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WisdomTree Hedged Commodity Securities
Limited
Registered No: 109413
Annual Report and Audited Financial Statements for the
Year ended 31 December 2022
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Management and Administration
1
Directors’ Report
2-10
Statement of Directors’ Responsibilities
11
Independent Auditor’s Report
12-20
Statement of Profit or Loss and Other Comprehensive Income
21
Statement of Financial Position
22
Statement of Cash Flows
23
Statement of Changes in Equity
24
Notes to the Financial Statements
25-41
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The directors of WisdomTree Hedged Commodity Securities Limited (“HCSL” or the “Company”) submit
herewith the annual report and financial statements of the Company for the year ended 31 December 2022.
Directors
The names and particulars of the directors of the Company during and since the end of the financial year are:
Directors’ Interests
No director has an interest in the shares of the Company as at the date of this report.
Principal Activities
The Company’s principal activity is the issue and listing of currency-hedged commodity securities (“Currency-
Hedged Commodity Securities”).
Currency-Hedged Commodity Securities are undated secured limited recourse financial instruments designed
to track the price of individual commodity futures contracts or baskets of commodity futures contracts for which
the effects of foreign exchange risks are hedged, and give investors an exposure similar to that which could be
achieved by managing a long fully cash collateralised unleveraged position in futures contracts of specific
maturities, less applicable fees. However, unlike managing a futures position, Currency-Hedged Commodity
Securities involve no need to roll from one futures contract to another, no margin calls, and no other brokerage
or other costs in holding or rolling futures contracts (although security holders incur other costs in holding
Currency-Hedged Commodity Securities). No trading or management of futures contracts is required by the
Company. Currency-Hedged Commodity Securities allow investors to buy and sell their 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.
Currency-Hedged Commodity Securities are backed by commodity contracts (“Commodity Contracts”) with
terms corresponding to the terms of Currency-Hedged Commodity Securities. The Company gains exposure
to the movements in the commodity indices by holding corresponding Commodity Contracts. The Company is
currently party to two facility agreements, one with Citigroup Global Markets Limited (“Citigroup”) and one with
Merrill Lynch International (“Merrill Lynch”) (together the “Commodity Contract Counterparties”), enabling the
Company to create and cancel Commodity Contracts on an ongoing basis.
Each time Currency-Hedged Commodity Securities are issued or redeemed, matching Commodity Contracts
between the Company and a Commodity Contract Counterparty are created or cancelled by the Company.
The price of each class of Currency-Hedged Commodity Security is calculated on a daily basis and reflects
movements in the commodity index relevant to that class since the previous day, adjusted by any applicable
fees. Therefore, the return for a particular class of Currency-Hedged Commodity Security will primarily be
based on the performance of the relevant commodity index.
Each currency-hedged commodity index is calculated by reference to the corresponding un-hedged commodity
index and provides a hedge against movements in the exchange rate between the US Dollar and the currency
of denomination of that commodity index, which is rebalanced on a daily basis. As the Company issues
securities which provide exposure to the daily movements in one of the currency-hedged Commodity Indices
and the Company gains exposure to the movements in that Commodity Index by holding corresponding
Commodity Contracts, the Company is not required to undertake any currency hedging activities.
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Principal Activities (continued)
The Company earns a management fee and a licence allowance based upon the number of Currency-Hedged
Commodity Securities in issue. These fees are expressed as an annual percentage, calculated on a daily basis
and reflected in the net asset value (“NAV”) of the Currency-Hedged Commodity Securities on a daily basis,
and paid monthly in arrears.
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 Currency-Hedged Commodity Securities. In return for these services, the Company
has an obligation to remunerate ManJer with an amount equal to the aggregate of the management fee, licence
allowance and the creation and redemption fees (the “ManJer Fee”). The management fee and licence
allowance are transferred directly to ManJer by the Commodity Contract Counterparties under the terms of the
Commodity Contracts.
Prior to 30 June 2022 ManJer received creation and redemption fees directly from the holders of Currency-
Hedged Commodity Securities who have entered into an authorised participant agreement with the Company
(“Authorised Participants”). After 30 June 2022 the creation and redemption fees are included and settled
between the Authorised Participants and the Commodity Contract Counterparties as part of each creation or
redemption, being transferred directly to ManJer by the Commodity Contract Counterparties on a monthly
basis. Accordingly, there are no cash flows through the Company.
Review of Operations
The most recent Prospectus was issued on 6 October 2022. As at 31 December 2022, the Company had the
following number of classes, in aggregate, of Currency-Hedged Commodity Securities in issue and admitted to
trading on the following exchanges:
The Company has entered into contractual obligations to issue and redeem Currency-Hedged Commodity
Securities at set prices on each trading day. These prices are based on an agreed formula published in the
Prospectus, and are equal to the published NAVs of each class of Currency-Hedged Commodity Security. Each
time Currency-Hedged Commodity Securities are issued or redeemed, matching Currency-Hedged
Commodity Contracts between the Company and a Currency-Hedged Commodity Contract Counterparty are
created or cancelled by the Company.
IFRS 13 requires the Company to identify the principal market for the Currency-Hedged Commodity Securities
and to utilise the available price within that principal market. The directors consider the stock exchanges where
the Currency-Hedged Commodity Securities are listed to be the principal market and as a result the fair value of
the Currency-Hedged Commodity 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 Commodity Contracts and Currency-Hedged Commodity 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 NAV of the Commodity Contracts and the price of Currency-Hedged Commodity
Securities.
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Review of Operations (continued)
The Company recognises its financial assets (Commodity Contracts) and financial liabilities (Currency-Hedged
Commodity Securities) at fair value in the Statement of Financial Position. The gain or loss on Currency-
Hedged Commodity Securities and Commodity Contracts is recognised through profit or loss in line with the
Company’s accounting policy. This is presented in more detail in note 7 to these financial statements.
The Company is entitled to a management fee and licence allowance which are calculated on a daily basis:
classic and longer dated GBP-Hedged Commodity Securities have a management fee rate of 0.49%
per annum;
classic and longer Dated EUR-Hedged Commodity Securities have a management fee rate of 0.69%
per annum; and
all Commodity Securities are subject to the licence allowance of 0.05% per annum.
The Company is also entitled to apply creation and redemption fees on the creation and redemption of
Currency-Hedged Commodity Securities.
During the year, the Company generated income from creation and redemption fees, management fees and
licence allowance as follows:
Non-GAAP Performance Measures
Under the terms of the service agreement with ManJer, the Company accrued expenses equal to the
management fees, licence allowance and creation and redemptions fees, which, after taking into account other
operating income and expenses, resulted in a result before fair value movements for the year of USD Nil (2021:
USD Nil).
As the difference in the valuation of Commodity Contracts (held to support the Currency-Hedged Commodity
Securities) and Currency-Hedged Commodity Securities would be reversed on a subsequent redemption of the
Currency-Hedged Commodity Securities and cancellation of the corresponding Commodity Contracts (as
described further in note 6), the Company presents an adjusted Statement of Profit or Loss and Other
Comprehensive Income and an adjusted Statement of Changes in Equity in note 14 of the financial statements.
Coronavirus disease (COVID-19)
The Board continues to monitor the advice and developments relating to COVID-19. The WisdomTree group
has and continues to implement measures to maintain the ongoing safety and well-being of employees, whilst
continuing to operate business as usual.
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Review of Operations (continued)
Ukraine Invasion
On 24 February 2022, Russia engaged in military actions in the sovereign territory of Ukraine (the “Crisis”). The
Crisis has resulted in the implementation of sanctions and further actions by governments which, as well as the
Crisis itself, have impacted financial and commodities markets.
As the Crisis continues, the board of directors (the “Board”) also continues to closely monitor and assess the
impact on the Company’s portfolio operations and valuation and will take any further actions needed or as
required under the terms of the applicable Prospectuses, as facts and circumstances are subject to change and
may be specific to investments and jurisdictions. Whilst it is not currently possible to predict future market
conditions and therefore determine if any further action may be required on any other classes of Commodity
Securities, the action that may be required includes, but is not limited to, temporarily not accepting applications
for Currency-Hedged Commodity Securities, temporarily suspending Currency-Hedged Commodity Securities
from trading on Stock Exchanges or a compulsory redemption of Commodity Securities. Any such action will
be undertaken in accordance with the constitutive documents of Currency-Hedged Commodity Securities.
Furthermore, there are mechanisms within the constitutive documents of the Currency-Hedged Commodity
Securities that enable the Currency-Hedged Commodity Contract Counterparties to request a compulsory
redemption in certain circumstances as set out and explained within the Prospectuses.
Future Developments
The Board are not aware of any other 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.
Going Concern
The nature of the Company’s business dictates that the outstanding Currency-Hedged Commodity Securities
may be redeemed at any time by Authorised Participants and in certain circumstances by individual holders
and also, in certain circumstances, may be compulsorily redeemed by the Company. As the redemption of
Currency-Hedged Commodity Securities will always coincide with the cancellation of an equal amount of
Commodity Contracts, 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. The net reported position on balance sheet, including in instances
where a deficit is reported, is not considered to impact the going concern position of the Company as this
position results solely due to the unrealised gains or losses on Commodity Contracts and Currency-Hedged
Commodity Securities due to the accounting measurement basis applied in accordance with IFRS. As
Commodity Contracts are held to support Currency-Hedged Commodity Securities, any deficit or surplus
reported on unrealised positions would be reversed on a subsequent redemption of the Currency-Hedged
Commodity Securities and the related cancellation of Commodity Contracts. A reported deficit is not
considered indicative of any issues relating to solvency of the Company and the directors are satisfied that any
obligations arising in respect of the Currency-Hedged Commodity can be managed in accordance with the
terms of the applicable Prospectus. The directors consider the operations of the Company to be ongoing, with a
reasonable expectation that the Company has adequate resources to continue in operational existence until 30
April 2024, and accordingly these financial statements have been prepared on the going concern basis.
Dividends
There were no dividends declared or paid in the year (2021: USD nil). It is the Company’s policy that dividends
will only be declared when the directors are of the opinion that there are sufficient distributable reserves.
Corporate Social Responsibility
Sustainability and corporate responsibility are embedded throughout the business of the WisdomTree group as
we believe this benefits shareholders and employees of the WisdomTree group, investors in WisdomTree’s
products as well as wider society.
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Corporate Social Responsibility (continued)
Environmental, Social and Governance (“ESG”) investing is guided at the WisdomTree Inc, group level by an
ESG Steering Committee, which includes senior leaders from across the WisdomTree Inc, 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 website (https://www.wisdomtree.eu/en-gb/wisdomtree-corporate-responsibility).
The Board acknowledges that climate change and its impact on the global economy is of increasing interest
and focus for stakeholders and that, where relevant, stakeholders will seek information from companies
regarding how climate change is expected to impact the operations of the business and how climate change
risk has been considered in the context of reported results.
In acknowledging the above, the Board has considered the Company’s exposure to climate change and
determined that due to the nature of the Company and its operations there are no directly observed impacts of
climate change on the business. As a result, the Board concluded that there is no basis on which to provide
extended information of analysis relating to climate change, including as part of the basis of accounting or
individual accounting policies adopted by the Company.
In the above determination, the Board has concluded specifically that climate change, including physical and
transition risks, does not have a material impact on the recognition and separate measurement considerations
of the assets and liabilities in these financial statements as at 31 December 2022.
This conclusion is based on the fact that assets are reported at fair value under IFRS, are short dated, and as
set out in note 11 are categorised as level 2 due to the use of observable, verifiable inputs, including use of third
party information sources within the agreed pricing formulae (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.
Directors’ Remuneration
No director has a service contract with the Company. The directors of the Company who are employees within
the WisdomTree, Inc group do not receive separate remuneration in their capacity as directors of the Company.
The directors of the Company who are employees of R&H Fund Services (Jersey) Limited (“R&H” or the
“Administrator”) do not receive separate remuneration in their capacity as directors of the Company, however
R&H receives a fee from ManJer which includes services in respect of the Company, including for the provision
of directors who are employees of R&H.
Prior to 30 June 2022, R&H specified the fees for the provision of Steven Ross and Christopher Foulds as
directors at £8,000 per annum. Following a restructuring of the fee methodology effective from 1 July 2022, the
fee for the provision of Steven Ross and Christopher Foulds as directors is not separately identified and
accordingly, no directors’ fees are separately disclosed.
Employees
The Company does not have any employees. It is the Company’s policy to use the services of specialist
subcontractors or consultants as far as possible.
Auditor
The Independent Auditor is Ernst & Young LLP. A resolution to re-appoint Ernst & Young LLP will be proposed
at the next Board meeting of the directors.
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Principal Risks and Uncertainties
The Currency-Hedged Commodity Securities provide investors with exposure to the performance of the
relevant commodity index. Each Currency-Hedged Commodity Security is a debt instrument whose redemption
price is linked to the performance of the underlying commodity index. Each class of Currency-Hedged
Commodity Security is issued under limited recourse arrangements whereby the holders have recourse only to
the relevant Commodity Contracts held to support the Currency-Hedged Commodity Securities and not to the
Commodity Contracts of any other class of Currency-Hedged Commodity Security or the Company.
Any price movements in the value of the Commodity Contracts are wholly attributable to the holders of the
Currency-Hedged Commodity Securities, therefore the Company has no residual exposure to movements in
the value of the Commodity Contracts. 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 and licence
allowance) the gains or losses on the liability represented by the Currency-Hedged Commodity Securities are
matched economically by corresponding losses or gains attributable to the Commodity Contracts (see detail on
page 3 regarding the accounting mis-match).
Furthermore, the Company has an obligation to remunerate ManJer with (the “ManJer Fee”), which results in
the Company recognising a result before fair value movements of nil for each period. As a result, the principal
risks and uncertainties to which the Company is exposed has not materially changed during the year ended 31
December 2022.
Each Currency-Hedged Commodity Security is a debt instrument whose redemption price is linked to the
performance of the underlying hedged commodity index. Each class of Currency-Hedged Commodity Security
is issued under limited recourse arrangements whereby the holders have recourse only to the relevant
Commodity Contracts held to support the Currency-Hedged Commodity Security and not to the Commodity
Contracts of any other class of Currency-Hedged Commodity Security or the Company.
There is an inherent risk from the point of view of investors as the values of commodities, and thus the value of
the Currency-Hedged Commodity Securities, may vary widely due to, amongst other things, changing supply
and demand for a particular commodity, government and monetary policy or intervention, interest rate levels
and global or regional political, economic or financial events. The market price of Currency-Hedged
Commodity Securities is (and will remain) a function of supply and demand amongst investors wishing to buy
and sell Currency-Hedged Commodity Securities and the bid or offer spread that the market makers are willing
to quote.
Movements in the value of the underlying hedged commodity index, and thus the value of the Currency-Hedged
Commodity Securities, may vary widely which could have an impact on the demand for the Currency-Hedged
Commodity Securities issued by the Company. These movements are shown in notes 6 and 7.
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Principal Risks and Uncertainties (continued)
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Principal Risks and Uncertainties (continued)
Further information on the contractual value (at NAV) of the Currency-Hedged Commodity Securities on a daily basis can be found on the WisdomTree website
(https://www.wisdomtree.eu/en-gb/products).
Additional information on other financial and operational risks and uncertainties faced by the Company, including further details surrounding the value of Currency-Hedged
Commodity Securities and the Commodity Contracts are disclosed in note 11 of these financial statements.
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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 1. 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.
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 Currency-
Hedged Commodity Securities, has not undertaken any business, save for issuing and redeeming Currency-
Hedged Commodity 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 Currency-Hedged Commodity 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
exchange-traded products.
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
20 April 2023
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The directors are responsible for preparing the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with International Financial Reporting
Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law
1991. They are responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in Jersey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
With regard to Directive 2004/109/EC, amended by Directive 2013/50/EU (collectively the Transparency
Directive), the Central Bank (Investment Market Conduct) Rules of the Central Bank of Ireland and the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the directors confirm that to
the best of their knowledge that:
the financial statements for the year ended 31 December 2022 give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company as required by law and in accordance with
IFRS as issued by the IASB; and
the Directors’ Report gives a fair view of the development and performance of the Company’s
business, including financial position and the important events that have occurred during the year, and
their impact on these financial statements, together with a description of the principal risks and
uncertainties they face.
By order of the Board
Christopher Foulds
Director
Jersey
20 April 2023
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES LIMITED
Opinion
We have audited the financial statements of WisdomTree Hedged Commodity Securities Limited
(the “company”) for the year ended 31 December 2022 which comprise the Statement of Profit
or Loss and Other Comprehensive Income, the Statement of Financial Position, the Statement of
Cash Flows, the Statement of Changes in Equity and the related notes 1 to 14, including a
summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IFRS”).
In our opinion, the financial statements:
►
give a true and fair view of the state of the company’s affairs as at 31 December 2022 and
of its 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 2024. Management’s
assessment has focussed on a combination of;
o
Assessing the ongoing viability of the company through continued involvement
of its Commodity Transaction Counterparty and Authorised Participants;
o
Assessing the ongoing ability of WisdomTree Management Jersey Limited
(“ManJer”) to continue to meet its obligations as manager and pay all expenses of
the Company. This includes consideration of the assets under management of all
managed issuer entities (“Issuer Platform”) which includes this Company. In
assessing this ability we considered the fixed and variable operating costs that
could be supported under varying levels of total assets under management for
the Issuer Platform.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
►
Using our understanding of the business, we evaluated whether the considerations
and method adopted by management in assessing going concern was appropriate.
►
We performed reverse stress testing on the forecasts to understand how severe the
downside scenarios would have to be, and in particular the reduction in platform assets
under management, to result in the platform generating insufficient management fees to
cover operating costs. We observed significant headroom in management fee income, at
current Assets Under Management (“AUM”) levels, in excess of fixed costs which
supports management’s assumption that the Issuer Platform is able to absorb
heightened levels of volatility in AUM.
►
We considered whether management’s disclosures, in the Annual Report and financial
statements, sufficiently and appropriately discloses information required in respect of the
going concern assumption applied through consideration of relevant disclosure standards.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on the
company’s ability to continue as a going concern over the period to 30 April 2024.
Our responsibilities and the responsibilities of the directors with respect to going concern
are described in the relevant sections of this report. However, because not all future events
or conditions can be predicted, this statement is not a guarantee as to the company’s ability
to continue as a going concern.
Overview of our audit approach
►
►
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance
materiality determine our audit scope for the company. This enables us to form an opinion on the
financial statements.
We take into account size, risk profile, the organisation of the company and effectiveness of
controls, changes in the business environment and the potential impact of climate change when
assessing the level of work to be performed. All audit work was performed directly by the audit
engagement team.
Changes from the prior year There were no scoping changes compared to the prior year.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact
companies. The company has determined that there are no directly observed impacts of climate
change on the business due to the nature of the company and its operations. This is explained
on pages 5 to 6 in the corporate social responsibility section, which form part of the “Other
information,” rather than the audited financial statements.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
Our procedures on these disclosures therefore consisted solely of considering whether they are
materially inconsistent with the financial statements or our knowledge obtained in the course of
the audit or otherwise appear to be materially misstated.
Our audit effort in considering climate change was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, the adequacy of the company’s
disclosures in the financial statements as set out in note 2 and conclusion that there was no
further impact of climate change to be taken into account as the material assets and liabilities
are valued based on market pricing as required by IFRS.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
Valuation of Financial Assets
Our response to the risk
There were no matters
referenced commodities or
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
Valuation of Financial
Our response to the risk
There were no matters
represented 100% of the total
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the
effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate,
could reasonably be expected to influence the economic decisions of the users of the
financial statements. Materiality provides a basis for determining the nature and extent of
our audit procedures.
We determined materiality for the company to be US$2.03 million (2021: US$4.49 million),
which is 1% (2021: 1%) of Total Assets. We believe that Total Assets provides us with an
appropriate basis for audit materiality as Total Assets reflects the relevant exposure of holders of
issued securities to the underlying asset base.
There has been no change in the basis of materiality used compared to the prior year.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to
reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the company’s overall
control environment, our judgement was that performance materiality was 50% (2021: 75%)
of our materiality, namely US$1.02m (2021: US$3.37m). We have set performance materiality
at this percentage in response to the value of errors identified and corrected in the financial
statement close process.
We had set performance materiality at 75% of our planning materiality in the prior year based
on our prior experience of not identifying errors or significant audit differences.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Board that we would report to them all uncorrected audit differences in
excess of US$102k (2021: US$225k), which is set at 5% of materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1
to 11, 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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
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 11, the
directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect irregularities,
including fraud. The risk of not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES
LIMITED (continued)
However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the company and management.
►
We obtained an understanding of the legal and regulatory frameworks that are applicable
to the company and determined that the most significant are those that relate to the
reporting framework, comprising IFRS and the Companies (Jersey) Law 1991. In
addition, we concluded that there are certain significant laws and regulations that may
have an effect on the presentation and disclosure of the financial statements being the
applicable Listing Rules of the Central Bank of Ireland (Investment Market Conduct) and
UK Listing Authority Rules;
►
We understood how WisdomTree Hedged Commodity Securities Limited is complying
with those frameworks by making enquiries of the directors and key management of
the administrative service provider. We corroborated our enquiries through our review
of minutes of Board meetings, papers provided to the board and correspondence
received from regulatory bodies and noted no contradictory evidence;
►
We assessed the susceptibility of the company’s financial statements to material
misstatement, including how fraud might occur by understanding the investment
objectives of the Company and discussing with management to understand where
reporting was considered susceptible to fraud. Where this risk was considered to be
higher, we performed audit procedures in response to the identified fraud risk.
These procedures included testing of transactions to supporting documentation, testing
of specific accounting journal entries and focussed testing, including that referred to in
the key audit matters section above. These procedures were designed to provide
reasonable assurance that the financial statements were free from fraud or error;
►
Based on this understanding we designed our audit procedures to identify non-compliance
with such laws and regulations. Our procedures involved reading board minutes to identify
any non-compliance with laws and regulations, a review of any associated reporting
submitted to the board on compliance with laws and regulations and enquiries of members of
management of the appointed administrative service provider.
►
As the Company operates in the asset management industry the Audit Partner assessed
the experience of the engagement team and concluded that the team had the
appropriate competence and capabilities.
A further description of our responsibilities for the audit of the financial statements is located
on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
►
Following the recommendation from those charged with governance, we were appointed
by the company on 3 December 2019 to audit the financial statements for the year ending
31 December 2019 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and
reappointments is 4 years, covering the years ending 31 December 2019 to 31
December 2022.
►
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to
the company and we remain independent of the company in conducting the audit.
►
The audit opinion is consistent with the additional report to those charged with governance.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE HEDGED COMMODITY SECURITIES LIMITED
(continued)
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: 20 April 2023
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The directors consider the Company’s activities as continuing.
1 A non-statutory and non-GAAP Statement of Profit or Loss and Other Comprehensive Income reflecting adjustments
representing the movement in the difference between the value of the Commodity Contracts and the price of Currency-
Hedged Commodity Securities is set out in note 14.
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 25 to 41 form part of these financial statements
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The assets and liabilities in the above Statement of Financial Position are presented in order of liquidity from
most to least liquid.
The financial statements on pages 21 to 41 were approved and authorised for issue by the board of directors
and signed on its behalf on 20 April 2023.
Christopher Foulds
Director
The notes on pages 25 to 41 form part of these financial statements
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Currency-Hedged Commodity Securities are issued through a direct transfer of cash from the Authorised
Participants to the Commodity Contract Counterparties or redeemed by the direct transfer of cash by the
Commodity Contract Counterparties to the Authorised Participants. As such the Company is not a party to any
cash transactions. The creations and redemptions of Currency-Hedged Commodity Securities and creations
and cancellations of Commodity Contracts, which are non-cash transactions for the Company, are disclosed in
notes 6 and 7 respectively in the reconciliation of opening to closing Currency-Hedged Commodity Securities
and Commodity Contracts.
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 Currency-Hedged Commodity Securities. In return for these services, the Company
has an obligation to remunerate ManJer with an amount equal to the aggregate of the management fee, licence
allowance and the creation and redemption fees (the “ManJer Fee”). The management fee and licence
allowance are transferred directly to ManJer by the Commodity Contract Counterparties under the terms of the
Commodity Contracts. Prior to 30 June 2022 ManJer received creation and redemption fees directly from the
Authorised Participants. After 30 June 2022 the creation and redemption fees are included and settled between
the Authorised Participants and the Commodity Contract Counterparties as part of each creation or redemption,
being transferred directly to ManJer by the Commodity Contract Counterparties on a monthly basis.
Accordingly, there are no cash flows through the Company.
The notes on pages 25 to 41 form part of these financial statements
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3 A non-statutory and non-GAAP Statement of Changes in Equity reflecting adjustments representing the difference between the value of Commodity Contracts and the price of Currency-
Hedged Commodity Securities is set out in note 14.
The notes on pages 25 to 41 form part of these financial statements
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1.
General Information
WisdomTree Hedged Commodity Securities Limited (the “Company”) is a company incorporated and domiciled
in Jersey. The address of the registered office is Ordnance House, 31 Pier Road, St. Helier, Jersey, JE4 8PW.
The Company’s principal activity is the issue and listing of currency-hedged commodity securities (“Currency-
Hedged Commodity Securities”). Currency-Hedged Commodity Securities are undated secured limited recourse
financial instruments designed to track the price of individual commodity futures contracts or baskets of
commodity futures contracts for which the effects of foreign exchange risks are hedged, and give investors an
exposure similar to that which could be achieved by managing a long fully cash collateralised unleveraged
position in futures contracts of specific maturities, less applicable fees. However, unlike managing a futures
position, Currency-Hedged Commodity Securities involve no need to roll from one futures contract to another, no
margin calls, and no other brokerage or other costs in holding or rolling futures contracts (although security
holders incur other costs in holding Currency-Hedged Commodity Securities). No trading or management of
futures contracts is required by the Company. Currency-Hedged Commodity Securities allow investors to buy
and sell their 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.
Currency-Hedged Commodity Securities are backed by commodity contracts (“Commodity Contracts”) with
terms corresponding to the terms of Currency-Hedged Commodity Securities. Each class of Currency-Hedged
Commodity Security is issued under limited recourse arrangements whereby the holders have recourse only to
the relevant Commodity Contract held to support the Currency-Hedged Commodity Securities and not to the
Commodity Contracts of any other class of Currency-Hedged Commodity Securities or to the Company. The
Company does not make gains from trading in the underlying Commodity Contracts. As a result (and with the
exception of the impact of management fees and licence allowance), from a commercial perspective gains and
losses in respect of Commodity Contracts will always be offset by a corresponding loss or gain on the Currency-
Hedged Commodity Securities and therefore commercially the Company does not retain any net gains or losses
or net risk exposures. However, the difference in valuation between Commodity Contracts and Currency-
Hedged Commodity Securities creates a mis-match between values reported within these financial statements.
This difference in valuation would be reversed on a subsequent redemption of the Currency-Hedged Commodity
Securities and cancellation of the corresponding Commodity Contracts. Further details are disclosed within the
Accounting Policies and in note 14, with additional information regarding the risks of the Company disclosed in
note 11. 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 14 of the financial statements to reflect the
economic results of the Company through the reversal of the difference in valuation between Commodity
Contracts and Currency-Hedged Commodity Securities given the gain or loss would be reversed on a
subsequent redemption of the Currency-Hedged Commodity Securities and cancellation of the corresponding
Commodity Contracts, 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 trading or management of futures
contracts is required of the Company because the Company has entered into arrangements to acquire an
equivalent asset exposure represented by the Currency-Hedged Commodity Securities from third parties which
fully hedges the exposure of the Company.
The Company is entitled to:
(1)
a management fee and a licence allowance which are calculated by applying a fixed percentage to the
Contractual Value of Currency-Hedged Commodity Securities in issue on a daily basis (the
“Management Fee and Licence Allowance”); and
(2)
apply creation and redemption fees on the issue and redemption of the Currency-Hedged Commodity
Securities.
No creation or redemption fees are payable to the Company when investors trade in the Currency-Hedged
Commodity Securities on a listed market such as the London Stock Exchange.
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 Currency-Hedged Commodity Securities. In return for these services, the
Company has an obligation to remunerate ManJer with an amount equal to the management fee, licence
allowance and the creation and redemption fees earned (the “ManJer Fee”). As a result, the Company
recognises a result before fair value movements of nil for each period.
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2.
Accounting Policies
The main accounting policies of the Company are described below.
Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the
International Financial Reporting Interpretations Committee of the IASB. The financial statements have been
prepared under the historical cost convention, as modified by the revaluation of certain financial assets and
financial liabilities held at fair value through profit or loss.
The Board has concluded specifically that climate change, including physical and transition risks, does not have
a material impact on the recognition and separate measurement considerations of the assets and liabilities in
these financial statements as at 31 December 2022.
This conclusion is based on the fact that assets are reported at fair value under IFRS, are short dated, and as set
out in note 11 are categorised as level 2 due to the use of observable, verifiable inputs, including use of third
party information sources within the agreed pricing formulae (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.
Critical Accounting Estimates and Judgements
The presentation of financial statements in conformity with IFRSs requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Company’s
accounting policies. The Company makes estimates and assumptions that affect the reported amounts of assets
and liabilities. Estimates are continually evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Significant Judgements
The key accounting judgement required to prepare these financial statements is 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 15.
Significant Estimates
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 Currency-Hedged Commodity Securities
may be redeemed at any time by Authorised Participants and in certain circumstances by individual holders and
also, in certain circumstances, may be compulsorily redeemed by the Company. As the redemption of Currency-
Hedged Commodity Securities will always coincide with the cancellation of an equal amount of Commodity
Contracts, 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. The net reported position on balance sheet, including in instances where a deficit
is reported, is not considered to impact the going concern position of the Company as this position results solely
due to the unrealised gains or losses on Commodity Contracts and Currency-Hedged Commodity Securities due
to the accounting measurement basis applied in accordance with IFRS. As Commodity Contracts are held to
support Currency-Hedged Commodity Securities, any deficit or surplus reported on unrealised positions would
be reversed on a subsequent redemption of the Currency-Hedged Commodity Securities and the related
cancellation of Commodity Contracts. A reported deficit is not considered indicative of any issues relating to
solvency of the Company and the directors are satisfied that any obligations arising in respect of the Currency-
Hedged Commodity can be managed in accordance with the terms of the applicable Prospectus. The directors
consider the operations of the Company to be ongoing, with a reasonable expectation that the Company has
adequate resources to continue in operational existence until 30 April 2024, and accordingly these financial
statements have been prepared on the going concern basis.
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2.
Accounting Policies (continued)
Accounting Standards
(a)
Standards, amendments and interpretations adopted in the year:
There were no new standards, amendments and interpretations adopted in the current year that resulted in
a significant effect on these financial statements. In particular, the following standards that have been
revised, issued and became effective but are not considered applicable to the Company:
Amendments to IFRS 3 Business Combinations
Amendments to IFRS 4 Insurance Contracts
Amendments to IFRS 16 Leases
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
Annual Improvements to IFRS
2.
Accounting Policies (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 8 Accounting Policies, Changes in Accounting Estimates and Errors (effective for
annual periods beginning on or after 1 January 2023)
Amendments to IAS 12 Deferred Tax (effective for annual periods beginning on or after 1 January
2023)
Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on
or after 1 January 2024)
Amendments to IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2024)
The directors do not expect the adoption of the above standards, amendments and interpretations that are
in issue but not yet effective will have a material impact on the financial statements of the Company in future
periods.
Currency-Hedged Commodity Securities and Commodity Contracts
i)
Issue and Redemption
Each time a Currency-Hedged Commodity Security is issued or redeemed by the Company a
corresponding number and value of Commodity Contracts are created or cancelled with Citigroup Global
Markets Limited (“Citigroup”) and Merrill Lynch International (“Merrill Lynch”) (collectively the “Commodity
Contract Counterparties”). The Commodity Contracts represent the financial assets of the Company and
the Currency-Hedged Commodity Securities give rise to the financial liabilities. Upon initial recognition, the
fair value is recorded using the price calculated based on the formula set out in the Prospectus, referred to
as the “Contractual Value” (see below).
Financial assets and liabilities are recognised and de-recognised on the transaction (trade) date.
ii)
Classification at fair value through Profit or Loss
Each Currency-Hedged Commodity Security and Commodity Contract comprises a financial instrument
whose redemption or cancellation price is linked to the performance of the relevant commodity index
adjusted by the applicable fees and expenses.
The Commodity Contracts held are classified as financial assets at fair value through profit or loss under
IFRS 9 and the Currency-Hedged Commodity Securities are classified as financial 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.
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2.
Accounting Policies (continued)
Currency-Hedged Commodity Securities and Commodity Contracts (continued)
iii)
Pricing
The Commodity Contracts are priced by reference to certain currency-hedged commodity indices
calculated and published by Bloomberg L.P. or Bloomberg Finance L.P. (together “Bloomberg”) and a
multiplier calculated by the Company and agreed with the Commodity Contract Counterparties. The
multiplier takes into account the daily accrual of the Management Fee and Licence Allowance and swap
spread as well as the incremental capital enhancement component of the Currency-Hedged Commodity
Security, and is the same across all Currency-Hedged Commodity Securities of the same type (i.e. all
classic Currency-Hedged Commodity Securities use the same multiplier). This price (the Contractual
Value) is calculated based on the formula set out in the Prospectus and is considered to be the fair value of
the Commodity Contracts.
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 Currency-Hedged Commodity
Securities are listed to be the principal market and as a result the fair value of the Currency-Hedged
Commodity 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 Currency-Hedged
Commodity Securities are priced using the latest traded mid-market price on (or before) the Statement of
Financial Position date.
Consequently, a difference arises between the value of Commodity Contracts (held to support the
Currency-Hedged Commodity Securities) and Currency-Hedged Commodity Securities (at market value)
presented in the Statement of Financial Position. This difference is reversed on a subsequent redemption
of the Currency-Hedged Commodity Securities and cancellation of the corresponding Commodity
Contracts.
Commodity Contracts and Securities Awaiting Settlement
The issue and redemption of Currency-Hedged Commodity Securities, and the creation or cancellation of
Commodity Contracts, 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
Commodity Contracts and the Currency-Hedged Commodity 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.
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 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 revaluation reserve, which the directors have deemed
to be non-distributable, as the balance relates to unrealised gains and losses on Commodity Contracts (held to
support the Currency-Hedged Commodity Securities) and Currency-Hedged Commodity Securities, which will
be reversed on a subsequent redemption of the Currency-Hedged Commodity Securities and the related
cancellation of Commodity Contracts and will therefore not be realised.
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2.
Accounting Policies (continued)
Income
The Company derives its income over time (in respect of management fees), and at a point in time (in respect of
creation and redemption fees) as follows:
i)
Management Fees and Licence Allowance
Management Fees and Licence Allowance are calculated by applying a fixed percentage to the Contractual
Value of Currency-Hedged Commodity Securities in issue on a daily basis in accordance with the terms of
the securities issued:
classic and longer dated GBP-Hedged Commodity Securities have a management fee rate of 0.49% per
annum;
classic and longer Dated EUR-Hedged Commodity Securities have a management fee rate of 0.69%
per annum; and
all Commodity Securities are subject to the licence allowance of 0.05% per annum.
The Management Fees and Licence Allowance are accrued and recognised on a daily basis and are
invoiced on a monthly basis and settled directly between ManJer and the Commodity Contract
Counterparties.
ii)
Creation and Redemption Fees
Fees for the issue and redemption of Commodity Securities are recognised at the fair value of the
consideration expected to be received, on the date on which the transaction becomes legally binding.
Prior to 30 June 2022, accrued creation and redemption fees were invoiced on a quarterly basis and settled
directly between ManJer and the relevant Authorised Participants. After 30 June 2022 the creation and
redemption fees are included as part of each creation or redemption and settled between the Authorised
Participants and the Commodity Contract Counterparties, and transferred directly to ManJer by the
Commodity Contract Counterparties on a monthly basis.
Foreign Currency
The financial statements of the Company are presented in the currency in which the majority of Currency-
Hedged Commodity 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 the transaction. Monetary
assets and liabilities denominated in foreign currencies at the year end date are translated at rates ruling at
that date. Prior to 30 June 2022, creation and redemption fees were translated at the average rate for the
month in which they are incurred. The resulting differences are accounted for through profit or loss.
Segmental Reporting
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.
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.
Whilst the Company has a number of different Currency-Hedged Commodity Securities in issue, the financial
information reviewed by CODM is not segregated by those different Currency-Hedged Commodity Securities
and therefore the board of directors have concluded that these components do not meet the criteria of operating
segments. Furthermore marketing of the Currency-Hedged Commodity Securities is undertaken on a
centralised basis and the terms of the Currency-Hedged Commodity Securities of any class rank pari passu in all
respects irrespective of stock exchange listing.
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2.
Accounting Policies (continued)
Segmental Reporting (continued)
As a result, the CODM determined that the Company is operating a single segment or product group, classic and
longer dated Currency-Hedged Commodity Securities, and one geographical segment which is Europe.
Therefore the Company discloses its results on an equivalent aggregated form and does not provide and further
segmental information. 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.
3.
Result Before Fair Value Movements
Result Before Fair Value Movements for the year comprised:
Audit Fees for the year of GBP 25,079 will be met by ManJer (2021: GBP 20,500).
4.
Taxation
The Company is subject to Jersey Income Tax. During the year the Jersey Income Tax rate applicable to the
Company is zero percent (2021: zero percent).
5.
Trade and Other Receivables
The fair value of these receivables is equal to the carrying value. The Trade and Other Receivables are due
to be recovered within 12 months of the year end.
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6.
Commodity Contracts
As at 31 December 2022, there were certain Commodity Contracts awaiting settlement in respect of the creation
or redemption of Currency-Hedged Commodity Securities with transaction dates before the year end and
settlement dates in the following year:
The amount receivable on Commodity Contracts awaiting settlement is USD 219,949 (2021: USD
326,512).
The amount payable on Commodity Contracts awaiting settlement is USD 367,961 (2021: USD
796,585).
The below reconciliation of changes in the Commodity Contracts includes only non-cash changes.
7.
Currency-Hedged Commodity Securities
Whilst the Currency-Hedged Commodity Securities are quoted on the open market, the Company’s ultimate
liability relates to its contractual obligations to issue and redeem Currency-Hedged Commodity Securities at set
prices on each trading day. These prices are based on an agreed formula, and are equal to the published net
asset value (“NAV”) of each class of Currency-Hedged Commodity Security. Therefore, the actual contractual
issue and redemption of Currency-Hedged Commodity Securities occur at a price that corresponds to the fair
value of the Commodity Contracts. As a result, the Company has no net exposure to gains or losses on the
Currency-Hedged Commodity Securities and Commodity Contracts.
The Company measures the Currency-Hedged Commodity Securities at their fair value in accordance with IFRS
13 rather than at the Contractual Value (as described in the Prospectus). The fair value is the price quoted on
stock exchanges or other markets where the Currency-Hedged Commodity 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:
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7.
Currency-Hedged Commodity Securities (continued)
The Contractual Values and changes thereof during the year based on the contractual settlement values are:
The gain or loss on the difference between the value of the Commodity Contracts and the fair value of Currency-
Hedged Commodity Securities would be reversed on a subsequent redemption of the Currency-Hedged
Commodity Securities and cancellation of the corresponding Commodity Contracts. Refer to note 14 for the
non-statutory and non-GAAP adjustments which reflect the results of this reversal.
As at 31 December 2022, there were certain Currency-Hedged Commodity Securities awaiting settlement in
respect of creations or redemptions with transaction dates before the year end and settlement dates in the
following year:
The amount receivable on Currency-Hedged Commodity Securities awaiting settlement is USD 367,961
(2021: USD 796,585).
The amount payable on Currency-Hedged Commodity Securities awaiting settlement is USD 219,949
(2021: USD 326,512).
The below reconciliation of changes in the Commodity Securities, being liabilities arising from financing
activities, includes only non-cash changes.
8.
Trade and Other Payables
The fair value of these payables is equal to the carrying value. The ManJer Fee Payable is due to be settled
within 12 months of the year end.
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9.
Stated Capital
The Company can issue an unlimited capital of nil par value shares in accordance with its Memorandum of
Association.
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”).
10.
Related Party Disclosures
Entities and individuals which have significant influence over the Company, either through ownership or by virtue
of being a director of the Company are considered to be related parties. In addition, entities with common
ownership to the Company and entities with common directors are also considered to be related parties.
Fees charged by ManJer during the year:
The following balances were due to ManJer at year end:
At 31 December 2022, USD 3 is receivable from ManJer (2021: USD 3).
As disclosed in the Directors’ Report, ManJer paid fees to R&H Fund Services (Jersey) Limited (“R&H” or the
“Administrator”) for administration services, which includes the provision of Directors, however following the
restructuring of the fee agreement effective from 1 July 2022, fees for those services are no longer separately
identified following the restructuring of the fee agreement effective from 1 July 2022.
Steven Ross is a director of R&H and a partner in Rawlinson & Hunter, Jersey Partnership, which wholly owns
R&H. Christopher Foulds is a director of R&H. During the year, R&H charged ManJer administration fees, which
include the Company and other entities for which ManJer is Manager and R&H is the Administrator, in
aggregate, of GBP 19,526 (2021: GBP 39,052), of which GBP nil (2021: GBP 9,763) was outstanding at the year
end.
Peter Ziemba and Stuart Bell are executive officers of WisdomTree, Inc.
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11.
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 Currency-Hedged Commodity Securities are subject to normal market fluctuations and other risks inherent
in investing in securities and other financial instruments. There can be no assurance that any appreciation in the
value of securities will occur, and the capital value of an investor’s original investment is not guaranteed. The
value of investments may go down as well as up, and an investor may not get back the original amount invested.
The information provided below is not intended to be a comprehensive summary of all the risks associated with
the Currency-Hedged Commodity Securities and investors should refer to the most recent Prospectus for a
detailed summary of the risks inherent in investing in the Currency-Hedged Commodity 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 Authorised Participants or the Commodity Contract Counterparties will
default on their contractual obligations resulting in financial loss. Each class of Currency-Hedged Commodity
Security is issued under limited recourse arrangements whereby the holders have recourse only to the relevant
Commodity Contracts (held to support the Currency-Hedged Commodity Securities) and not to the Commodity
Contracts of any other class of Currency-Hedged Commodity Securities or to the Company, therefore limiting the
credit risk of the Company in connection with the issue of the Currency-Hedged Commodity Securities.
There are compulsory redemption provisions as outlined in the prospectus that can be triggered by the Company
or the Commodity Contract Counterparties in certain circumstances whereby a compulsory redemption of all
Currency-Hedged Commodity Securities in issue would be undertaken.
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.
The value of Currency-Hedged Commodity Securities and the ability of the Company to repay the redemption
price is dependent on the receipt of such amount from the Commodity Contract Counterparties and may be
affected by the credit rating attached to each Commodity Contract Counterparty. Currently the Company has
two Commodity Contract Counterparties, Merrill Lynch and Citigroup. At the reporting date the exposure to the
Commodity Contract Counterparties was split approximately 85% and 15% (2021: 64% and 36%), respectively.
In the event that a Commodity Contract Counterparty was to default, the Company would only transact with the
non-defaulting Commodity Contract Counterparty. Furthermore, the Company could use the proceeds resulting
from the sale of the collateral (see below) to transact with the non-defaulting Commodity Contract Counterparty
to replacing the affected Commodity Contracts where possible.
To cover the credit risk under the Commodity Contracts, the Commodity Contract Counterparties are obliged to
place an amount of collateral, equal to or greater than the exposure, into a pledge account with the custodian,
based on the total outstanding value of the Commodity Contracts at the end of the previous trading day. The
collateral held with the custodian is held in accounts in the names of the Commodity Contract Counterparties. In
the event of default by a Commodity Contract Counterparty, the Company has rights which it can exercise over
the collateral amounts placed in this pledge account. The realised value of the collateral may differ from the
amount owed by the Currency Transaction Counterparty, as prices fluctuate intraday (i.e. from the last point the
exposure and collateral were valued). Our collateral schemes apply strict margins and concentration limits to
reduce the risk of such a loss, but do not completely remove it.
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11.
Financial Risk Management (continued)
(a)
Credit Risk (continued)
The Board monitors credit risk exposure, including through an assessment of the credit rating of the Commodity
Contract Counterparties Citigroup: A+ (2021: A+) (Fitch, 19 September 2022 and Merrill Lynch: AA (2021: AA)
(Fitch, 19 September 2022)), in order to ensure the Company’s exposure is managed, and has continued to do
so more closely with a focus on any potential impact of, or developments relating to both the Ukraine Crisis and
COVID-19.
(b)
Settlement Risk
Settlement risk primarily refers to the risk that an Authorised Participant or the Commodity Contract
Counterparty 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 cash, Commodity Contracts or Currency-Hedged Commodity Securities on the settlement date.
The directors feel that this risk is mitigated as a result of the cash or Currency-Hedged Commodity Securities
settling through the CREST system. The system ensures that the 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 6 and 7.
(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. In addition, amounts in respect of the Management Fee, Licence
Allowance and creation and redemption fees are transferred from the relevant counterparties directly to ManJer
and there are no cash flows through the Company.
The Currency-Hedged Commodity 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, or in the case of a compulsory
redemption. Generally, only Authorised Participants can submit applications and redemptions directly with the
Company.
Furthermore, liquidity risk for the Company is mitigated because the timing of redemptions of the Currency-
Hedged Commodity Securities and Commodity Contracts are matched, therefore the Company does not have to
wait for a longer-term contract to mature in order to pay its debts to ex-security holders. Furthermore, while the
agreements with the Commodity Contract Counterparties include limits (both daily and in the aggregate) on the
issue and cancellation of Commodity Contracts, the Company is not obliged to issue and redeem Currency-
Hedged Commodity Securities in excess of those limits under the terms of the security agreement.
Consequently, the Company has not presented any tabular information in respect of liquidity risk.
(d)
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 liability in respect of Commodity Contracts and Currency-Hedged Commodity
Securities, respectively, relates to its contractual obligations to issue and redeem Currency-Hedged Commodity
Securities at set prices on each trading day. The fair value of each creation and redemption of Currency-Hedged
Commodity Securities is recorded using the price by reference to the value of the commodity indices calculated
and published by Bloomberg. 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 14 this mismatch is reversed on the
redemption of Currency Securities.
As a result, the Company’s contractual and economic liability in connection with the issue and redemption of
Currency-Hedged Commodity Securities is matched by movements in corresponding Commodity Contracts.
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11.
Financial Risk Management (continued)
(d)
Sensitivity Analysis (continued)
Whilst sensitivity analysis could be performed on this mismatch, 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.
(e)
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 is the Stated Capital 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 Commodity Contracts (held to support the Currency-Hedged Commodity Securities) and
Currency-Hedged Commodity Securities, which are reversed on a subsequent redemption of the Currency-
Hedged Commodity Securities and the related cancellation of Commodity Contracts 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 Currency-Hedged Commodity Securities. These
Currency-Hedged Commodity Securities are issued and redeemed as demand requires. The Company holds a
corresponding number of Commodity Contracts which matches the total liability of the Currency-Hedged
Commodity 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. 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, Licence Allowance and creation and redemption fees earned.
As all Currency-Hedged Commodity Securities in issue are supported by an equivalent number of Commodity
Contracts held with the Commodity Contract Counterparties 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 Currency-Hedged Commodity Securities.
(f)
Market Risk
Market risk is the risk that changes in market prices (such as index and equity 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, Currency-Hedged Commodity Securities provide investors with long exposure to the
performance of the relevant commodity index.
The value of the Company’s liability in respect of the Currency-Hedged Commodity Securities fluctuates
according to the performance of the underlying commodity indices and the risk of such change in price is
managed by the Company by entering into Commodity Contracts with the Commodity Contract
Counterparties which match the liability. Whilst the Currency-Hedged Commodity Securities are quoted on
the open market, the Company’s ultimate liability relates to its contractual obligations to issue and redeem
Currency-Hedged Commodity Securities at set prices on each trading day. The Company measures the
Currency-Hedged Commodity 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 Commodity Contracts and the fair value of Currency-Hedged Commodity Securities would be reversed
on a subsequent redemption of the Currency-Hedged Commodity Securities and cancellation of the
corresponding Commodity Contracts. Refer to note 7 for the further details regarding fair values.
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11.
Financial Risk Management (continued)
(f)
Market Risk (continued)
i)
Price Risk (continued)
The Company therefore bears no residual financial risk on a contractual basis from a change in the value of
a commodity, commodity index or currency by reference to the futures price.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 value of commodities, and thus
the value of the Currency-Hedged Commodity Securities, may vary widely due to, amongst other things,
changing supply or demand for a particular commodity, government and monetary policy or intervention,
interest rate levels and global or regional political, economic or financial events.
The market price of Currency-Hedged Commodity Securities is (and will remain) a function of supply and
demand amongst investors wishing to buy and sell Currency-Hedged Commodity Securities and the bid-
offer spread that the market makers are willing to quote. This is highlighted further in note 14, and below
under the Fair Value Hierarchy.
Coronavirus disease (COVID-19)
The Board continues to monitor the advice and developments relating to COVID-19. The WisdomTree
group has and continues to implement measures to maintain the ongoing safety and well-being of
employees, whilst continuing to operate business as usual.
Ukraine Invasion
On 24 February 2022, Russia engaged in military actions in the sovereign territory of Ukraine (the “Crisis”).
The Crisis has resulted in the implementation of sanctions and further actions by governments which, as well
as the Crisis itself, have impacted financial and commodities markets.
As the Crisis continues, the board of directors (the “Board”) also continues to closely monitor and assess the
impact on the Company’s portfolio operations and valuation and will take any further actions needed or as
required under the terms of the applicable Prospectuses, as facts and circumstances are subject to change
and may be specific to investments and jurisdictions. Whilst it is not currently possible to predict future
market conditions and therefore determine if any further action may be required on any other classes of
Commodity Securities, the action that may be required includes, but is not limited to, temporarily not
accepting applications for Currency-Hedged Commodity Securities, temporarily suspending Currency-
Hedged Commodity Securities from trading on Stock Exchanges or a compulsory redemption of Commodity
Securities. Any such action will be undertaken in accordance with the constitutive documents of Currency-
Hedged Commodity Securities. Furthermore, there are mechanisms within the constitutive documents of
the Currency-Hedged Commodity Securities that enable the Currency-Hedged Commodity Contract
Counterparties to request a compulsory redemption in certain circumstances as set out and explained within
the Prospectuses.
ii)
Interest Rate Risk
The multiplier used in the pricing of the Commodity Contracts or the Currency-Hedged Commodity
Securities takes into account the incremental capital enhancement component of the Currency-Hedged
Commodity Security, which includes the impact of interest rates. This incremental capital enhancement
component of the Commodity Contracts and Currency-Hedged Commodity Securities is attributable to the
security holder. As a result, the Company does not have significant exposure to interest rate risk.
iii)
Currency Risk
The Company has exposure to currency risk as the Currency-Hedged Commodity Securities are priced in
US Dollars and hedged against exchange rate movements between the US Dollar, Australian Dollar, Euro
and Pound Sterling. However, 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 Currency-Hedged Commodity Securities are
matched economically by corresponding losses or gains attributable to the Commodity Contracts.
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11.
Financial Risk Management (continued)
(g)
Fair Value Hierarchy
The levels in the hierarchy are defined as follows:
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 Currency-Hedged Commodity Securities
are quoted and traded on the open market. Where the market on which the Currency-Hedged Commodity
Securities prices are quoted is determined to be active at the relevant reporting date, the Currency-Hedged
Commodity Securities are classified as level 1 financial liabilities. Where the market on which the Currency-
Hedged Commodity Securities prices are quoted is determined to be inactive at the relevant reporting date, the
Currency-Hedged Commodity Securities are classified as level 2 financial liabilities. The Company values the
Level 2 Currency-Hedged Commodity Securities using the unadjusted market price available at each reporting
date. This is considered to most appropriately reflect the price at which transactions would occur as at the
reporting date.
The Company’s rights in respect of Commodity Contracts relate to its contractual obligations to issue and
redeem Currency-Hedged Commodity Securities at set prices on each trading day. These prices are based on
an agreed formula (set out in the Prospectus), and are equal to the published NAVs of each class of Currency-
Hedged Commodity Security. Therefore, Commodity Contracts are classified as level 2 financial assets, 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 Currency-Hedged Commodity Securities and the Commodity Contracts are recognised at fair value upon
initial recognition and revalued to fair value in line with the Company’s accounting policy. There are no assets or
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. Transfers between levels may also be recognised if
the primary market on which the Currency-Hedged Commodity Securities prices are quoted was determined to
be inactive at the relevant reporting date. The Company considers both the last trade date and trading volumes
during the 5 trading days leading up to each reporting date to determine if the market for a particular Currency-
Hedged Commodity Security is active. Transfers as a result of the analysis of the activity levels of the market are
identified and recognised at each reporting date.
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11.
Financial Risk Management (continued)
(g)
Fair Value Hierarchy (continued)
There were no transfers or reclassifications between Level 1 and Level 2 for any of the assets during the year or
at the reporting date. As at 31 December 2022, Currency-Hedged Commodity Securities with a fair value of USD
470,409 (2021: USD 1,766,787) were transferred from Level 1 to Level 2, and Currency-Hedged Commodity
Securities with a fair value of USD 1,766,787 (2021: USD 3,227,775) were transferred from Level 2 to Level 1.
12.
Ultimate Controlling Party
In accordance with the disclosure requirements of IFRS the directors have determined that no entity meets the
definition of immediate parent or ultimate controlling party. The holder of issued equity shares is HoldCo, a
Jersey registered company. WisdomTree, Inc (formerly WisdomTree Investments, Inc) is the ultimate controlling
party of HoldCo.
13.
Events Occurring After the Reporting Period
There have been no significant events that have occurred since the end of the reporting period up to the date of
signing the Financial Statements which would impact on the financial position of the Company disclosed in the
Statement of Financial Position as at 31 December 2022, or on the results and cash flows of the Company for the
year ended on that date.
14.
Non-GAAP and Non-Statutory Information
As a result of the mis-match in the accounting valuation of Commodity Contracts (held to support the Currency-
Hedged Commodity Securities) and Currency-Hedged Commodity Securities (as disclosed in notes 6 and 7) 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 Commodity Contracts and the price of Currency-Hedged Commodity
Securities. The Statement of Changes in Equity also reflects the fair value movements on both the Commodity
Contracts (held to support the Currency-Hedged Commodity Securities) and the Currency-Hedged Commodity
Securities.
These gains or losses on the difference between the value of the Commodity Contracts (held to support the
Currency-Hedged Commodity Securities) and the price of Currency-Hedged Commodity Securities would be
reversed on a subsequent redemption of the Currency-Hedged Commodity Securities and cancellation of the
corresponding Commodity Contracts. Furthermore, each class of Currency-Hedged Commodity Security is
issued under limited recourse arrangements whereby the holders have recourse only to the relevant Commodity
Contracts (held to support the Currency-Hedged Commodity Securities) and not to the Commodity Contracts of
any other class of Currency-Hedged Commodity Security or to the Company. As a result, the Company does not
make gains from trading in the underlying Commodity Contracts (held to support the Currency-Hedged
Commodity Securities) and, from a commercial perspective (with the exception of the impact of Management
Fees and Licence Allowance) gains and losses in respect of Commodity Contracts (held to support the
Currency-Hedged Commodity Securities) will always be offset by a corresponding loss or gain on the Currency-
Hedged Commodity Securities and the Company does not retain any net gains or losses.
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14.
Non-GAAP and Non-Statutory Information (continued)
The mismatched accounting values are as shown below:
To reflect the commercial results, the Company has presented below a non-GAAP and non-Statutory Statement
of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity for the period which
reflect an Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Currency-Hedged
Commodity Securities, together with those gains or losses being transferred to a separate reserve which is
deemed non-distributable.
(a)
Non-GAAP and Non-Statutory Statement of Profit or Loss and Other Comprehensive Income
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14.
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 the Commodity Contracts and the price of Currency-Hedged Commodity Securities.
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