Gold Bullion Securities Limited
Registered No: 87322
Report and Financial Statements for the
Year ended 31 December 2021
Gold Bullion Securities Limited
Contents
www.wisdomtree.eu
Gold Bullion Securities Limited
Management and Administration
Directors
Administrator
Stuart Bell
Christopher Foulds
Steven Ross
Peter Ziemba
R&H Fund Services (Jersey) Limited
Ordnance House
PO Box 83
31 Pier Road
St Helier
Jersey, JE4 8PW
Registered Office
Registrar
Ordnance House
31 Pier Road
St Helier
Jersey, JE4 8PW
Computershare Investor Services (Jersey) Limited
13 Castle Street
St Helier
Jersey, JE1 1ES
Manager
Custodian
WisdomTree Management Jersey Limited
Ordnance House
31 Pier Road
St Helier
Jersey, JE4 8PW
HSBC Bank plc
8 Canada Square
London, E14 5HQ
United Kingdom
Auditor
Trustee
Ernst & Young LLP
Liberation House
Castle Street
St Helier
Jersey, JE1 1EY
The Law Debenture Trust Corporation plc
Fifth Floor
100 Wood Street
London, EC2V 7EX
United Kingdom
Jersey Legal Advisers
Company Secretary
Mourant Ozannes
22 Grenville Street
St Helier
Jersey, JE4 8PX
R&H Fund Services (Jersey) Limited
Ordnance House
31 Pier Road
St Helier
Jersey, JE4 8PW
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Gold Bullion Securities Limited
Directors’ Report
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 2021.
Directors
The names and particulars of the directors of the Company during and since the end of the financial year are:
Stuart Bell
Christopher Foulds
Steven Ross
Peter Ziemba
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 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”).
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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Gold Bullion Securities Limited
Directors’ Report (Continued)
Review of Operations
The most recent Prospectus was issued on 11 November 2021. The Gold Securities are listed on the London
Stock Exchange, the Deutsche Börse, the Borsa Italiana, the Euronext Brussels and the NYSE Euronext Paris.
As at 31 December 2021, the fair value of assets under management amounted to USD 3,719.4 million
(2020: USD 4,623.2 million). The Company recognises its assets (Gold Bullion) and liabilities (Gold
Securities) at fair value in the Statement of Financial Position.
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 provided by the LBMA on the
transaction date.
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 which is calculated by reducing the Gold Entitlement of the Gold Securities on
a daily basis by an agreed amount; 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:
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 (2020: 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.
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Gold Bullion Securities Limited
Directors’ Report (Continued)
Review of Operations (continued)
Coronavirus disease (COVID-19)
The COVID-19 pandemic continues to persist and the ultimate duration of the pandemic and its short-term
and long-term impact on the global economy is unknown. National governments and supranational
organisations in multiple states continue taking steps designed to protect their populations from COVID-19,
including requiring or encouraging home working, the cancellation of sporting, cultural and other events and
restricting or discouraging gatherings of people. COVID-19 has created market turmoil and increased market
volatility generally. Mutations in the virus, a setback in vaccine distribution and negative global economic
consequences arising from the pandemic, amongst other factors, could have a future adverse impact on the
global financial markets. The steps outlined above, and public sentiment, may affect both the volatility and
prices of Gold Bullion and hence the prices of the Gold Securities, and such effects may be significant and
may be long-term in nature.
The directors are closely monitoring the advice and developments relating to the spread of COVID-19, which
is fluid and rapidly changing. 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.
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 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 2023, and accordingly these financial
statements have been prepared on the going concern basis.
Future Developments
On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The board of
directors (the “Board”) is closely monitoring developments that may impact financial markets including
sanctions, actions by governments and developments of the crisis. The Board will further assess the impact
on the fund’s portfolio operations and valuation and will take any potential actions needed, as facts and
circumstances are subject to change and may be specific to investment strategies and jurisdictions.
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.
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).
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Gold Bullion Securities Limited
Directors’ Report (Continued)
Corporate Social Responsibility (continued)
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 2021.
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, including use of third party
information sources within the agreed pricing formula (set out in the Prospectus). 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.
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.
Dividends
There were no dividends declared or paid in the year (2020: 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.
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.
Directors’ Remuneration
No director has a service contract with the Company. The directors of the Company who are employees
within the WisdomTree Investments, Inc group do not receive separate remuneration in their capacity as
directors of the Company. R&H Fund Services (Jersey) Limited (“R&H” or the “Administrator”) receives a fee
in respect of the directors of the Company who are employees of R&H.
The following directors’ fees have been paid by ManJer on behalf of the Company for the year:
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Gold Bullion Securities Limited
Directors’ Report (Continued)
Principal Risks and Uncertainties
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.
The Gold Securities provide investors with exposure to gold. 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.
During the year ended 31 December 2021, the price of gold dropped 3.75%. Coupled with the impact of the
Management Fees, the Gold Securities dropped in value by 4.32% between 31 December 2020 and 31
December 2021.
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,
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 pays ManJer an amount equal to the management fee and the creation and
redemption fees earned (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 2021.
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.
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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Gold Bullion Securities Limited
Directors’ Report (Continued)
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
27 April 2022
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Gold Bullion Securities Limited
Statement of Directors’ Responsibilities
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 2021 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
27 April 2022
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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 2021 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 (“IFRS”) as issued by the International
Accounting Standards Board.
In our opinion, the financial statements:
►
give a true and fair view of the state of the company’s affairs as at 31 December 2021 and of its
profit 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 2023. Management’s assessment has
focussed on a combination of;
►
Assessing the ongoing viability of the company through continued involvement of
its Custodian and Authorised Participants;
►
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 in the current economic climate.
►
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 2023.
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,
including controls and changes in the business environment 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
The company has explained climate-related risks in the Corporate Social Responsibility section of the
Directors’ Report. Our procedures on these disclosures therefore consisted solely of considering
whether these disclosures are materially inconsistent with the Company’s 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)
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)
The risk has remained
consistent with that observed in
the prior year.
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$37.2 million (2020: US$46.2 million), which is
1% (2020: 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 75% (2020: 50%) of our
materiality, namely US$27.9m (2020: US$23.1m). We had set performance materiality at 50% of our
materiality in the prior year based on our prior experience of identifying 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$1.9m (2020: US$2.3m), 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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
Other information
The other information comprises the information included in the annual report set out on pages 1 to 8,
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.
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 8, 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.
-13-
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
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 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 UK Listing
Authority and the Central Bank of Ireland (Investment Market Conduct) Rules;
►
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 a review of 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 reviewed
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.
-14-
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued)
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
3 years, covering the years ending 31 December 2019 to 31 December 2021.
►
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: 27 April 2022
-15-
Gold Bullion Securities Limited
Statement of Profit or Loss and Other Comprehensive Income
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 20 to 36 form part of these financial statements
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Gold Bullion Securities Limited
Statement of Financial Position
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 16 to 36 were approved and authorised for issue by the board of directors
and signed on its behalf on 27 April 2022.
Christopher Foulds
Director
The notes on pages 20 to 36 form part of these financial statements
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Gold Bullion Securities Limited
Statement of Cash Flows
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
Management 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 20 to 36 form part of these financial statements
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Gold Bullion Securities Limited
Statement of Changes in Equity
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 20 to 36 form part of these financial statements
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Gold Bullion Securities Limited
Notes to the Financial Statements
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 purpose of the Company is to provide a vehicle that facilitates the issuance and subsequent listing and
trading of securities that track the performance of gold without needing to take physical delivery of the gold
(“Gold Securities”). The Gold Securities are issued under limited recourse arrangements whereby the
holders have recourse only to the gold bullion (“Gold Bullion”) held to support the Gold Securities and not to
the Company. The Gold Securities are secured on an amount of Gold Bullion equivalent to the entitlement to
that Gold Bullion in respect 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. 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 16,
with additional information regarding the risks of the Company disclosed in note 15. 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 18 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 which is calculated by reducing 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.
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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
2.
Accounting Policies (continued)
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. 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 physical metals (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
physical metals 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.
The directors do not consider that any significant estimates have been applied in the preparation of these
financial statements.
Going Concern
The nature of the Company’s business dictates that the outstanding Gold Securities may be redeemed at
any time by 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, and furthermore, the
Company will hold the Gold Bullion received to support the Gold Securities issued and will only transfer out
Gold Bullion to facilitate the payment of Management Fees or the redemption of Gold Securities, liquidity risk
is mitigated such that there is no material residual risk. All other expenses of the Company 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 in place. 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 2023, 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 16 Leases
•
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 to address the accounting issues that arise when
financial instruments are modified from referencing an IBOR
There were no other new standards, amendments and interpretations adopted in the current year that
resulted in a significant effect on these financial statements.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
2.
Accounting Policies (continued)
Accounting Standards (continued)
(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 1 Presentation of Financial Statements (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 16 Property, Plant and Equipment (effective for annual periods beginning on or
after 1 January 2022)
•
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (effective for
annual periods beginning on or after 1 January 2022)
•
Annual Improvements to IFRS (impacting IFRS 1, IFRS 9 and IAS 41)
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.
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.
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 mid-market price on the
Statement of Financial Position date taken at the time the gold fix is set.
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.
- 22 -www.wisdomtree.eu
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
2.
Accounting Policies (continued)
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 physical metals. 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
provided 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.
Gold Bullion Held in Respect of Management Fees and Management 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 physical metals. 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.
- 23 -www.wisdomtree.eu
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
2.
Accounting Policies (continued)
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.
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 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.
- 24 -www.wisdomtree.eu
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
2.
Accounting Policies (continued)
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.
Audit Fees for the year of GBP 25,500 will be met by ManJer (2020: GBP 26,430).
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 (2020: zero percent).
5.
Gold Swing Bar
Year ended 31 December
20212020
USDUSD
The 430 (2020: 430) ounce gold bar held by the Company is held for the purpose of facilitating the allocation
of gold to holders of Gold Securities. The gold is recorded at fair value using the last price published by the
LBMA being the AM fix rate on 31 December 2021 of USD 1,820.100 per oz. (2020: USD 1,891.100 per oz.).
- 25 -www.wisdomtree.eu
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
6.
Gold Bullion Held in Respect of Management Fees
As at 31 December
20212020
USDUSD
Management Fees recognised in Gold Bullion and are recorded at fair value.
7.
Trade and Other Receivables
The fair value of the receivables is equal to the carrying value. The Trade and Other Receivables are due to
be recovered within 12 months of the year end.
8.
Gold Bullion
As at 31 December
20212020
USDUSD
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 as a result of unsettled redemptions is USD Nil (2020: USD
5,079,300).
All Gold Bullion assets have been valued using the AM fix on 31 December 2021 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.
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
9.
Gold Securities
Gold Securities are secured, undated zero coupon notes with a face value of USD 0.00001. As at 31
December 2021, there were 21,972,822 (2020: 26,181,830) Gold Securities outstanding, with a face value,
in aggregate, of USD 220 (2020: USD 262).
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 provided by the LBMA on the transaction date, and is the “Contractual Value”.
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:
As at 31 December
20212020
USDUSD
The contractual values and changes thereof during the year based on the contractual settlement values are:
As at 31 December
20212020
USDUSD
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 payable as a result of unsettled redemptions of Gold Securities is USD Nil (2020: USD
5,079,300).
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
9.
Gold Securities (continued)
The below reconciliation of changes in the Gold Securities, being liabilities arising from financing activities,
includes only non-cash changes.
10.Trade and Other Payables
As at 31 December
20212020
USDUSD
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
Year ended 31 December
20212020
USDUSD
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
As at 31 December
20212020
USDUSD
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”).
- 28 -www.wisdomtree.eu
Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
13.
Share Premium
As at 31 December
20212020
USDUSD
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:
Year ended 31 December
20212020
USDUSD
The following balances were due to ManJer at the year end:
As at 31 December
20212020
USDUSD
At 31 December 2021, USD 141,820 is receivable from ManJer (2020: USD 141,820).
As disclosed in the Directors’ Report, ManJer paid Directors’ Fees in respect of the Company of GBP 16,000
(2020: GBP 16,000).
Steven Ross is a director of R&H Fund Services (Jersey) Limited (“R&H” or the “Administrator”) and a partner of
Rawlinson & Hunter, Jersey Partnership, which wholly owns R&H. Christopher Foulds is a senior employee of
R&H. During the year, R&H charged ManJer administration fees in respect of the Company of GBP 67,252 (2020:
GBP 67,252), of which GBP 16,813 (2020: GBP 16,813) was outstanding at the year end.
Peter Ziemba and Stuart Bell are executive officers of WisdomTree Investments, 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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
15.
Financial Risk Management (continued)
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.
(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. 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.
The Board monitors credit risk exposure 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 the spread of
COVID-19, which is fluid and rapidly changing.
(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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
15.
Financial Risk Management (continued)
(c)
Liquidity Risk (continued)
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 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.
(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
provided 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 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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
15.
Financial Risk Management (continued)
(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. During the year ended 31
December 2021, the price of gold dropped 3.75%. Coupled with the impact of the Management Fees,
the Gold Securities dropped in value by 4.32% between 31 December 2020 and 31 December 2021.
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.
Therefore, the Company 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 COVID-19 pandemic continues to persist and the ultimate duration of the pandemic and its short-
term and long-term impact on the global economy is unknown. National governments and supranational
organisations in multiple states continue taking steps designed to protect their populations from COVID-
19, including requiring or encouraging home working, the cancellation of sporting, cultural and other
events and restricting or discouraging gatherings of people.
COVID-19 has created market turmoil and increased market volatility generally. Mutations in the virus, a
setback in vaccine distribution and negative global economic consequences arising from the pandemic,
amongst other factors, could have a future adverse impact on the global financial markets. The steps
outlined above, and public sentiment, may affect both the volatility and prices of commodities, including
gold, and hence the prices of the Gold Securities, and such effects may be significant and may be long-
term in nature. 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 directors’ consideration in respect of the going concern position of
the Company is set out in note 2.
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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
15.
Financial Risk Management (continued)
(f)
Fair Value Hierarchy
The levels in the hierarchy are defined as follows:
•
Level 1
•
Level 2
•
Level 3
fair value based on quoted prices in active markets for identical assets.
fair values based on valuation techniques using observable inputs other than quoted prices.
fair values based on valuation techniques using inputs that are not based on observable
market data.
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 provided 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 through profit or loss 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 Investments, Inc is the ultimate controlling party of HoldCo.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
17.
Events Occurring After the Reporting Period
On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The Management
of the Company is closely monitoring developments that may impact financial markets including sanctions, actions
by governments and developments of the crisis. The Management of the Company will further assess the impact
on the fund’s portfolio operations and valuation and will take any potential actions needed, as facts and
circumstances are subject to change and may be specific to investment strategies and
jurisdictions.
There have been no other 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 2021 or on the results and cash flows of
the Company for the year ended on that date.
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:
Year ended 31 December
20212020
USDUSD
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.
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
18.
Non-GAAP and Non-Statutory Information (continued)
(a)
Non-GAAP and Non-Statutory Statement of Profit or Loss and Other Comprehensive Income
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Gold Bullion Securities Limited
Notes to the Financial Statements (Continued)
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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