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Gold Bullion Securities Limited
Registered No: 87322
Annual Report and Audited Financial Statements for the
Year ended 31 December 2022
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Management and Administration
1
Directors’ Report
2-8
Statement of Directors’ Responsibilities
9
Independent Auditor’s Report
10-16
Statement of Profit or Loss and Other Comprehensive Income
17
Statement of Financial Position
18
Statement of Cash Flows
19
Statement of Changes in Equity
20
Notes to the Financial Statements
21-38
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Directors
Administrator
Registered Office
Registrar
Manager
Custodian
Auditor
Trustee
Jersey Legal Advisers
Company Secretary
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The directors of Gold Bullion Securities Limited (“GBS” or the “Company”) submit herewith the annual report and
financial statements of the Company for the year ended 31 December 2022.
Directors
The names and particulars of the directors of the Company during and since the end of the financial year are:
Directors’ Interests
No director has an interest in the Shares of the Company as at the date of this report.
Principal Activities
The Company’s principal activity is the issue and listing of gold bullion securities (“Gold Securities”). These Gold
Securities allow investors to gain exposure to gold without needing to take physical delivery of gold bullion (“Gold
Bullion”). It also allows investors to buy and sell that interest through the trading of a security on the London
Stock Exchange and any other exchange to which that security may be admitted to trading from time to time.
A Gold Security is a secured, undated zero coupon note of the Company, constituted by a trust instrument, with a
face value of USD 0.00001. Under the terms of this trust instrument the Gold Securities are secured on an
amount of Gold Bullion equivalent to the entitlement of each Gold Security (referred to as the “Gold
Entitlement”), which is calculated in accordance with an agreed formula published in the Prospectus. This Gold
Bullion is held in custody by designated custodians or their sub-custodians and is the subject of a first legal
mortgage in favour of the Trustee. Gold Bullion, once deposited, may only be removed after approval from the
Trustee.
Generally only security holders who have entered into an approved applicant agreement with the Company
(“Approved Applicant”) can submit applications and redemptions directly with the Company.
A holder of a Gold Security is entitled to require the redemption of that Gold Security and receive an amount of
Gold Bullion equal to the Gold Entitlement on the date of redemption (and subject to applicable redemption fees).
This redemption may occur:
through an appropriate counterparty (such as an Approved Applicant as described above); or
through a transfer of physical Gold Bullion to the security holders’ own allocated bullion account.
The Company earns a management fee by reducing the Gold Entitlement on a daily basis by an agreed amount
(the “Gold Sales Charge” or “Management Fee”) as set out below.
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or
the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing) as well as the payment of costs relating
to the listing and issue of Gold Securities. In return for these services, the Company has an obligation to
remunerate ManJer with an amount equal to the Management Fee and the creation and redemption fees earned
(the “ManJer Fee”). The Gold Bullion in respect of the Management Fee is transferred in the form of Gold Bullion
on a monthly basis (in arrears) following agreement from the Trustee from the Company’s custodian accounts
directly to ManJer. In addition, creation and redemption fees are transferred directly to ManJer and there are no
cash flows through the Company.
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Review of Operations
The most recent Prospectus was issued on 5 August 2022. The Gold Securities are listed on the London Stock
Exchange, the Deutsche Börse, the Borsa Italiana and the NYSE Euronext Paris.
The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement. Gold
Bullion is marked to fair value using the latest price published by the London Bullion Market Association
(“LBMA”). The Company has entered into contractual obligations to issue and redeem Gold Securities in
exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The Gold Bullion in
respect of each creation and redemption is recorded using the price published by the LBMA on the transaction
date. The fair value of the Gold Bullion as at 31 December amounted to:
The Company has a loan facility with HSBC Bank USA, N.A. giving the Company the rights, interest and title to a
gold bar that is used to ensure all Gold Bullion Securities are supported by holdings of gold in allocated form.
IFRS 13 requires the Company to identify the principal market and to utilise the available price within that
principal market. The directors consider the stock exchanges where the Gold Securities are listed to be the
principal market and as a result the fair value of the Gold Securities is the on-exchange price as quoted on the
stock exchange demonstrating active trading with the highest trading volume on each day that the price is
obtained. As a result of the difference in valuation between Gold Bullion and Gold Securities there is a mis-
match between the values recognised, and the results of the Company reflect a gain or loss on the difference
between the value of the Gold Bullion (through the application of the price provided by the LBMA against the
Gold Entitlement referred to within these financial statements as the “Contractual Value”) and the price of Gold
Securities.
The gain or loss on Gold Securities and Gold Bullion is recognised through profit or loss in line with the
Company’s accounting policy. This is presented in more detail in notes 8 and 9 to these financial statements.
The Company’s exposure to risk is disclosed in note 15 to the financial statements.
The Company is entitled to:
A Management Fee (at a rate of 0.40% per annum) which reduces the Gold Entitlement of the Gold
Securities on a daily basis; and
Creation and redemption fees on the issue and redemption of the Gold Securities.
During the year, the Company generated income from Management Fees and creation and redemption fees as
follows:
The change in Gold Entitlement of each class of Gold Security reduces the value of the Gold Securities. This
reduction equates to the Management Fee amount in Gold Bullion, that is recognised for that day per each Gold
Security in issue on that day. The Management Fees are accrued and recognised on a daily basis until invoiced
and settled by transfer of the Gold Bullion. The amount recognised as income is calculated by applying the
average LBMA Price to the total Management Fee accrued on a monthly basis.
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Review of Operations (continued)
Non-GAAP Performance Measures
Under the terms of the service agreement with ManJer, the Company accrued expenses equal to the
Management Fee and creation and redemption fees, which, after taking into account other operating income and
expenses, resulted in a result before fair value movements for the year of USD Nil (2021: USD Nil).
As the difference in the valuation of Gold Bullion (held to support the Gold Securities) and Gold Securities would
be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion
(as described further in note 9), the Company presents an adjusted Statement of Profit or Loss and Total
Comprehensive Income and an adjusted Statement of Changes in Equity in note 18 of the financial statements.
Ukraine Invasion
On 24 February 2022, Russia engaged in military actions in the sovereign territory of Ukraine (the “Crisis”). The
Crisis has resulted in the implementation of sanctions and further actions by governments which, as well as the
Crisis itself, have impacted financial and commodities markets. In response to sanctions imposed on Russia by
the United Kingdom, United States and European Union, on 7 March 2022 the LBMA suspended six Russian
gold refiners (the “Russian Refiners”) from the Good Delivery List (the “Suspension”). As a result of the
Suspension, gold bars produced after 7 March 2022 by the Russian Refiners will not be considered Good
Delivery unless and until the LBMA further amends its Good Delivery Rules. In line with the LBMA’s Good
Delivery Rules, gold bars received from the Russian Refiners prior to 7 March 2022 still fall within the Good
Delivery Rules and can be traded within the London Good Delivery system. Prior to the Suspension, the
Company received gold bars from two Russian Refineries; in line with the Good Delivery Rules, these gold bars
meet the Good Delivery Rules and constitute Good Delivery. The gold bars previously received from those two
Russian Refineries have since been transferred on the redemption of Securities and there are currently no gold
bars held from Russian Refineries.
The Company will only accept Gold Bullion bars which constitute Good Delivery and meet the Good Delivery
Rules set by the LBMA. Therefore, as a result of the Suspension, the Company does not accept Gold Bullion
bars that the Russian Refineries produced after 7 March 2022 (until there is an amendment to the Good Delivery
Rules). This may impact the price and liquidity of existing and newly sourced Good Delivery Gold Bullion bars
and hence may adversely affect the trading market and price for Gold Securities and may cause the value of
Gold Securities to decline or increase in value.
As the Crisis continues, the board of directors (the “Board”) also continues to closely monitor and assess the
impact on the Company’s portfolio operations and valuation and will take any further actions needed or as
required under the terms of the Prospectus, as facts and circumstances are subject to change and may be
specific to investment strategies and jurisdictions. Whilst it is not currently possible to predict future market
conditions and therefore determine if any further action may be required, the action that may be required
includes, but is not limited to, temporarily not accepting applications for Gold Securities, temporarily suspending
Gold Securities from trading on Stock Exchanges or a compulsory redemption of Gold Securities. The Company
has not initiated any of these further actions to date (see Future Developments below for other actions taken).
Any such action will be undertaken in accordance with the constitutive documents of the Gold Securities.
Coronavirus disease (COVID-19)
The Board continues to monitor the advice and developments relating to COVID-19. The WisdomTree group
has and continues to implement measures to maintain the ongoing safety and well-being of employees, whilst
continuing to operate business as usual.
Future Developments
The Board are not aware of any developments that might have a significant effect on the operations of the
Company in subsequent financial periods not already disclosed in this report or the attached financial
statements.
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Going Concern
The nature of the Company’s business dictates that the outstanding Gold Securities may be redeemed at any
time by only holders of Gold Securities who have entered into an authorised applicant agreement with the
Company (“Approved Applicants”) and in certain circumstances by individual holders and also, in certain
circumstances, may be compulsorily redeemed by the Company. As the redemption of Gold Securities will
always coincide with the transfer of an equal amount (in value) of Gold Bullion, liquidity risk is mitigated such that
there is no material residual risk. All other expenses are met by ManJer. The directors closely monitor the
financial position and performance of ManJer, its assets under management, and therefore its related revenue
streams, in respect of fulfilling the obligations under the services agreement. The net reported position on
balance sheet, including in instances where a deficit is reported, is not considered to impact the going concern
position of the Company as this position results solely due to the unrealised gains or losses on Gold Bullion and
Gold Securities due to the accounting measurement basis applied in accordance with IFRS. As Gold Bullion are
held to support Gold Securities, any deficit or surplus reported on unrealised positions would be reversed on a
subsequent redemption of the Gold Securities and the related cancellation of Gold Bullion. A reported deficit is
not considered indicative of any issues relating to solvency of the Company and the directors are satisfied that
any obligations arising in respect of the Gold Securities can be managed in accordance with the terms of the
applicable Prospectus. The directors consider the operations of the Company to be ongoing, with a reasonable
expectation that the Company has adequate resources to continue in operational existence until 30 April 2024,
and accordingly these financial statements have been prepared on the going concern basis.
Dividends
There were no dividends declared or paid in the year (2021: USD Nil). It is the Company’s policy that dividends
will only be declared when the directors are of the opinion that there are sufficient distributable reserves.
Corporate Social Responsibility
Sustainability and corporate responsibility are embedded throughout the business of the WisdomTree group as
we believe this benefits shareholders and employees of the WisdomTree group, investors in WisdomTree’s
products as well as wider society.
Environmental, Social and Governance (“ESG”) investing is guided at the WisdomTree group level by an ESG
Steering Committee, which includes senior leaders from across the WisdomTree group business, and which
included several sub-committees focused on particular ESG considerations, such as improving data and
transparency into the ESG attributes of WisdomTree’s products. Particular ESG considerations relevant to the
Company’s products are overseen by the directors, leveraging the work undertaken by the ESG Steering
Committee. More information on WisdomTree’s corporate social responsibility strategy can be found on the
WisdomTree group website (https://www.wisdomtree.eu/en-gb/wisdomtree-corporate-responsibility).
The Board acknowledges that climate change and its impact on the global economy is of increasing interest and
focus for stakeholders and that, where relevant, stakeholders will seek information from companies regarding
how climate change is expected to impact the operations of the business and how climate change risk has been
considered in the context of reported results.
In acknowledging the above, the Board has considered the Company’s exposure to climate change and
determined that due to the nature of the Company and its operations there are no directly observed impacts of
climate change on the business. As a result, the Board concluded that there is no basis on which to provide
extended information of analysis relating to climate change, including as part of the basis of accounting or
individual accounting policies adopted by the Company.
In the above determination, the Board has concluded specifically that climate change, including physical and
transition risks, does not have a material impact on the recognition and separate measurement considerations of
the assets and liabilities in these financial statements as at 31 December 2022.
This conclusion is based on the fact that assets are reported at fair value under IFRS, and as set out in note 15
are categorised as level 2 due to the use of observable, verifiable inputs and third party information sources. The
liabilities are valued utilising listed market prices at the period end. These observable inputs and market prices
will reflect wider market sentiment, which inherently includes market perspectives relating to the impact of
climate change.
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Corporate Social Responsibility (continued)
The Board recognises that government and societal responses to climate change risks are still developing and
the future impact cannot be predicted. Future valuations of assets and liabilities may therefore differ as the
market responds to these changing impacts or assesses the impact of current requirements differently.
Directors’ Remuneration
No director has a service contract with the Company. The directors of the Company who are employees within
the WisdomTree, Inc group do not receive separate remuneration in their capacity as directors of the Company.
The directors of the Company who are employees of R&H Fund Services (Jersey) Limited (“R&H” or the
“Administrator”) do not receive separate remuneration in their capacity as directors of the Company, however
R&H receives a fee from ManJer which includes services in respect of the Company, including for the provision
of directors who are employees of R&H.
Prior to 30 June 2022, R&H specified the fees for the provision of Steven Ross and Christopher Foulds as
directors at £8,000 per annum. Following a restructuring of the fee methodology effective from 1 July 2022, the
fee for the provision of Steven Ross and Christopher Foulds as directors is not separately identified and
accordingly, no directors’ fees are separately disclosed.
Employees
The Company does not have any employees. It is the Company’s policy to use the services of specialist
subcontractors or consultants as far as possible.
Auditor
The Independent Auditor is Ernst & Young LLP. A resolution to re-appoint Ernst & Young LLP will be proposed at
the next Board meeting of the directors.
Principal Risks and Uncertainties
The Gold Securities provide investors with exposure to gold. Each Gold Security is a debt instrument whose
redemption price is linked to the value of the underlying Gold Bullion. The Gold Securities are issued under a
limited recourse arrangement whereby the holders have recourse only to the Gold Bullion held to support the
Gold Securities and not to the Company.
Any movements in the value of the Gold Bullion are wholly attributable to the holders of the Gold Securities,
therefore the Company has no residual exposure to movements in the value of the Gold Bullion. From a
commercial perspective the Company does not retain any net gains or losses or net risk exposures, as (with the
exception of the impact of management fees) the gains or losses on the liability represented by the Gold
Securities are matched economically by corresponding losses or gains attributable to the Gold Bullion (see detail
on page 3 regarding the accounting mis-match).
Furthermore, the Company has an obligation to remunerate ManJer with the ManJer Fee, which results in the
Company recognising a result before fair value movements of nil for each period. As a result, the principal risks
and uncertainties to which the Company is exposed has not materially changed during the year ended 31
December 2022.
There is an inherent risk from the point of view of investors as the value of gold, and thus the value of the Gold
Securities, may vary widely due to, amongst other things, changing supply and demand for gold, government
and monetary policy or intervention, interest rate levels and global or regional political, economic or financial
events. The market price of Gold Securities is (and will remain) a function of supply and demand amongst
investors wishing to buy and sell Gold Securities and the bid or offer spread that the market makers are willing to
quote.
Movements in the value of the underlying Gold Bullion, and thus the value of the Gold Securities, may vary
widely which could have an impact on the demand for the Gold Securities issued by the Company. These
movements are shown in notes 8 and 9.
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Principal Risks and Uncertainties (continued)
The fair value of the Gold Securities as at 31 December amounted to:
Further information on the contractual value of the Gold Bullion on a daily basis can be found on the WisdomTree
website (https://www.wisdomtree.eu/en-gb/products).
Movements in the value of the underlying Gold Bullion may vary widely which could have an impact on the
demand for the Gold Bullion issued by the Company. The movement in the price of the Gold Bullion are:
Additional information on other financial and operational risks and uncertainties faced by the Company, including
further details surrounding the value of Gold Securities and the Gold Bullion are disclosed in note 15 of these
financial statements.
2022 Review
Gold is seen as the foremost precious metal, having been used as a currency and a method for storing wealth in
the past and this is because there are large above-ground stocks which can be quickly mobilised – this liquidity
often resulting in gold acting more like a currency than a commodity. Although inflation was supportive of gold
last year, the aggression with which central banks acted to tighten monetary policy strengthened the US dollar
and lifted Treasury yields creating headwinds for precious metals.
Future Outlook
2023 looks set to continue the recent challenge of meaningfully predicting prices and volatility for precious
metals, largely because of the continuing Ukraine Crisis, with the impact of ongoing financial sanctions, in
addition to potential future supply issues. Furthermore, whilst the risk of escalating conflict has also set many
investors returning to gold as a safe haven, if in 2023, China’s lockdowns are lifted for good, and the economic
engine starts firing again, fuelled by accommodative monetary policy, this could be the catalyst for wider market
recovery.
Corporate Governance
There is no standard code of corporate governance in Jersey. The operations, as previously described in the
Directors’ Report, are such that the directors have determined that the Company is not required to apply, and has
elected not to voluntarily apply, the UK Corporate Governance Code.
As the Board is small, there is no nomination committee and appointments of new directors are considered by
the Board as a whole. The Board does not consider it appropriate that directors should be appointed for a
specific term. Furthermore, the structure of the Board is such that it is considered unnecessary to identify a
senior non-executive director.
The constitution of the Board is disclosed on page 2. The Board meets regularly as required by the operations of
the Company, but at least quarterly to review the overall business of the Company and to consider matters
specifically reserved for its review.
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Internal Control
During the year the Company did not have any employees or subsidiaries, and there is no intention that this will
change. The Company, being a special purpose company established for the purpose of issuing Gold
Securities, has not undertaken any business, save for issuing and redeeming Gold Securities, entering into the
required documents and performing the obligations and exercising its rights in relation thereto, since its
incorporation. The Company does not intend to undertake any business other than issuing and redeeming Gold
Securities and performing the obligations and exercising its rights in relation thereto.
The Company is dependent upon ManJer to provide management and administration services to it. ManJer is
licensed under the Financial Services (Jersey) Law 1998 to conduct classes U and Z of Fund Services Business.
ManJer outsources the administration services in respect of the Company to the Administrator. Documented
contractual arrangements are in place with the Administrator which define the areas where the authority is
delegated to them. The performance of the Manager and Administrator are reviewed on an ongoing basis by the
Board through their review of periodic reports.
ManJer provides management and other services to both the Company and other companies issuing commodity
and index tracking securities.
The Board, having reviewed the effectiveness of the internal control systems of the Manager and the
Administrator, does not consider that there is a need for the Company to establish its own internal audit function.
Audit Committee
The Board has not established a separate audit committee; instead the Board meets to consider the financial
reporting by the Company, the internal controls, and relations with the external auditor. In addition, the Board
reviews the independence and objectivity of the auditor.
Christopher Foulds
Director
Jersey
19 April 2023
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The directors are responsible for preparing the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with International Financial Reporting Standards
(“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law
1991. They are responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in Jersey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
With regard to Directive 2004/109/EC, amended by Directive 2013/50/EU (collectively the Transparency
Directive), the Central Bank (Investment Market Conduct) Rules of the Central Bank of Ireland and the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the directors confirm that to
the best of their knowledge that:
the financial statements for the year ended 31 December 2022 give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company as required by law and in accordance with
IFRS as issued by the IASB; and
the Directors’ Report gives a fair view of the development and performance of the Company’s business,
including financial position and the important events that have occurred during the year, and their impact
on these financial statements, together with a description of the principal risks and uncertainties they
face.
By order of the Board
Christopher Foulds
Director
Jersey
19 April 2023
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED
Opinion
We have audited the financial statements of Gold Bullion Securities Limited (the “company”) for the
year ended 31 December 2022 which comprise the Statement of Profit or Loss and Other
Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the
Statement of Changes in Equity and the related notes 1 to 18, including a summary of significant
accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards as issued by the International
Accounting Standards Board (“IFRS”).
In our opinion, the financial statements:
►
give a true and fair view of the state of the company’s affairs as at 31 December 2022 and of its
loss for the year then ended;
►
have been properly prepared in accordance with IFRS; and
►
have been properly prepared in accordance with the requirements of the Companies (Jersey)
Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
company in accordance with the ethical requirements that are relevant to our audit of the financial
statements, including the UK FRC’s Ethical Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
directors’ assessment of the company’s ability to continue to adopt the going concern basis of
accounting included:
►
We obtained an understanding of management’s rationale for using the going concern basis
of accounting and confirmed our understanding of management’s Going Concern assessment
process including the process they adopted to capture all key factors in their assessment;
►
We obtained management’s board approved going concern assessment covering the period
of assessment from the date of signing to 30 April 2024. Management’s assessment has
focussed on a combination of;
o
Assessing the ongoing viability of the company through continued involvement of
its Custodian and Authorised Participants;
o
Assessing the ongoing ability of WisdomTree Management Jersey Limited (“ManJer”) to
continue to meet its obligations as manager and pay all expenses of the company. This
includes consideration of the assets under management of all managed issuer entities
(“Issuer Platform”) which includes this company. In assessing this ability we considered
the fixed and variable operating costs that could be supported under varying levels of
total assets under management for the Issuer Platform.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
►
Using our understanding of the business, we evaluated whether the considerations
and method adopted by management in assessing going concern was appropriate.
►
We performed reverse stress testing on the forecasts to understand how severe the
downside scenarios would have to be, and in particular the reduction in platform assets under
management, to result in the platform generating insufficient management fees to cover
operating costs. We observed significant headroom in management fee income, at current
Assets Under Management (“AUM”) levels, in excess of fixed costs which supports
management’s assumption that the Issuer Platform is able to absorb heightened levels of
volatility in AUM.
►
We considered whether management’s disclosures, in the Annual Report and financial
statements, sufficiently and appropriately discloses information required in respect of the
going concern assumption applied through consideration of relevant disclosure standards.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the company’s
ability to continue as a going concern over the period to 30 April 2024.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going
concern.
Overview of our audit approach
►
►
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for the company. This enables us to form an opinion on the financial
statements. We take into account size, risk profile, the organisation of the company and effectiveness of
controls, changes in the business environment and the potential impact of climate change when
assessing the level of work to be performed. All audit work was performed directly by the audit
engagement team.
Changes from the prior year There were no scoping changes compared to the prior year.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact
companies. The company has determined that there are no directly observed impacts of climate
change on the business due to the nature of the company and its operations. This is explained on
page 5 in the corporate social responsibility section, which form part of the “Other information,” rather
than the audited financial statements. Our procedures on these disclosures therefore consisted solely
of considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
Our audit effort in considering climate change was focused on evaluating management’s assessment
of the impact of climate risk, physical and transition, the adequacy of the company’s disclosures in
the financial statements as set out in note 2 and conclusion that there was no further impact of
climate change to be taken into account as the material assets and liabilities are valued based on
market pricing as required by IFRS.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not
provide a separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
Valuation of Financial
Our response to the risk
There were no matters identified
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect
of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of the financial statements. Materiality
provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the company to be US$34.1 million (2021: US$37.2 million), which is
1% (2021: 1%) of Total Assets. We believe that Total Assets provides us with an appropriate basis for
audit materiality as Total Assets reflects the relevant exposure of holders of issued securities to the
underlying asset base.
There has been no change in the basis of materiality used compared to the prior year.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the company’s overall control
environment, our judgement was that performance materiality was 50% (2021: 75%) of our
materiality, namely US$17.1m (2021: US$27.9m). We have set performance materiality at this
percentage in response to the value of errors identified and corrected in the financial statement close
process. We had set performance materiality at 75% of our planning materiality in the prior year
based on our prior experience of not identifying errors or significant audit differences.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Board that we would report to them all uncorrected audit differences in excess
of US$1.7m (2021: US$1.9m), which is set at 5% of materiality, as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 9,
other than the financial statements and our auditor’s report thereon. The directors are responsible for
the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the
course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
►
proper accounting records have not been kept by the company, or proper returns adequate for our
audit have not been received from branches not visited by us; or
►
the financial statements are not in agreement with the company’s accounting records and
returns; or
►
we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 9, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud.
The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable
of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
►
We obtained an understanding of the legal and regulatory frameworks that are applicable to the
company and determined that the most significant are those that relate to the reporting
framework, comprising IFRS and the Companies (Jersey) Law 1991. In addition, we concluded
that there are certain significant laws and regulations that may have an effect on the presentation
and disclosure of the financial statements being the applicable Listing Rules of the Central Bank
of Ireland (Investment Market Conduct) and UK Listing Authority Rules;
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
►
We understood how Gold Bullion Securities Limited is complying with those frameworks by
making enquiries of the directors and key management of the administrative service provider.
We corroborated our enquiries through our review of minutes of Board meetings, papers
provided to the board and correspondence received from regulatory bodies and noted no
contradictory evidence;
We assessed the susceptibility of the company’s financial statements to material misstatement, including
how fraud might occur by understanding the investment objectives of the Company and discussing with
management to understand where reporting was considered susceptible to fraud. Where this risk was
considered to be higher, we performed audit procedures in response to the identified fraud risk. These
procedures included testing of transactions to supporting documentation, testing of specific accounting
journal entries and focussed testing, including that referred to in the key audit matters section above.
These procedures were designed to provide reasonable assurance that the financial statements were
free from fraud or error;
►
Based on this understanding we designed our audit procedures to identify non-compliance with
such laws and regulations. Our procedures involved reading board minutes to identify any non-
compliance with laws and regulations, a review of any associated reporting submitted to the
board on compliance with laws and regulations and enquiries of members of management of the
appointed administrative service provider;
►
As the Company operates in the asset management industry the Audit Partner assessed the
experience of the engagement team and concluded that the team had the appropriate
competence and capabilities.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
►
Following the recommendation from those charged with governance, we were appointed by the
company on 3 December 2019 to audit the financial statements for the year ending 31 December
2019 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 4
years, covering the years ending 31 December 2019 to 31 December 2022.
►
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
company and we remain independent of the company in conducting the audit.
►
The audit opinion is consistent with the additional report to those charged with governance.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of the
Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Christopher David Gordon Barry, FCA
for and on behalf of Ernst & Young LLP
Jersey, Channel Islands
Date:19 April 2023
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The directors consider the Company’s activities as continuing.
1 A non-statutory and non-GAAP Statement of Profit or Loss and Other Comprehensive Income reflecting adjustments
representing the movement in the difference between the value of Gold Bullion and the price of Gold Securities is set out in
note 18.
2 There are no items of Other Comprehensive Income, therefore the (Loss) / Profit for the Year also represented the Total
Comprehensive Income for the Year.
The notes on pages 21 to 38 form part of these financial statements
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The assets and liabilities in the above Statement of Financial Position are presented in order of liquidity from
most to least liquid.
The financial statements on pages 17 to 38 were approved and authorised for issue by the board of directors and
signed on its behalf on 19 April 2023.
Christopher Foulds
Director
The notes on pages 21 to 38 form part of these financial statements
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Gold Securities are issued through a direct transfer of Gold Bullion from the Approved Applicants to the
Custodian or redeemed by the direct transfer of Gold Bullion by the Custodian to the Approved Applicants. As
such the Company is not a party to any cash transactions. The creations and redemptions of Gold Securities
and additions and disposals of Gold Bullion, which are non-cash transactions for the Company, are disclosed in
notes 8 and 9 respectively in the reconciliation of opening to closing Gold Securities and Gold Bullion.
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or
the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing) as well as the payment of costs relating
to the listing and issue of Gold Securities. In return for these services, the Company has an obligation to
remunerate ManJer with an amount equal to the Management Fee and the creation and redemption fees
earned, less expenses (the “ManJer Fee”). The Gold Bullion in respect of the ManJer Fee is transferred by the
Trustee from the Company’s custodian accounts to ManJer’s custodian accounts. In addition, amounts in
respect of the creation and redemption fees are transferred directly from the Approved Applicants to ManJer and
there are no cash flows through the Company.
The notes on pages 21 to 38 form part of these financial statements
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Retained
Earnings
3 A non-statutory and non-GAAP Statement of Changes in Equity reflecting adjustments representing the difference between the value of Gold Bullion and the price of Gold Securities is set
out in note 18.
The notes on pages 21 to 38 form part of these financial statements
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1.
General Information
Gold Bullion Securities Limited (the “Company”) is a company incorporated and domiciled in Jersey. The
address of the registered office is Ordnance House, 31 Pier Road, St. Helier, Jersey, JE4 8PW.
The Company’s principal activity is the issue and listing of gold bullion securities (“Gold Securities”). These Gold
Securities allow investors to gain exposure to gold without needing to take physical delivery of gold bullion (“Gold
Bullion”). It also allows investors to buy and sell that interest through the trading of a security on the London
Stock Exchange and any other exchange to which that security may be admitted to trading from time to time. A
Gold Security is a secured, undated zero coupon note of the Company, constituted by a trust instrument, with a
face value of USD 0.00001. Under the terms of this trust instrument the Gold Securities are secured on an
amount of Gold Bullion equivalent to the entitlement of each Gold Security (referred to as the “Gold
Entitlement”), which is calculated in accordance with an agreed formula published in the Prospectus.
The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement. The
Company does not make gains from trading in the underlying Gold Bullion. The Gold Securities are issued under
limited recourse arrangements whereby the holders have recourse only to the Gold Bullion held to support the
Gold Securities and not to the Company. As a result (and with the exception of the impact of Management
Fees), from a commercial perspective gains and losses in respect of Gold Bullion will always be offset by
corresponding loss or gain on the Gold Securities and therefore commercially the Company does not retain any
net gains or losses or net risk exposures. However, the difference in valuation between Gold Bullion and Gold
Securities creates a mis-match between the values reported within these financial statements. This difference in
valuation would be reversed on a subsequent redemption of the Gold Securities and transfer of the
corresponding Gold Bullion. Further details are disclosed within the Accounting Policies and in note 18, with
additional information regarding the risks of the Company disclosed in note 17. Furthermore, the Company
presents an adjusted Statement of Profit or Loss and Other Comprehensive Income and an adjusted Statement
of Changes in Equity in note 17 of the financial statements to reflect the economic results of the Company
through the reversal of the difference in valuation between Gold Bullion and Gold Securities given the gain or
loss would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding
Gold Bullion, and therefore will not be realised.
Exchange-traded products are not typically actively managed, are significantly lower in cost when compared to
actively managed mutual funds and are easily accessible to investors. No active trading of Gold Bullion is
required of the Company because the Company only receives or delivers Gold Bullion on the issue and
redemption of Gold Securities, and only holds Gold Bullion as determined by the Gold Entitlement to support the
Gold Securities.
The Company is entitled to:
(1)
A management fee (at a rate of 0.40% per annum) which reduces the Gold Entitlement on a daily basis
by an agreed amount, (the “Gold Sales Charge” or the “Management Fee”); and
(2)
Creation and redemption fees on the issue and redemption of the Gold Securities.
No creation or redemption fees are payable to the Company when investors trade in the Gold Securities on a
listed market such as the London Stock Exchange. Creation and redemption fees may also be waived with
certain approved persons where applicable.
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or
the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing) as well as the payment of costs relating
to the listing and issuance of Gold Securities. In return for these services, the Company pays ManJer an amount
equal to the Management Fee and the creation and redemption fees earned (the “ManJer Fee”). As a result, the
Company recognises a result before fair value movements of nil for each period.
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2.
Accounting Policies
The main accounting policies of the Company are described below.
Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the
International Financial Reporting Interpretations Committee of the IASB. The financial statements have been
prepared under the historical cost convention, as modified by the revaluation of Gold Bullion and financial
liabilities held at fair value through profit or loss.
The Board has considered the Company’s exposure to climate change and determined that due to the nature of
the Company and its operations there are no directly observed impacts of climate change on the business. As a
result, the Board concluded that there is no basis on which to provide extended information of analysis relating to
climate change, including as part of the basis of accounting or individual accounting policies adopted by the
Company.
In the above determination, the Board has concluded specifically that climate change, including physical and
transition risks, does not have a material impact on the recognition and separate measurement considerations of
the assets and liabilities in these financial statements as at 31 December 2022.
This conclusion is based on the fact that assets are reported at fair value under IFRS, and as set out in note 15
are categorised as level 2 due to the use of observable, verifiable inputs and third party information sources. The
liabilities are valued utilising listed market prices at the period end. These observable inputs and market prices
will reflect wider market sentiment, which inherently includes market perspectives relating to the impact of
climate change.
Critical Accounting Estimates and Judgements
The presentation of financial statements in conformity with IFRSs requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Company’s
accounting policies.
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities.
Estimates are continually evaluated and based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
Significant Judgements
The key accounting judgements required to prepare these financial statements are:
1.
In respect of the presentation of non-statutory and non-GAAP adjustments to the Statement of Profit or
Loss and Other Comprehensive Income and the Statement of Changes in Equity, as disclosed in note 18.
2.
The determination of the appropriate accounting policy to be applied to Gold Bullion.
Under IFRS there is no standard treatment for the classification of gold bullion (as they do not meet the
definition of a financial asset, cash, inventory or property, plant or equipment) therefore the election of how
to treat gold bullion is left to some interpretation for companies which hold these assets. The Gold Bullion
is held to provide the security holders with the exposure to changes in the fair value of Gold Bullion and
therefore the Directors consider that carrying the Gold Bullion at fair value through profit or loss,
consistent with the treatment that would be applicable to a financial instrument, reflects the objectives and
the purpose of holding the asset.
Significant Estimates
The directors do not consider that any significant estimates have been applied in the preparation of these
financial statements.
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2.
Accounting Policies (continued)
Going Concern
The nature of the Company’s business dictates that the outstanding Gold Securities may be redeemed at any
time by only holders of Gold Securities who have entered into an authorised applicant agreement with the
Company (“Approved Applicants”) and in certain circumstances by individual holders and also, in certain
circumstances, may be compulsorily redeemed by the Company. As the redemption of Gold Securities will
always coincide with the transfer of an equal amount (in value) of Gold Bullion, liquidity risk is mitigated such that
there is no material residual risk. All other expenses are met by ManJer. The directors closely monitor the
financial position and performance of ManJer, its assets under management, and therefore its related revenue
streams, in respect of fulfilling the obligations under the services agreement. The net reported position on
balance sheet, including in instances where a deficit is reported, is not considered to impact the going concern
position of the Company as this position results solely due to the unrealised gains or losses on Gold Bullion and
Gold Securities due to the accounting measurement basis applied in accordance with IFRS. As Gold Bullion are
held to support Gold Securities, any deficit or surplus reported on unrealised positions would be reversed on a
subsequent redemption of the Gold Securities and the related cancellation of Gold Bullion. A reported deficit is
not considered indicative of any issues relating to solvency of the Company and the directors are satisfied that
any obligations arising in respect of the Gold Securities can be managed in accordance with the terms of the
applicable Prospectus. The directors consider the operations of the Company to be ongoing, with a reasonable
expectation that the Company has adequate resources to continue in operational existence until 30 April 2024,
and accordingly these financial statements have been prepared on the going concern basis.
Accounting Standards
(a)
Standards, amendments and interpretations considered by the Company:
The following standards that have been revised, issued and became effective but are not considered
applicable to the Company:
Amendments to IFRS 3 Business Combinations
Amendments to IFRS 4 Insurance Contracts
Amendments to IFRS 16 Leases
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
Annual Improvements to IFRS
There were no other new standards, amendments and interpretations adopted in the current year that
resulted in a significant effect on these financial statements.
(b)
New and revised IFRSs in issue but not yet effective:
The Company has not applied the following new and revised IFRSs that have been issued but are not yet
effective:
IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2023)
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (effective for
annual periods beginning on or after 1 January 2023)
Amendments to IAS 12 Deferred Tax (effective for annual periods beginning on or after 1 January
2023)
Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on
or after 1 January 2024)
Amendments to IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2024)
The directors do not expect the adoption of the above standards, amendments and interpretations that are
in issue but not yet effective will have a material impact on the financial statements of the Company in future
periods.
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2.
Accounting Policies (continued)
Gold Securities
i)Issue and Redemption
Each time a Gold Security is issued or redeemed by the Company a corresponding amount of Gold Bullion
is transferred into or from the relevant secured account held by the Custodian. Upon initial recognition, the
fair value is recorded using the market close price published by the London Bullion Market Association
(“LBMA”) applied to the underlying Gold Bullion transferred.
Financial liabilities are recognised and de-recognised on the transaction (trade) date.
ii)Classification at fair value through Profit or Loss
Gold Securities comprise a financial instrument whose redemption price is linked to the value of the
underlying Gold Bullion. Gold Securities are classified as liabilities measured at fair value through profit or
loss under IFRS 9 due to an embedded derivative. This also significantly reduces a measurement or
recognition inconsistency that would otherwise arise from measuring assets or liabilities, or recognising
the gains and losses on them, on different bases.
Gold Bullion
iii)Pricing
IFRS 13 requires the Company to identify the principal market and to utilise the available price within that
principal market. The directors consider the stock exchanges where the Gold Securities are listed to be
the principal market and as a result the fair value of the Gold Securities is the on-exchange price as quoted
on the stock exchange demonstrating active trading with the highest trading volume on each day that the
price is obtained. The Gold Securities are priced using the latest traded mid-market price on (or before)
the Statement of Financial Position date.
A difference arises between the value of Gold Bullion (held to support the Gold Securities) and Gold
Securities (at market value) presented in the Statement of Financial Position. This difference is reversed
on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion.
The Company holds Gold Bullion equal to the amount due to holders of Gold Securities solely for the purpose of
meeting its obligations under the Gold Securities.
As described above, under IFRS there is no standard treatment for the classification of gold bullion. The Gold
Bullion is held to provide the security holders with the exposure to changes in the fair value of Gold Bullion and
therefore the Directors consider that carrying the Gold Bullion at fair value through profit or loss, consistent with
the treatment that would be applicable to a financial instrument, reflects the objectives and the purpose of
holding the asset.
Gold Bullion is priced on a daily basis based on the amount of Gold Bullion held using the latest fixing price
published by the LBMA, and is considered to be the fair value of the Gold Bullion. Also on a daily basis an
amount is transferred to Gold Bullion held in respect of the Management Fee. The valuation of the Gold Bullion is
equivalent to the LBMA fixing price being applied to the total Gold Entitlement of the Gold Securities, and is
referred to as the ‘Contractual Value’.
Gold Bullion and Gold Securities Awaiting Settlement
The issue and redemption of Gold Securities, and the transfer in and out of Gold Bullion, is accounted for on the
transaction date. The transaction will not settle until two days after the transaction date. Where transactions are
awaiting settlement at the year end, the value of the Gold Bullion and the Gold Securities due to be settled is
separately disclosed within the relevant assets and liabilities on the Statement of Financial Position. The fair
value of these receivables and payables is considered equivalent to their carrying value.
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2.
Accounting Policies (continued)
Gold Bullion Held in Respect of Management Fees and ManJer Fee Payable in Gold Bullion
Management Fee income is accrued by reducing the Gold Entitlement of the Gold Securities on a daily basis by
an agreed amount. These fees are recognised in Gold Bullion, recorded at fair value through profit or loss in
accordance with the accounting judgement set out above in respect of Gold Bullion. The amount recognised at
the Statement of Financial Position date is revalued using the latest price published by the LBMA.
Management Fees payable are also accrued based on the income accrued in accordance with the agreement
with ManJer. These fees are payable in Gold Bullion, recorded at fair value through profit or loss to significantly
reduce a measurement or recognition inconsistency that would otherwise arise from measuring assets or
liabilities, or recognising the gains and losses on them, on different bases. The payable at the Statement of
Financial Position date is revalued using the latest price published by the LBMA.
Gold Swing Bar
The Company has a loan facility with HSBC Bank USA, N.A. giving the Company the rights, interest and title to a
gold bar that is held for the purpose of facilitating the allocation of gold to holders of Gold Securities (the “Gold
Swing Bar”). The Gold Swing Bar is denominated in gold ounces. Under IFRS there is no standard treatment for
the classification of gold bullion. The Directors however consider that the measurement of the Gold Bullion,
including the Gold Swing Bar, at fair value through profit or loss is the most appropriate treatment as it most
accurately reflects the substance of the asset.
The fair value is calculated using the latest price published by the LBMA.
Gold Loan
The Gold Loan with HSBC Bank USA, N.A. associated with the Gold Swing Bar is also denominated in gold
ounces, and has been designated as a financial liability at fair value through profit or loss as this eliminates the
potential accounting mismatch that would result from any differing treatment of the Gold Swing Bar and the Gold
Loan (should the Gold Loan be measured at amortised cost).
The fair value is calculated using the latest price published by the LBMA applied to the amount in gold ounces of
the Gold Loan.
Other Financial Assets and Liabilities
Other financial assets and liabilities are non-derivative financial assets and liabilities including trade and other
receivables and trade and other payables (primarily Creation and Redemption Fees) with a fixed payment
amount and are not quoted in an active market. After initial measurement the other financial assets and liabilities
are subsequently measured at amortised cost using the effective interest method less any allowance for
expected credit losses (in respect of financial assets only). The effective interest method is a method of
calculating the amortised cost of an instrument and of allocating interest over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash flows (including all fees paid or received that
form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition. Impairment losses, including reversals of impairment losses and impairment gains, are recorded
through profit or loss.
Reserves
A revaluation reserve and a retained earnings reserve are maintained within equity. All profit or loss is taken to
the retained earnings reserve at the end of the accounting period to which it relates and the gain or loss relating
to the mis-match of accounting values is transferred to the non-distributable revaluation reserve as the balance
relates to unrealised gains and losses on Gold Bullion (held to support the Gold Securities) and Gold Securities,
which will be reversed on a subsequent redemption of the Gold Securities and the related transfer of Gold Bullion
and will therefore not be realised.
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2.
Accounting Policies (continued)
Income
The Company derives its income over time (in respect of Management Fees), and at a point in time (in respect of
creation and redemption fees) as follows:
i)
Management Fees
Management Fees are calculated by applying a fixed percentage of 0.40% per annum to reduce the Gold
Entitlement of the Gold Securities on a daily basis in accordance with the terms of the Securities issued.
The change in the Gold Entitlement reduces the value of the Gold Securities. This reduction equates to the
Management Fee amount in Gold Bullion, that is recognised for that day per each Gold Security in issue on
that day. The Management Fees are accrued and recognised on a daily basis until invoiced and settled by a
transfer of Gold Bullion. The amount recognised as income is calculated by applying the average LBMA
fixing price to the total Management Fee accrued on a monthly basis.
ii)
Creation and Redemption Fees
Fees for the issue and redemption of Gold Securities are recognised at the fair value of the consideration
expected to be received, on the date on which the transaction becomes legally binding. Accrued creation
and redemption fees are invoiced and settled on a quarterly basis.
Foreign Currency
The financial statements of the Company are presented in the currency in which the majority of the Gold
Securities issued by the Company are denominated (its functional currency). For the purpose of the financial
statements, the results and financial position of the Company are expressed in United States Dollars, which is
the functional currency of the Company and the presentational currency of the financial statements.
Transactions in foreign currencies are initially recorded at the spot rate at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the year-end date are translated at rates ruling at that
date. Creation and redemption fees are translated at the average rate for the month in which they are incurred.
The resulting differences are accounted for through profit or loss.
Segmental Reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the
Company that are regularly reviewed by the Chief Operating Decision Maker (“CODM”) in order to allocate
resources to the segments and to assess their performance. The CODM has been determined as the board of
directors. A segment is a distinguishable component of the Company that is engaged either in providing
products or services (business segment), or in providing products and services within a particular economic
environment (geographical segment), which is subject to risks and rewards that are different from those of other
segments.
The Company has not provided segmental information as the Company has only one business or product group,
issuing Gold Securities, and one geographical segment which is Europe. In addition, the Company has no single
major customer from which greater than 10% of income is generated. All information relevant to the
understanding of the Company’s activities is included in these financial statements.
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3.
Result Before Fair Value Movements
Result Before Fair Value Movements for the year comprised:
Audit Fees for the year of GBP 30,689 will be met by ManJer (2021: GBP 25,500).
4.
Taxation
The Company is subject to Jersey Income Tax. During the year the Jersey Income Tax rate applicable to the
Company is zero percent (2021: zero percent).
5.
Gold Swing Bar
The 430 (2021: 430) ounce gold bar held by the Company is used to ensure all Gold Bullion Securities are
supported by holdings of gold in allocated form.
6.
Gold Bullion Held in Respect of Management Fees
Management Fees recognised in Gold Bullion and are recorded at fair value.
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7.
Trade and Other Receivables
The fair value of the receivables is equal to the carrying value. The Creation and Redemption Fees are due to
be recovered within 12 months of the year end.
8.
Gold Bullion
As at the year end, there can be certain amounts of Gold Bullion awaiting settlement in respect of the creation or
redemption of Gold Securities with transaction dates before the year end and settlement dates in the following
year:
The amount payable on Gold Securities awaiting settlement is USD 2,685,944 (2021: USD Nil).
All Gold Bullion assets have been valued using the AM fix on 30 December 2022 as published by the LBMA
being the last fix price available for the year.
The below reconciliation of changes in the Gold Bullion includes only non-cash changes.
9.
Gold Securities
Gold Securities are secured, undated zero coupon notes with a face value of USD 0.00001. As at 31 December
2022, there were 20,284,372 (2021: 21,972,822) Gold Securities outstanding, with a face value, in aggregate, of
USD 203 (2021: USD 220).
Whilst the Gold Securities are quoted on the open market, the Company’s ultimate liability relates to its
contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the
Gold Entitlement on each trading day. The fair value of each creation and redemption of Gold Securities is
recorded using the price published by the LBMA on the transaction date, and is the “Contractual Value”.
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9.
Gold Securities (continued)
The issue and redemption of Gold Securities is recorded at a value that corresponds to the value of the Gold
Bullion transferred in respect of the issue and redemption. As a result, the Company has no net exposure to
gains or losses on the Gold Securities and Gold Bullion. The Company measures the Gold Securities at their fair
value in accordance with IFRS 13 rather than at the Contractual Value described above. The fair value is the
price quoted on stock exchanges or other markets where the Gold Securities are listed or traded.
The fair values and changes thereof during the year based on prices available on the open market as recognised
in the financial statements are:
The contractual values and changes thereof during the year based on the contractual settlement values are:
The gain or loss on the difference between the value of the Gold Bullion and the fair value of Gold Securities
would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold
Bullion. Refer to note 18 for the non-statutory and non-GAAP adjustments which reflect the results of this
reversal.
As at the year end, there can be certain amounts of Gold Bullion awaiting settlement in respect of the
creation or redemption of Gold Securities with transaction dates before the year end and settlement dates in
the following year:
The amount of Gold Bullion Held in respect of Securities awaiting settlement is USD 2,685,944 (2021:
USD Nil).
The below reconciliation of changes in the Gold Securities, being liabilities arising from financing activities,
includes only non-cash changes.
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10.
Trade and Other Payables
Management Fees payable by transfer of Gold Bullion are recorded at fair value. The fair value of the remaining
payables is equal to the carrying value. The ManJer Fee Payable is due to be settled within 12 months of the
year end.
11.
Gold Loan
The loan is denominated in gold ounces and marked to fair value at the year end with movements recognised in
the Statement of Profit or Loss and Other Comprehensive Income. The loan is repayable on demand. The
Company intends to maintain the loan as long as the Company continues to operate.
12.
Share Capital
The Company has an authorised capital of 10,000 Ordinary Shares of GBP 1 each.
All Shares issued by the Company carry one vote per Share without restriction and carry the right to dividends.
All Shares are held by WisdomTree Holdings Jersey Limited (“HoldCo”).
13.
Share Premium
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14.
Related Party Disclosures
Entities and individuals which have significant influence over the Company, either through ownership or by virtue
of being a director of the Company are considered to be related parties. In addition, entities with common
ownership to the Company and entities with common directors are also considered to be related parties.
Fees charged by ManJer during the year:
The following balances were due to ManJer at the year end:
At 31 December 2022, USD 141,820 is receivable from ManJer (2021: USD 141,820).
As disclosed in the Directors’ Report, ManJer paid fees to R&H Fund Services (Jersey) Limited (“R&H” or the
“Administrator”) for administration services, which includes the provision of Directors, however following the
restructuring of the fee agreement effective from 1 July 2022, fees for those services are no longer separately
identified following the restructuring of the fee agreement effective from 1 July 2022.
Steven Ross is a director of R&H and a partner of Rawlinson & Hunter, Jersey Partnership which wholly owns
R&H. Christopher Foulds is a director of R&H. During the year, R&H charged ManJer administration fees which
include the Company and other entities for which ManJer is the Manager and R&H is the Administrator, in
aggregate, of GBP 646,585 of which GBP 295,796 was outstanding at the year end. (The administration
agreement was updated, effective 1 July 2022 and the charges directly attributable to the Company are no
longer specified. During the year ended 31 December 2021 the charges directly attributable to the Company
amounted to GBP 67,252 with GBP 16,813 outstanding).
Peter Ziemba and Stuart Bell are executive officers of WisdomTree, Inc.
15.
Financial Risk Management
The Company is exposed to a number of risks arising from its activities, including credit risk, settlement risk,
liquidity risk and market risk. The Board is responsible for the overall risk management approach and for
approving the risk management strategies and principles. The Board meets frequently to consider the risk
exposures of the Company and to determine appropriate management policies. The risk management policies
employed by the Company to manage these are discussed below.
The Gold Securities are subject to normal market fluctuations and other risks inherent in investing in securities
and other financial instruments. There can be no assurance that any appreciation in the value of securities will
occur, and the capital value of an investor’s original investment is not guaranteed. The value of investments may
go down as well as up, and an investor may not get back the original amount invested.
The information provided below is not intended to be a comprehensive summary of all the risks associated with
the Gold Securities and investors should refer to the most recent Prospectus for a detailed summary of the risks
inherent in investing in the Gold Securities. Any data provided should not be used or interpreted as a basis for
future forecast or investment performance.
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15.
Financial Risk Management (continued)
(a)
Credit Risk
Credit risk primarily refers to the risk that Approved Applicants or the Custodian will default on their contractual
obligations resulting in financial loss. The Gold Securities are issued under limited recourse arrangements
whereby the holders have recourse only to the Gold Bullion (held to support the Gold Securities) and not to the
Company, therefore limiting the credit risk of the Company in connection with the issue of the Gold Securities.
The total carrying amounts of the amounts receivable awaiting settlement and trade and other receivables best
represent the maximum credit risk exposure at the Statement of Financial Position date. At the reporting date
the Company’s amounts receivable awaiting settlement and trade and other receivables are detailed on the
Statement of Financial Position.
Credit risk is managed by the Company by only dealing with Approved Applicants who are believed to be
creditworthy. In the event the Approved Applicants fail to complete their obligation, no Gold Securities will be
created therefore the Company does not have the risk of loss of the amount expected to be received.
Credit risk also includes custodial risk. Gold Bullion is the subject of a fixed charge or legal mortgage in favour of
The Law Debenture Trust Corporation p.l.c (the “Trustee”) pursuant to security deeds entered into by the Trustee
and the Company to secure the obligations owed by the Company to the Trustee and the holders of the relevant
Gold Securities (the “Security”). However, there is no exposure to credit risk of the Trustee by virtue of the
existence of the Security. Under the custodian agreements the relevant custodian acknowledges the Security
created in favour of the Trustee and agrees that once Gold Bullion is deposited in the secured gold accounts, it
may only be removed after approval from the Trustee.
The custodian is not required to take out insurance and neither is the Trustee. Accordingly, there is a risk that the
secured Gold Bullion could be lost, stolen or damaged and the Company would not be able to satisfy its
obligations in respect of the Gold Securities. Currently HSBC Bank plc is the only custodian.
Gold Bullion held with the custodian is held either in allocated or unallocated form.
Allocated: An allocated account evidences that uniquely identifiable bars of bullion have been
“allocated” to the customer and are segregated from other gold held in the custodian’s vault. An
allocated account is held in the customer’s name (which, for the Gold Securities, means in the name of
the Trustee as legal mortgagee pursuant to the Security and in its capacity as trustee for the Security
Holders). The customer has full title to the bullion held in the allocated account. As a result, allocated
Bullion does not entail any credit risk exposure to the custodian, and the credit exposure to the custodian
is therefore limited to the amounts held in unallocated accounts.
Unallocated: Unlike Bullion held in an allocated account, bullion in an unallocated account does not
entitle the customer to a particular bar of bullion and the customer’s holding is not segregated from that
of other customers or the custodian. Instead, the books and records of the custodian record that the
customer is entitled to a specific amount of bullion. As the bullion is not segregated, the customer has a
credit risk exposure to the custodian. Bullion in unallocated form is easier to transfer as it simply requires
an update of the custodian’s books and records rather than movements of physical bullion and for this
reason transfers in connection with creation and redemption of Gold Securities are carried out in
unallocated form.
The gold swing bar held by the Company is used to ensure all Gold Bullion Securities are supported by holdings
of gold in allocated form. As a result the gold held in unallocated gold form is less than 1 physical gold bar and
immaterial in value.
The Board monitors credit risk exposure, including through an assessment of the credit rating of the custodian
(HSBC: AA- (2021: AA-) (Fitch, 7 October 2022)), to ensure the Company’s exposure is managed, and has
continued to do so more closely with a focus on any potential impact of, or developments relating to both the
Ukraine Crisis and COVID-19.
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15.
Financial Risk Management (continued)
(b)
Settlement Risk
Settlement risk primarily refers to the risk that an Approved Applicant or the Custodian will default on its
contractual obligations resulting in financial loss.
The directors believe that settlement risk would only be caused by the risk of the Company’s trading counterparty
not delivering Gold Bullion or Gold Securities on the settlement date. The Gold Securities settle through the
CREST system. The directors feel that this risk is mitigated as Gold Securities are not issued until the required
amount of Gold Bullion has been received in the Custodian account, and Gold Bullion is not transferred until the
relevant Gold Securities have been delivered in CREST. As a result, each transaction does not settle until both
parties have fulfilled their contractual obligations.
Amounts outstanding in respect of positions yet to settle are disclosed in notes 8 and 9.
(c)
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its
financial liabilities as they fall due. The Company’s receivables and payables are all payable on demand and
generally settled on a short-term basis. Liquidity risk in respect of receivables and payables related to income
and expenses is mitigated as Gold Bullion in respect of the Management Fee is retained by the Company on a
daily basis, in order for the related ManJer expense accumulated (for the month, in arrears) to be settled (in Gold
Bullion) once invoiced, and amounts in respect of the creation and redemption fees are transferred from the
relevant counterparties directly to ManJer and there are no related cash flows through the Company.
The Gold Securities do not have a contractual maturity date and will only be redeemed at the request of the
holder of the security, which may be requested at any time, with the transaction settling through the transfer of
Gold Bullion two days after the transaction date, or in the case of a compulsory redemption by either transferring
the Gold Bullion, or by realising the Gold Bullion for cash and settling the cash proceeds to holders on a short-
term basis. Generally, only Approved Applicants can submit applications and redemptions directly with the
Company.
When the Gold Securities are redeemed, the Company returns the corresponding amount of Gold Bullion
determined by the Gold Entitlement of those Gold Securities, therefore any redemption of Gold Securities would
not impact the liquidity of the Company. Consequently, the Company has not presented any tabular information
in respect of liquidity risk.
(d)
Capital Management
The primary objective of the Company’s capital management policy is to ensure that it maintains sufficient
resources for operational purposes. The capital being managed are the Share Capital and Share Premium, as
presented in the Statement of Changes in Equity. Retained Earnings and the Revaluation Reserve, as presented
in the Statement of Changes in Equity, are not considered managed capital as these balances relate to
unrealised gains and losses on Gold Bullion (held to support the Gold Securities) and Gold Securities, which are
reversed on a subsequent redemption of the Gold Securities and the related transfer of Gold Bullion and will
therefore not be realised. The Company is not subject to any capital requirements imposed by a regulator and
there were no changes in the Company’s approach to capital management during the year.
The Company’s principal activity is the issue and listing of Gold Securities. These securities are issued and
redeemed as demand requires. The Company holds a corresponding amount of Gold Bullion which matches the
total contractual liability of the Gold Securities issued. ManJer supplies or arranges for the supply of all
management and administration services to the Company and pays all management and administration costs of
the Company, including Trustee and Custodian Fees. In return for these services the Company pays ManJer a
fee, which under the terms of the service agreement is equal to the aggregate of the Management Fee and
creation and redemption fees earned.
As all Gold Securities in issue are supported by an equivalent amount of Gold Bullion held by the Custodian and
the running costs of the Company are paid by ManJer, the directors of the Company consider the capital
management and its current capital resources are adequate to maintain the ongoing listing and issue of Gold
Securities.
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15.
Financial Risk Management (continued)
(e)
Sensitivity Analysis
IFRS 7 requires disclosure of a “sensitivity analysis” for each type of market risk to which the Company is
exposed to at the reporting date, showing how profit or loss and equity would have been affected by a
reasonably possible change to the relevant risk variable.
The Company’s rights and liabilities in respect of Gold Securities, relate to its contractual obligations to issue and
redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day.
The fair value of each creation and redemption of Gold Securities is recorded using the price published by the
LBMA on the transaction date. However, under IFRS 13, the liability is recorded at fair value (being the on-
exchange price) which results in a mismatch. As described in note 18 this mismatch is reversed on the
redemption of Gold Securities.
As a result, the Company’s contractual and economic liability in connection with the issue and redemption of
Gold Securities is matched by movements in the corresponding Gold Bullion. Whilst sensitivity analysis could be
performed on this mismatch, the Company does not ultimately have economic exposure to the on-exchange
price, but to the contractual liability of the Gold Securities and consequently, the Company does not have any net
exposure to market price risk. Furthermore the result of the numeric sensitivity is considered not material by the
directors and in their opinion, no sensitivity analysis is required to be disclosed.
(f)
Market Risk
Market risk is the risk that changes in market prices (such as equity and bullion prices, interest rates and foreign
exchange rates) will affect the Company’s income, or the value of its financial instruments held or issued.
i)
Price Risk
As described above, Gold Securities provide investors with exposure to gold. Movements in the value of
the underlying Gold Bullion may vary widely which could have an impact on the demand for the Gold Bullion
issued by the Company. The movement in the price of the Gold Bullion are:
The value of the Company’s liability in respect of the Gold Securities fluctuates according to Gold Bullion
prices and the risk of such change in price is managed by the Company by holding Gold Bullion in the same
quantity as its liability. Whilst the Gold Securities are quoted on the open market, the Company’s ultimate
liability relates to its contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion
as determined by the Gold Entitlement on each trading day. The Company measures the Gold Securities at
their fair value in accordance with IFRS 13 rather than at the Contractual Value (as described in the
Prospectus). The gain or loss on the difference between the value of the Gold Bullion and the fair value of
Gold Securities would be reversed on a subsequent redemption of the Gold Securities and transfer of the
corresponding Gold Bullion. Refer to note 9 for the further details regarding fair values.
The Company therefore bears no residual financial risk from a change in the price of Gold Bullion.
Furthermore, the impact of price sensitivity is considered immaterial to these financial statements. However,
there is an inherent risk from the point of view of investors as the price of Gold Bullion and the value of the
Gold Securities may vary widely due to, amongst other things, changing supply or demand for Gold Bullion,
government and monetary policy or intervention and global or regional political, economic or financial
events. The market price of Gold Securities is (and will remain) a function of supply and demand amongst
investors wishing to buy and sell Gold Securities and the bid-offer spread that the market makers are willing
to quote. This is highlighted further in note 18, and below under the Fair Value Hierarchy.
Coronavirus disease (COVID-19)
The Board continues to monitor the advice and developments relating to COVID-19. The WisdomTree
group has and continues to implement measures to maintain the ongoing safety and well-being of
employees, whilst continuing to operate business as usual.
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15.
Financial Risk Management (continued)
(f)
Market Risk (continued)
i)
Price Risk (continued)
Ukraine Invasion
On 24 February 2022, Russia engaged in military actions in the sovereign territory of Ukraine (the “Crisis”).
The Crisis has resulted in the implementation of sanctions and further actions by governments which, as well
as the Crisis itself, have impacted financial and commodities markets. In response to sanctions imposed on
Russia by the United Kingdom, United States and European Union, on 7 March 2022 the LBMA suspended
six Russian gold refiners (the “Russian Refiners”) from the Good Delivery List (the “Suspension”). As a result
of the Suspension, gold bars produced after 7 March 2022 by the Russian Refiners will not be considered
Good Delivery unless and until the LBMA further amends its Good Delivery Rules. In line with the LBMA’s
Good Delivery Rules, gold bars received from the Russian Refiners prior to 7 March 2022 still fall within the
Good Delivery Rules and can be traded within the London Good Delivery system. Prior to the Suspension,
the Company received gold bars from two Russian Refineries; in line with the Good Delivery Rules, these
gold bars meet the Good Delivery Rules and constitute Good Delivery. The gold bars previously received
from those two Russian Refineries have since been transferred on the redemption of Securities and there
are currently no gold bars held from Russian Refineries.
The Company will only accept Gold Bullion bars which constitute Good Delivery and meet the Good Delivery
Rules set by the LBMA. Therefore, as a result of the Suspension, the Company does not accept Gold Bullion
bars that the Russian Refineries produced after 7 March 2022 (until there is an amendment to the Good
Delivery Rules). This may impact the price and liquidity of existing and newly sourced Good Delivery Gold
Bullion bars and hence may adversely affect the trading market and price for Gold Securities and may cause
the value of Gold Securities to decline or increase in value.
As the Crisis continues, the board of directors (the “Board”) also continues to closely monitor and assess the
impact on the Company’s portfolio operations and valuation and will take any further actions needed or as
required under the terms of the Prospectus, as facts and circumstances are subject to change and may be
specific to investment strategies and jurisdictions. Whilst it is not currently possible to predict future market
conditions and therefore determine if any further action may be required, the action that may be required
includes, but is not limited to, temporarily not accepting applications for Gold Securities, temporarily
suspending Gold Securities from trading on Stock Exchanges or a compulsory redemption of Gold
Securities. The Company has not initiated any of these further actions to date. Any such action will be
undertaken in accordance with the constitutive documents of the Gold Securities.
ii)
Interest Rate Risk
The Company does not have significant exposure to interest rate risk since none of its assets or liabilities
bear any interest.
iii)
Currency Risk
The directors do not consider the Company to have a significant exposure to currency risk arising from the
current economic uncertainties facing a number of countries around the world as the gains or losses on the
liability represented by the Gold Securities are matched economically by corresponding losses or gains
attributable to the Gold Bullion.
(g)
Fair Value Hierarchy
The levels in the hierarchy are defined as follows:
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15.
Financial Risk Management (continued)
(g)
Fair Value Hierarchy (continued)
Categorisation within the hierarchy is determined on the basis of the lowest level input that is significant to the
fair value measurement of each relevant asset/liability.
The Company is required to utilise the available on-market price as the Gold Securities are quoted and actively
traded on the open market. Therefore, Gold Securities are classified as Level 1 financial liabilities.
The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement (which is
calculated in accordance with an agreed formula published in the Prospectus). Gold Bullion is marked to fair
value using the latest price published by the LBMA. The Company has contractual obligations to issue and
redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day.
The fair value of each creation and redemption of Gold Securities is recorded using the price published by the
LBMA on the transaction date applied to that Gold Entitlement. Therefore, Gold Bullion is classified as a level 2
asset, as the value is calculated using third party pricing sources supported by observable, verifiable inputs.
The categorisation of the Company’s assets and (liabilities) are as shown below:
The Gold Securities and the Gold Bullion are recognised at fair value upon initial recognition and revalued to fair
value in line with the Company’s accounting policy. There are no liabilities classified in level 3. Transfers
between levels would be recognised if there was a change in circumstances that prevented public information in
respect of Level 1 inputs from being available. Any such transfers would be recognised on the date of the
change in circumstances that cause the transfer. There were no transfers or reclassifications between Level 1
and Level 2 for any of the assets or liabilities during the year.
16.
Ultimate Controlling Party
In accordance with the disclosure requirements of IFRS the directors have determined that no entity meets the
definition of immediate parent or ultimate controlling party. The holder of issued equity shares is HoldCo, a
Jersey registered company. WisdomTree, Inc (formerly WisdomTree Investments, Inc) is the ultimate controlling
party of HoldCo.
17.
Events Occurring After the Reporting Period
There have been no significant events that have occurred since the end of the reporting period up to the date of
signing the Financial Statements which would impact on the financial position of the Company disclosed in the
Statement of Financial Position as at 31 December 2022 or on the results and cash flows of the Company for the
year ended on that date.
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18.
Non-GAAP and Non-Statutory Information
As a result of the mis-match in the accounting valuation of Gold Bullion (held to support the Gold Securities) and
Gold Securities (as disclosed in notes 8 and 9) the profits and losses and comprehensive income of the
Company presented in the Statement of Profit or Loss and Other Comprehensive Income reflect gains and
losses which represent the movement in the cumulative difference between the value of the Gold Bullion and the
price of Gold Securities. The Statement of Changes in Equity also reflects the fair value movements on both the
Gold Bullion (held to support the Gold Securities) and the Gold Securities.
These gains or losses on the difference between the value of the Gold Bullion (held to support the Gold
Securities) and the price of Gold Securities would be reversed on a subsequent redemption of the Gold
Securities and transfer of the corresponding Gold Bullion.
Furthermore, the Gold Securities are issued under limited recourse arrangements whereby the holders have
recourse only to the relevant Gold Bullion (held to support the Gold Securities) and not to the Company. As a
result, the Company does not make gains from trading in the underlying Gold Bullion (held to support the Gold
Securities) and, from a commercial perspective (with the exception of the impact of Management Fees) gains
and losses in respect of Gold Bullion (held to support the Gold Securities) will always be offset by a
corresponding loss or gain on the Gold Securities and the Company does not retain any net gains or losses.
The mismatched accounting values are as shown below:
To reflect the commercial results, the Company has presented below a non-GAAP and non-Statutory Statement
of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity for the period which
reflect an Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Gold Securities,
together with those gains or losses being transferred to a separate reserve which is deemed non-distributable.
(a)
Non-GAAP and Non-Statutory Statement of Profit or Loss and Other Comprehensive Income
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18.
Non-GAAP and Non-Statutory Information (continued)
(b)
Non-GAAP and Non-Statutory Statement of Changes in Equity
4 This represents the difference between the value of Gold Bullion and the price of Gold Securities.
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