investing Pool have no loan guarantee arrangements or other off-balance sheet arrangements of any kind
other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services for the benefit, or on behalf of the Trust and the
Investing Pool. While the Trusts and the Investing Pools exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on either the Trusts or
the Investing Pools financial position.
22
Critical Accounting Policies
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements
relies on estimates and assumptions that impact the Trusts and the Investing Pools financial position and results of operations. These estimates and assumptions affect the Trusts and the Investing Pools application of
accounting policies. In addition, please refer to Note 2 to the financial statements of the Trust and the Investing Pool for further discussion of the Trusts and the Investing Pools accounting policies.