WisdomTree Metal Securities Limited
Registered No: 95996
Annual Report and Audited Financial Statements for the
Year ended 31 December 2023
Management and Administration
1
Directors’ Report
2-10
Statement of Directors’ Responsibilities
11
Independent Auditor’s Report
12-18
Statement of Profit or Loss and Other Comprehensive Income
19
Statement of Financial Position
20
Statement of Cash Flows
21
Statement of Changes in Equity
22
Notes to the Financial Statements
23-42
www.wisdomtree.eu
Directors
Administrator
Registered Office
Registrar
Manager
Trustee
Custodian
Swiss Gold Custodian
Auditor
Jersey Legal Advisers
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The directors of WisdomTree Metal Securities Limited (“MSL” or the “Company”) submit herewith the annual
report and financial statements of the Company for the year ended 31 December 2023.
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 metal securities (“Metal Securities”). Metal
Securities allow investors to gain exposure to the precious metals market without needing to take physical
delivery of platinum, palladium, silver and gold bullion (“Metal Bullion”). It also allows investors to buy and sell
that interest through the trading of a security on the London Stock Exchange and any other exchange to which
that security may be admitted to trading from time to time.
A Metal Security is an undated secured limited recourse debt obligation of the Company, constituted by a trust
instrument. Under the terms of this trust instrument the Metal Securities are secured on an amount of Metal
Bullion equivalent to the entitlement of each Metal Security (referred to as the “Metal Entitlement”), which is
calculated in accordance with an agreed formula published in the Prospectus. This Metal Bullion is held in
custody by designated custodians or their sub-custodians and the subject of fixed and floating charges in
favour of the Trustee. Metal Bullion, once deposited, may only be removed after approval from the Trustee.
A holder of a Metal Security is entitled to require the redemption of that Metal Security and receive an amount of
Metal Bullion equal to the Metal Entitlement on the date of redemption (and subject to applicable redemption
fees):
in the case of an authorised participant or any holder of WisdomTree Physical Swiss Gold Securities
and WisdomTree Core Physical Gold Securities – at any time; or
in the case of any other holder – only in circumstances where there are no authorised participants (or
otherwise as determined by the Company), and where the holder has an unallocated bullion account
and the holder is not an Undertaking for Collective Investment in Transferable Securities (“UCITS”).
The Company earns a management fee by reducing the Metal Entitlement of each class of Metal Security on a
daily basis by an agreed amount (the “Management Fee”) as set out below:
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer”
or the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing), as well as the payment of costs
relating to the listing and issue of Metal 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 and the creation and
redemption fees (the “ManJer Fee”). The Metal Bullion in respect of the Management Fee is transferred in the
form of bullion on a monthly basis (in arrears) following agreement from the Trustee from the Company’s
custodian accounts directly to ManJer. In addition, creation and redemption fees are transferred directly to
ManJer and there are no cash flows through the Company.
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Review of Operations
The most recent Prospectus was issued on 11 October 2023. As at 31 December 2023, the Company had the
following classes of Metal Securities in issue and admitted to trading on the following exchanges:
The Company holds Metal Bullion to support the Metal Securities as determined by the Metal Entitlement.
Metal Bullion is marked to fair value using the latest price published by the London Bullion Market Association
(“LBMA”). The Company has entered into contractual obligations to issue and redeem Metal Securities in
exchange for Metal Bullion as determined by the Metal Entitlement of each class of Metal Security on each
trading day. The Metal Bullion in respect of each creation and redemption is recorded using the price published
by the LBMA on the transaction date. The fair value of assets under management as at 31 December
amounted to:
The Company has entered into overdraft agreements with the custodians (one with JP Morgan Chase Bank,
NA, and two with HSBC Bank plc). Each agreement allows for the loan of up to one bullion bar of gold
(collectively the “Overdraft Facility”). The gold held under the Overdraft Facility (the “Metal Bullion on Loan”) is
used by the Company to ensure all WisdomTree Physical Swiss Gold Securities, WisdomTree Physical Gold
Securities and WisdomTree Core Physical Gold Securities, respectively, are supported by holdings of gold in
allocated form.
IFRS 13 requires the Company to identify the principal market for the Metal Securities and to utilise the
available price within that principal market. The directors consider the stock exchanges where the Metal
Securities are listed to be the principal market and as a result the fair value of the Metal 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 Metal Bullion and Metal Securities there is a mis-match
between the values recognised, and the results of the Company reflect a gain or loss on the difference between
the value of the Metal Bullion (through the application of the price published by the LBMA against the Metal
Entitlement, referred to within these financial statements as the “Contractual Value”) and the price of Metal
Securities.
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Review of Operations (continued)
The Company recognises its assets (Metal Bullion) and financial liabilities (Metal Securities) at fair value in the
Statement of Financial Position. The gain or loss on Metal Securities and Metal Bullion is recognised through
profit or loss in line with the Company’s accounting policy. This is presented in more detail in notes 7 and 8 to
these financial statements.
The Company is entitled to:
A Management Fee which is calculated by reducing the Metal Entitlement of each class of Metal
Security on a daily basis by an agreed amount (as set out below); and
Creation and redemption fees on the issue and redemption of the Metal Securities.
The Management Fee rates for each class of Individual Metal Security are:
The Management Fee for WisdomTree Physical Precious Metals Basket Security is the total of the Metal
Entitlements of the Individual Metal Securities of which it is made up: Platinum – 0.1; Palladium – 0.2; Silver –
1.2; and Gold – 0.4 (therefore the Management Fee rate being applied is in respect of those Individual Metal
Securities).
During the year, the Company generated income from creation and redemption fees and Management Fees as
follows:
The change in Metal Entitlement of each class of Metal Security reduces the value of the Metal Securities. This
reduction equates to the Management Fee amount in Metal Bullion, that is recognised for that day per each
Metal Security in issue on that day. The Management Fees are accrued and recognised on a daily basis until
invoiced and settled by transfer of the Metal Bullion. The amount recognised as income is calculated by
applying the average LBMA Price to the total Management Fee accrued on a monthly basis.
Non-GAAP Performance Measures
Under the terms of the service agreement with ManJer, the Company accrued expenses equal to the
Management Fee and creation and redemption fees, which, after taking into account other operating income
and expenses, resulted in a result before fair value movements for the year of USD Nil (2022: USD Nil).
As the difference in the valuation of Metal Bullion (held to support the Metal Securities) and Metal Securities
would be reversed on a subsequent redemption of the Metal Securities and transfer of the corresponding Metal
Bullion (as described further in note 8), the Company presents an adjusted Statement of Profit or Loss and Total
Comprehensive Income and an adjusted Statement of Changes in Equity in note 16 of the financial statements.
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Review of Operations (continued)
Ukraine Invasion
Russia has continued military action in the sovereign territory of Ukraine throughout the year ended 31
December 2023 (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.
On 7 March 2022 and in response to sanctions imposed on Russia by the United Kingdom, United States and
European Union as a result of the Crisis, the LBMA suspended six Russian refiners (the “Russian Refiners”)
from the Good Delivery List (the “Suspension”). On 8 March 2023 the Company entered into an agreement with
the Trustee and the Custodian to enable the Custodian to remove the gold bars within the Company’s custody
accounts manufactured by Russian refiners and to replace them with bars that are not manufactured by
Russian refiners. The exchange was completed on the same working day, with no impact on the total amount
and value of gold held. As a result there are currently no gold bars held from Russian Refineries.
The Company will only accept Metal Bullion bars which constitute Good Delivery and meet the Good Delivery
Rules set by the LBMA. Therefore, as a result of the Suspension, the Company does not accept Metal Bullion
bars that the Russian Refineries produced after 7 March 2022 (until there is an amendment to the Good
Delivery Rules). Any further changes to the Good Delivery Rules set by the LBMA may impact the price and
liquidity of existing and newly sourced Good Delivery Metal Bullion bars and hence may adversely affect the
trading market and price for Metal Securities and may cause the value of Metal Securities to decline or increase
in value.
As the Crisis continues, the board of directors (the “Board”) also continues to closely monitor and assess the
impact on the Company’s portfolio operations and valuation and will take any further actions needed or as
required under the terms of the Prospectus, as facts and circumstances are subject to change and may be
specific to investment strategies and jurisdictions. Whilst it is not currently possible to predict future market
conditions and therefore determine if any further action may be required, the action that may be required
includes, but is not limited to, temporarily not accepting applications for Metal Securities, temporarily
suspending Metal Securities from trading on Stock Exchanges or a compulsory redemption of Metal Securities.
Other than as described above, the Company has not initiated any of these further actions during the current
year or subsequently to date. Any such action will be undertaken in accordance with the constitutive documents
of the Metal Securities.
Future Developments
The Board are not aware of any developments that might have a significant effect on the operations of the
Company in subsequent financial periods not already disclosed in this report or the attached financial
statements.
Going Concern
The nature of the Company’s business dictates that the outstanding Metal 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 Metal Securities will
always coincide with the transfer of an equal amount (in value) of Metal Bullion, 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 Metal Bullion and Metal Securities due to the accounting measurement basis applied in accordance
with IFRS. As Metal Bullion are held to support Metal Securities, any deficit or surplus reported on unrealised
positions would be reversed on a subsequent redemption of the Metal Securities and the related transfer of
Metal Bullion. A reported deficit is not considered indicative of any issues relating to solvency of the Company
and the directors are satisfied that any obligations arising in respect of the Metal Securities can be managed in
accordance with the terms of the applicable Prospectus.
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Going Concern (continued)
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 at least 30 April 2025 (being the
period of assessment), and accordingly these financial statements have been prepared on the going concern
basis.
Dividends
There were no dividends declared or paid in the year (2022: 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 WisdomTree, Inc and its
subsidiaries (the “WisdomTree group”) as we believe this benefits shareholders and employees of the
WisdomTree group, investors in WisdomTree’s products as well as wider society.
Environmental, Social and Governance (“ESG”) investing is guided at the WisdomTree group level by an ESG
Steering Committee, which includes senior leaders from across the WisdomTree group, and which further
includes 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 Board, 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 2023.
This conclusion is based on the fact that assets are reported at fair value under IFRS, and as set out in note 13
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 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.
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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.
Principal Risks and Uncertainties
The Metal Securities provide investors with exposure to precious metals. Each Metal Security is a debt
instrument whose redemption price is linked to the value of the relevant underlying Metal Bullion. Each class of
Metal Security is issued under limited recourse arrangements whereby the holders have recourse only to the
relevant Metal Bullion held to support the Metal Securities and not to the Metal Bullion of any other class of
Metal Security or the Company.
Any movements in the value of the Metal Bullion are wholly attributable to the holders of the Metal Securities,
therefore the Company has no residual exposure to movements in the value of the Metal Bullion. From a
commercial perspective the Company does not retain any net gains or losses or net risk exposures, as (with the
exception of the impact of management fees) the gains or losses on the liability represented by the Metal
Securities are matched economically by corresponding losses or gains attributable to the Metal Bullion (see
detail on page 3 regarding the accounting mis-match).
Furthermore, the Company has an obligation to remunerate ManJer with the ManJer Fee, which results in the
Company recognising a result before fair value movements of nil for each period. As a result, the principal risks
and uncertainties to which the Company is exposed has not materially changed during the year ended 31
December 2023.
There is an inherent risk from the point of view of investors as the values of Metal Bullion, and thus the value of
the Metal Securities, may vary widely due to, amongst other things, changing supply and demand for Metal
Bullion, government and monetary policy or intervention, interest rate levels and global or regional political,
economic or financial events. The market price of Metal Securities is (and will remain) a function of supply and
demand amongst investors wishing to buy and sell Metal Securities and the bid or offer spread that the market
makers are willing to quote.
The fair value the Metal Securities as at 31 December amounted to:
Further information on the contractual value of the Metal Securities on a daily basis can be found on the
WisdomTree website (https://www.wisdomtree.eu/en-gb/products).
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Principal Risks and Uncertainties (continued)
Movements in the value of the underlying Metal Bullion, and thus the value of the Metal Securities, may vary
widely which could have an impact on the demand for the Metal Securities issued by the Company. The
movement in the prices of the Metal Bullion are:
Additional information on other financial and operational risks and uncertainties faced by the Company,
including further details surrounding the value of Metal Securities and the Metal Bullion are disclosed in note 15
of these financial statements.
2023 Review
Gold is seen as the foremost precious metal, having been used as a currency and a method for storing wealth
in the past and this is because there are large above-ground stocks which can be quickly mobilised – this
liquidity often resulting in gold acting more like a currency than a commodity.
Central bank demand for gold in 2022 was the strongest on record and in the first three quarters of 2023, that
source of demand was on track to beat 2022 levels. Whilst this was offset by a lack of institutional investor
interest in the metal, overall gold performed well in the year ended 31 December 2023, reaching a new high on
28 December 2023. The gold price rose almost 14%, however while reaching this nominal high, in real terms
(netting off inflation) gold is still 15% below the August 2020 level (that marked the previous nominal high). Gold
significantly outperformed US Government Bonds (up 4% over the same period based on the Bloomberg US
Treasury Index). In contrast to 2022, bond and US Dollar headwinds eased toward the end of 2023, allowing
the metal to gain. Also, while the US Dollar was firm, the USD basket depreciated over the previous year, once
again providing gold some relief.
Like gold, silver has also been used as a currency in the past. However, the main differences between gold and
silver is that more than half of gold demand comes from jewellery while more than half of silver demand comes
from industrial uses and therefore silver is affected by the dynamics of industrial metals as well, which often
generates more price volatility. Silver prices have generally continued to follow a similar trend gold, however
silver lacks the same geopolitical hedge qualities as gold, and possibly explains why it has not reflected the
same overall movement this year, being relatively flat when compared against the prior year.
Platinum and palladium are the two best known metals of the six platinum group metals (PGMs) as they have
the greatest economic importance and are found in the largest quantities. Palladium, mostly used as a catalyst
in car engines to scrub pollutants from exhaust fumes, as well in making microchips.
Palladium has continued its precipitous fall despite a rally at the end of year, taking the trailing one year price
decline to 37%. The metal, primarily used as an automobile catalyst (“auto-cat”), has been seeing shrinking
demand as internal combustion engine vehicles (where the metal is used) are giving up market share to electric
vehicles. Furthermore, with many car manufacturers shifting to the cheaper platinum, for their auto-cat needs,
the metal has fared worse. However, we are getting closer to price parity for the two metals. That is something
we haven’t seen since 2018, and when we get there, that should slow down the pace of substitution.
Platinum is currently cheaper than Palladium and has similar chemical properties. However platinum prices
have seen greater volatility. According to Metals Focus (a leading, independent precious metals research
consultancy), platinum had a record deficit of 1024koz in 2023. Price weakness may reflect the shortfall
narrowing this year (681koz expected by Metals Focus). Meanwhile supply is expected to remain flat, with
deficits expected to extend into 2024, but moderate to 353koz with above ground stocks cushioning those
deficits.
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Future Outlook
The continuing Ukraine Crisis, with the impact of ongoing financial sanctions, in addition to potential future
supply issues, particularly as Russia is a significant source of supply of palladium continues the challenges of
meaningfully predicting prices. In response to date, we have seen central banks buying gold (as a pseudo-
currency that no other central bank controls) in order to diversify their foreign exchange holdings.
Metal prices generally rallied in late December 2023 on hopes that the Federal Reserve will start cutting rates
as early as March 2024. However, the resilience of the US economy continues to surprise most analysts, and
the release of the US Federal Reserve Open Market Committee minutes from the 12-13 December meeting in
early January 2024 showed that the central bank is not in as much of a hurry as the market thought. All the US
Dollar depreciation from 18 December 2023 to 27 December 2023 has been reversed in the first week of 2024.
As markets recalibrate, metal prices may lose some of the steam gathered in late 2023 and dip in Q1 2024.
However, as rate cuts start to become communicated, metal prices could again rally as cuts become both
communicated and implemented.
Additional information on other financial and operational risks and uncertainties faced by the Company,
including further details surrounding the value of Metal Securities and the Metal Bullion are disclosed in note 13
of these financial statements.
Corporate Governance
There is no standard code of corporate governance in Jersey. The operations, as previously described in the
directors’ report, are such that the directors have determined that the Company is not required to apply, and has
elected not to voluntarily apply, the UK Corporate Governance Code.
As the Board is small, there is no nomination committee and appointments of new directors are considered by
the Board as a whole. The Board does not consider it appropriate that directors should be appointed for a
specific term. Furthermore, the corporate governance framework implemented and constitution 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 Metal
Securities, has not undertaken any business, save for issuing and redeeming Metal 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
Metal 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 related party 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.
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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 auditors. In addition, the Board
reviews the independence and objectivity of the auditor.
Christopher Foulds
Director
Jersey
17 April 2024
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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 2023 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
17 April 2024
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED
Opinion
We have audited the financial statements of WisdomTree Metal Securities Limited (the “company”) for
the year ended 31 December 2023 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 16, including a summary of material
accounting policy information. 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 2023 and of
its profit for the year then ended;
►
have been properly prepared in accordance with IFRS;
►
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 2025. Management’s assessment has focussed
on a combination of;
►
Assessing the ongoing viability of the company through continued involvement of its Custodian
and Authorised Participants;
►
Assessing the ongoing ability of WisdomTree Management Jersey Limited (“ManJer”) to
continue to meet its obligations as manager and pay all expenses of the company. This
includes consideration of the assets under management of all managed issuer entities
(“Issuer Platform”) which includes this company. In assessing this ability management
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 METAL 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 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 and AUM based 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 for a period to 30 April 2025.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.
Overview of our audit approach
►
►
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for the company. This enables us to form an opinion on the financial
statements. We take into account size, risk profile, the organisation of the company and effectiveness of
controls, changes in the business environment and the potential impact of climate change when
assessing the level of work to be performed. All audit work was performed directly by the audit
engagement team.
Changes from the prior year
There were no scoping changes compared to the prior year.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact companies.
The company has determined that there are no directly observed impacts of climate change on the
business due to the nature of the company and its operations. This is explained on page 6 in the
corporate social responsibility section, which form part of the “Other information,” rather than the
audited financial statements. Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appear to be materially misstated.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED (continued)
Our audit effort in considering climate change was focused on evaluating management’s assessment of
the impact of climate risk, physical and transition, the adequacy of the company’s disclosures in the
financial statements as set out in note 2 and conclusion that there was no further impact of climate
change to be taken into account as the material assets and liabilities are valued based on market
pricing as required by IFRS.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a
separate opinion on these matters.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED (continued)
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$93.8 million (2022: US$101.4 million), which is
1% (2022: 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% (2022: 50%) of our planning
materiality, namely US$46.9m (2022: US$50.7m). We have set performance materiality in both periods
at this percentage in response to the value of errors identified and corrected in the financial statement
close process.
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$4.69m (2022: US$5.07m), which is set at 5% of materiality, as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED (continued)
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.
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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED (continued)
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
►
We obtained an understanding of the legal and regulatory frameworks that are applicable to the
company and determined that the most significant are those that relate to the reporting framework,
comprising IFRS and 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 Metal 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.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WISDOMTREE METAL SECURITIES LIMITED (continued)
Other matters we are required to address
►
Following the recommendation from those charged with governance, we were appointed by the
company on 3 December 2019 to audit the financial statements for the year ending 31 December
2019 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 5
years, covering the years ending 31 December 2019 to 31 December 2023.
►
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company and
we remain independent of the company in conducting the audit. The audit opinion is consistent with the
additional report to those charged with governance.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of the
Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Christopher David Gordon Barry, FCA
for and on behalf of Ernst & Young LLP
Jersey, Channel Islands
Date: 17 April 2024
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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 Total Comprehensive Income reflecting adjustments
representing the movement in the difference between the value of Metal Bullion and the price of Metal Securities is set out in
note 16.
2 There are no items of Other Comprehensive Income, therefore the Profit / (Loss) for the Year also represented the Total
Comprehensive Income for the Year.
The notes on pages 23 to 42 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 19 to 42 were approved and authorised for issue by the board of directors
and signed on its behalf on 17 April 2024.
Christopher Foulds
Director
The notes on pages 23 to 42 form part of these financial statements
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Metal Securities are issued through a direct transfer of Metal Bullion from the Authorised Participants to the
custodian or redeemed by the direct transfer of Metal Bullion by the custodian to the Authorised Participants.
Transactions related to the Metal Bullion on Loan and the Overdraft Facilities are included within this direct
transfer process with the custodian. As such the Company is not a party to any cash transactions. The
creations and redemptions of Metal Securities and additions and disposals of Metal Bullion, which are non-cash
transactions for the Company, are disclosed in notes 7 and 8 respectively in the reconciliation of opening to
closing Metal Securities and Metal Bullion.
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer”
or the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing), as well as the payment of costs relating
to the listing and issue of Metal 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 and the creation and
redemption fees (the “ManJer Fee”). The Metal Bullion in respect of the ManJer Fee is transferred by the
Trustee from the Company’s custodian accounts to ManJer’s custodian accounts. In addition, amounts in
respect of the creation and redemption fees are transferred directly from the Authorised Participants to ManJer
and there are no cash flows through the Company. These fees are disclosed in note 3.
The notes on pages 23 to 42 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 Metal Bullion and the price of Metal Securities is
set out in note 16.
The notes on pages 23 to 42 form part of these financial statements
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1.
General Information
WisdomTree Metal 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 metal securities (“Metal Securities”). Metal
Securities allow investors to gain exposure to the precious metals market without needing to take physical
delivery of platinum, palladium, silver and gold bullion (“Metal Bullion”). It also allows investors to buy and sell
that interest through the trading of a security on the London Stock Exchange and any other exchange to which
that security may be admitted to trading from time to time. Each class of Metal Security is issued under limited
recourse arrangements whereby the holders have recourse only to the relevant platinum, palladium, silver and
gold bullion (“Metal Bullion”) held to support the Metal Securities and not to the Metal Bullion of any other class
of Metal Security or to the Company. The Metal Securities are secured on an amount of Metal Bullion
equivalent to the entitlement to that Metal Bullion in respect of each Metal Security (referred to as the “Metal
Entitlement”), which is calculated in accordance with an agreed formula published in the Prospectus. The
Company holds Metal Bullion to support the Metal Securities as determined by the Metal Entitlement. The
Company does not make gains from trading in the underlying Metal Bullion. As a result, (and with the exception
of the impact of Management Fees), from a commercial perspective gains and losses in respect of Metal
Bullion will always be offset by a corresponding loss or gain on the Metal Securities and therefore commercially
the Company does not retain any net gains or losses or net risk exposures. However, the difference in
valuation between Metal Bullion and Metal Securities creates a mis-match between the values reported within
these financial statements. This difference in valuation would be reversed on a subsequent redemption of the
Metal Securities and transfer of the corresponding Metal Bullion. Further details are disclosed within the
Accounting Policies and in note 16, with additional information regarding the risks of the Company disclosed in
note 13. Furthermore, the Company presents an adjusted Statement of Profit or Loss and Total
Comprehensive Income and an adjusted Statement of Changes in Equity in note 16 of the financial statements
to reflect the economic results of the Company through the reversal of the difference in valuation between Metal
Bullion and Metal Securities given the gain or loss would be reversed on a subsequent redemption of the Metal
Securities and transfer of the corresponding Metal Bullion, and therefore will not be realised.
Exchange traded products are not typically actively managed, are significantly lower in cost when compared to
actively managed mutual funds and are easily accessible to investors. No active trading or management of
Metal Bullion is required of the Company because the Company only receives or delivers Metal Bullion on the
issue and redemption of Metal Securities, and only holds Metal Bullion as determined by the Metal Entitlement
of each class of Metals Security to support the Metal Securities.
The Company is entitled to:
(1)
a management fee which is calculated by reducing the Metal Entitlement of each class of Metal
Security on a daily basis by an agreed amount (the “Management Fee”); and
(2)
creation and redemption fees on the issue and redemption of the Metal Securities.
No creation or redemption fees are payable to the Company when investors trade in the Metal Securities on a
listed market such as the London Stock Exchange. Creation and redemption fees may also be waived with
certain approved persons where applicable.
The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer”
or the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and
administration services required by the Company (including marketing), as well as the payment of costs relating
to the listing and issuance of Metal Securities. In return for these services, the Company has an obligation to
remunerate ManJer with an amount equal to the Management Fee and the creation and redemption fees
earned (the “ManJer Fee”). 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, except for Metal Bullion and financial liabilities held at fair
value through profit or loss.
The board of directors (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 2023.
This conclusion is based on the fact that assets are reported at fair value under IFRS, and as set out in note 13
are categorised as level 2 due to the use of observable, verifiable inputs and third party information sources.
The liabilities are valued utilising listed market prices at the period end. These observable inputs and market
prices will reflect wider market sentiment, which inherently includes market perspectives relating to the impact
of climate change.
Material 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.
Significant Estimates
The directors do not consider that any significant estimates have been applied in the preparation of these
financial statements. The Company makes estimates and assumptions that affect the reported amounts of
assets and liabilities. Estimates are continually evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The
directors do not consider that any significant estimates have been applied in the preparation of these financial
statements.
The directors do not consider that any significant estimates have been applied in the preparation of these
financial statements.
Significant Judgements
The key accounting judgements required to prepare these financial statements are:
1.
In respect of the presentation of non-statutory and non-GAAP adjustments to the Statement of Profit or
Loss and Other Comprehensive Income and the Statement of Changes in Equity, as disclosed in note
16.
2.
The determination of the appropriate accounting policy to be applied to Metal Bullion. Under IFRS there
is no standard treatment for the classification of physical metals (as they do not meet the definition of a
financial asset, cash, inventory or property, plant or equipment) therefore the election of how to treat
physical metals is left to some interpretation for companies which hold these assets. The Metal Bullion
is held to provide the security holders with the exposure to changes in the fair value of Metal Bullion and
therefore the Directors consider that carrying the Metal Bullion at fair value through profit or loss,
consistent with the treatment that would be applicable to a financial instrument, reflects the objectives
and the purpose of holding the asset.
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2.
Accounting Policies (continued)
Going Concern
The nature of the Company’s business dictates that the outstanding Metal 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 Metal Securities will
always coincide with the transfer of an equal amount (in value) of Metal Bullion, 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 Metal Bullion and Metal Securities due to the accounting measurement basis applied in accordance
with IFRS.
As Metal Bullion are held to support Metal Securities, any deficit or surplus reported on unrealised positions
would be reversed on a subsequent redemption of the Metal Securities and the related transfer of Metal Bullion.
A reported deficit is not considered indicative of any issues relating to the solvency of the Company and the
directors are satisfied that any obligations arising in respect of the Metal Securities can be managed in
accordance with the terms of the applicable Prospectus. The directors consider the operations of the Company
to be ongoing, with a reasonable expectation that the Company has adequate resources to continue in
operational existence until at least 30 April 2025 (being the period of assessment), and accordingly these
financial statements have been prepared on the going concern basis.
Accounting Standards
(a)
Standards, amendments and interpretations considered by the Company (continued):
The following standards that have been revised, issued and became effective but are not considered
applicable to the Company:
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Amendments to IAS 12 Deferred Tax
IFRS 17 Insurance Contracts
There were no other new standards, amendments and interpretations adopted in the current year that
resulted in a significant effect on these financial statements.
(b)
New and revised IFRSs in issue but not yet effective:
The Company has not applied the following new and revised IFRSs that have been issued but are not yet
effective:
Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning
on or after 1 January 2024)
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 (effective for annual periods
beginning on or after 1 January 2024)
Amendments to IFRS 16 Lease Liability in Sale and Leaseback (effective for annual periods
beginning on or after 1 January 2025)
Lack of exchangeability - Amendments to IAS 21 (effective for annual periods beginning on or after 1
January 2025)
The directors do not expect the adoption of the above standards, amendments and interpretations that
are in issue but not yet effective will have a material impact on the financial statements of the Company in
future periods.
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2.
Accounting Policies (continued)
Metal Securities
i)Issue and Redemption
Each time a Metal Security is issued or redeemed by the Company a corresponding amount of Metal
Bullion is transferred into or from the relevant secured account held by the custodian. Upon initial
recognition, the fair value is recorded using the fixing price published by the London Bullion Market
Association (“LBMA”) applied to the underlying Metal Bullion transferred. Financial liabilities are
recognised and de-recognised on the transaction (trade) date.
ii)Classification at fair value through Profit or Loss
Metal Securities comprise a financial instrument whose redemption price is linked to the value of the
underlying Metal Bullion. Metal Securities are classified as liabilities at fair value through profit or loss
under IFRS 9 due to an embedded derivative. This also significantly reduces a measurement or
recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising
the gains and losses on them on different bases.
iii)Pricing
IFRS 13 requires the Company to identify the principal market and to utilise the available price within that
principal market. The directors consider that the stock exchanges where the Metal Securities are listed to
be the principal market and as a result the fair value of the Metal 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 Metal Securities are priced using the latest traded mid-market price on (or
before) the Statement of Financial Position date.
A difference arises between the value of Metal Bullion (held to support the Metal Securities) and Metal
Securities (at market value) presented in the Statement of Financial Position. This difference is reversed on a
subsequent redemption of the Metal Securities and transfer of the corresponding Metal Bullion.
Metal Bullion
The Company holds Metal Bullion equal to the amount due to holders of Metal Securities solely for the
purposes of meeting its obligations under the Metal Securities. As described above (under the heading Critical
Accounting Estimates and Judgements), under IFRS there is no standard treatment for the classification of
physical metals. The Metal Bullion is held to provide the security holders with the exposure to changes in the
fair value of Metal Bullion and therefore the Directors consider that carrying the Metal Bullion at fair value
through profit or loss, consistent with the treatment that would be applicable to a financial instrument, reflects
the objectives and the purpose of holding the asset. Metal Bullion is priced on a daily basis based on the
amount of Metal Bullion held using the latest fixing price published by the LBMA, and is considered to be the fair
value of the Metal Bullion. Also on a daily basis an amount is transferred to Metal Bullion Held in Respect of the
Management Fees. This valuation of the Metal Bullion is equivalent to the LBMA fixing price being applied to
the total Metal Entitlement of each class of Metal Security, and is referred to as the ‘Contractual Value’.
Metal Bullion and Metal Securities Awaiting Settlement
The issue and redemption of Metal Securities, and the transfer in and out of Metal Bullion, is accounted for on
the transaction date. The transaction will not settle until two days after the transaction date. Where
transactions are awaiting settlement at the year end, the value of the Metal Bullion and the Metal Securities due
to be settled is separately disclosed within the relevant assets and liabilities on the Statement of Financial
Position. Metal Bullion and Metal Securities Awaiting Settlement are recorded at fair value using the latest
prices published by the LBMA. Changes in fair value are recognised through profit or loss. The fair value of
these receivables and payables is considered equivalent to their carrying value.
Metal Bullion Held in Respect of Management Fees and ManJer Fee Payable in Metal Bullion
Management Fee income is accrued by reducing the Metal Entitlement of each class of Metal Security on a
daily basis by an agreed amount. These fees are recognised in Metal Bullion, recorded at fair value through
profit or loss in accordance with the accounting judgement set out above in respect of Metal Bullion. The
amount recognised at the Statement of Financial Position date is revalued using the latest price published by
the LBMA.
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2.
Accounting Policies (continued)
Metal Bullion Held in Respect of Management Fees and ManJer Fee Payable in Metal Bullion
(continued)
Management Fees payable are also accrued based on the income accrued in accordance with the agreement
with ManJer. The fees payable in Metal Bullion 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. The payable at the Statement of Financial
Position date is revalued using the latest prices published by the LBMA.
Overdraft Facility
The Company has entered into three agreements with the custodians which each allow for the loan of up to
one bullion bar of gold (collectively the “Overdraft Facility”). The Overdraft Facility is denominated in ounces
of Metal Bullion, repayable in ounces of Metal Bullion equivalent to the Metal Bullion on Loan. The Overdraft
Facility is recorded at the fair value of the ounces of Metal Bullion using the latest price published by the
LBMA and changes in fair value are recognised through profit or loss.
Metal Bullion on Loan
The gold held under the Overdraft Facility (the “Metal Bullion on Loan”) is used by the Company to ensure all
WisdomTree Physical Swiss Gold Securities, WisdomTree Physical Gold Securities and WisdomTree Core
Physical Gold Securities, respectively, are supported by holdings of gold in allocated form. The Metal Bullion
on Loan is recorded at fair value using the latest prices published by the LBMA. Changes in fair value are
recognised through profit or loss.
Other Financial Assets and Liabilities
Other financial assets and liabilities are non-derivative financial assets and liabilities including trade and other
receivables and trade and other payables (primarily creation and redemption fees) with a fixed payment
amount and are not quoted in an active market. After initial measurement the other financial assets and
liabilities are subsequently measured at amortised cost using the effective interest method less any allowance
for expected credit losses (in respect of financial assets only). The effective interest method is a method of
calculating the amortised cost of an instrument and of allocating interest over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash flows (including all fees paid or received
that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition. Impairment losses, including reversals of impairment losses and impairment gains, are
recorded through profit or loss.
Reserves
A revaluation reserve and a retained earnings reserve are maintained within equity. All profit or loss is taken to
the retained earnings reserve at the end of the accounting period to which it relates and the gain or loss relating
to the mis-match of accounting values is transferred to the revaluation reserve, which the directors have
deemed to be non-distributable, as the balance relates to unrealised gains and losses on Metal Bullion (held to
support the Metal Securities) and Metal Securities, which will be reversed on a subsequent redemption of the
Metal Securities and the related transfer of Metal Bullion and will therefore not be realised.
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2.
Accounting Policies (continued)
Income
The Company derives income over time (in respect of Management Fees), and at a point in time (in respect of
creation and redemption fees) as follows:
i)
Management Fees
Management Fees are calculated by applying a fixed percentage to reduce the Metal Entitlement of each
class of Metal Security on a daily basis in accordance with the terms of the securities issued, as follows:
The Management Fee for WisdomTree Physical Precious Metals Basket Security is the total of the Metal
Entitlements of the Individual Metal Securities of which it is made up: Platinum – 0.1; Palladium – 0.2;
Silver – 1.2; and Gold – 0.4 (therefore the Management Fee rate being applied is in respect of those
Individual Metal Securities).
The change in Metal Entitlement reduces the value of the Metal Securities. This reduction equates to the
Management Fee amount in the relevant Metal Bullion, that is recognised for that day per each Metal
Security in issue on that day. The Management Fees are accrued and recognised on a daily basis, until
invoiced and settled by transfer of the relevant Metal Bullion. The amount recognised as income is
calculated by applying the average LBMA fixing price to the total Management Fee accrued on a monthly
basis.
ii)
Creation and Redemption Fees
Fees for the issue and redemption of Metal Securities are recognised at the fair value of the consideration
expected to be received, on the date on which the transaction becomes legally binding. Accrued creation
and redemption fees are invoiced and settled on a quarterly basis.
Foreign Currency
The financial statements of the Company are presented in the currency in which the majority of the Metal
Securities issued by the Company are denominated (its functional currency). For the purpose of the financial
statements, the results and financial position of the Company are expressed in United States Dollars, which is
the functional currency of the Company and the presentational currency of the financial statements.
Transactions in foreign currencies are initially recorded at the spot rate at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the year-end date are translated at rates ruling at that
date. Creation and redemption fees are translated at the average rate for the month in which they are incurred.
The resulting differences are accounted for through profit or loss.
Segmental Reporting
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 classes of Metal Securities in issue, the financial information
reviewed by the CODM is aggregated and not segregated by those different classes of Metal Securities and
therefore the CODM concluded that these components do not meet the criteria of operating segments.
Furthermore the marketing of the Metal Securities is undertaken on a centralised basis and the terms of the
Metal 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, precious
metals, and one geographical segment which is Europe. Therefore the Company discloses its results on an
equivalent aggregated form and does not provide any 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 39,505 will be met by ManJer (2022: GBP 32,879).
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 (2022: zero percent).
5.
Metal Bullion Held in Respect of Management Fees
Management Fees are recognised in Metal Bullion and are recorded at fair value.
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6.
Trade and Other Receivables
The fair value of the receivables is equal to the carrying value. The Trade and Other Receivables are due to be
recovered within 12 months of the year end.
7.
Metal Bullion
As at 31 December 2023, there were certain amounts of Metal Bullion awaiting the settlement in respect of the
creation or redemption of Metal Securities with transaction dates before the year end and settlement dates in
the following year:
The amount of Metal Bullion payable on Metal Securities awaiting settlement is USD 637,034 (2022:
USD 846,572).
The amount of Metal Bullion Held awaiting settlement is USD 4,906,174 (2022: USD 15,630,861).
All Metal Bullion assets have been valued using the AM fix on 29 December 2023 as published by the LBMA
being the last fix prices available for the year.
The below reconciliation of changes in the Metal Bullion includes only non-cash changes.
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8.
Metal Securities
Whilst the Metal Securities are quoted on the open market, the Company’s ultimate liability relates to its
contractual obligations to issue and redeem Metal Securities in exchange for Metal Bullion as determined by
the Metal Entitlement of each class of Metal Security on each trading day. The fair value of each creation and
redemption of Metal Securities is recorded using the price published by the LBMA on the transaction date, and
is the “Contractual Value”. The issue and redemption of Metal Securities is recorded at a value that
corresponds to the value of the Metal Bullion transferred in respect of the issue and redemption. As a result,
the Company has no net exposure to gains or losses on the Metal Securities and Metal Bullion.
The Company measures the Metal Securities at their fair value in accordance with IFRS 13 rather than at the
Contractual Value described above. The fair value is the price quoted on stock exchanges or other markets
where the Metal Securities are listed or traded. The fair values and changes thereof during the year based on
prices available on the open market as recognised in the financial statements are:
The contractual redemption 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 Metal Bullion and the fair value of Metal Securities
would be reversed on a subsequent redemption of the Metal Securities and transfer of the corresponding Metal
Bullion. Refer to note 16 for the non-statutory and non-GAAP adjustments which reflect the results of this
reversal.
As at 31 December 2023, there were certain Metal 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 Metal Securities awaiting settlement is USD 637,034 (2022: USD 846,572).
The amount payable in respect of Metal Securities awaiting settlement is USD 4,906,174 (2022: USD
15,630,861).
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8.
Metal Securities (continued)
The below reconciliation of changes in the Metal Securities, being liabilities arising from financing activities,
includes only non-cash changes.
9.
Overdraft Facility
The Overdraft Facility, pursuant to the overdraft agreements entered into with the custodians (one with JP
Morgan Chase Bank, NA (“JP Morgan”), and two with HSBC Bank plc (“HSBC”)), allows for the loan of up to
one bullion bar of gold (per agreement). The gold held under the Overdraft Facility (the “Metal Bullion on Loan”)
is used by the Company to ensure all WisdomTree Physical Swiss Gold Securities, WisdomTree Physical Gold
Securities and WisdomTree Core Physical Gold Securities, respectively, are supported by holdings of gold in
allocated form.
The Company had Metal Bullion drawn under the Overdraft Facilities as follows:
The Metal Bullion on Loan and the Overdraft Facilities are recorded at the fair value of the Metal Bullion.
10.
Trade and Other Payables
Management Fees payable by transfer of Metal Bullion are recorded at fair value. The fair value of the
remaining payables is equal to the carrying value. The ManJer Fee Payable is due to be settled within 12
months of the year end.
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11.
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”).
12.
Related Party Disclosures
Entities and individuals which have significant influence over the Company, either through ownership or by
virtue of being a director of the Company are considered to be related parties. In addition, entities with common
ownership to the Company and entities with common directors are also considered to be related parties.
Fees charged by ManJer during the year:
The following balances were due to ManJer at the year end:
At 31 December 2023, USD 4 is receivable from ManJer (2022: USD 4).
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.
Steven Ross is a director of R&H and a partner of Rawlinson & Hunter, Jersey Partnership, which wholly owns
R&H. Christopher Foulds is a director of R&H. During the year, R&H charged ManJer administration fees,
which include the Company and other entities for which ManJer is the Manager and R&H is the Administrator, in
aggregate, of GBP 1,221,529 (31 December 2022: GBP 680,211), of which GBP 291,402 (31 December 2022:
GBP 333,639) was outstanding at the period end.
Peter Ziemba is an executive officer of WisdomTree, Inc. and Bryan Governey is European General Counsel
for the WisdomTree, Inc group.
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13.
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 Metal 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 Metal Securities and investors should refer to the most recent Prospectus for a detailed summary of the
risks inherent in investing in the Metal 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 custodian will default on its contractual
obligations resulting in financial loss. Each class of Metal Security is issued under limited recourse
arrangements whereby the holders have recourse only to the relevant Metal Bullion (held to support the Metal
Securities) and not to the Metal Bullion of any other class of Metal Security or to the Company, therefore limiting
the credit risk of the Company in connection with the issue of the Metal Securities.
The total carrying amounts of the Metal Bullion, amounts receivable awaiting settlement and trade and other
receivables best represent the maximum credit risk exposure at the Statement of Financial Position date. At
the reporting date the Company’s amounts receivable awaiting settlement and trade and other receivables are
detailed on the Statement of Financial Position. Credit risk is managed by the Company by only dealing with
Authorised Participants who are believed to be creditworthy. In the event the authorised participants fail to
complete their obligation, no Metal Securities will be created therefore the Company does not have the risk of
loss of the amount expected to be received.
Credit risk also includes custodial risk. Metal Bullion is the subject of a fixed charge or legal mortgage in favour
of The Law Debenture Trust Corporation p.l.c (the “Trustee”) pursuant to security deeds entered into by the
Trustee and the Company to secure the obligations owed by the Company to the Trustee and the holders of the
relevant Metal Securities (the “Security”). However, there is no exposure to credit risk to the Trustee by virtue of
the existence of the Security. Under the custodian agreements the relevant custodian acknowledges the
Security created in favour of the Trustee and agrees that once Metal Bullion is deposited in the secured metal
accounts, it may only be removed after approval from the Trustee.
The custodian is not required to take out insurance and neither is the Trustee. Accordingly, there is a risk that
the secured Metal Bullion could be lost, stolen or damaged and the Company would not be able to satisfy its
obligations in respect of the Metal Securities. Currently the Company has two custodians, HSBC and JP
Morgan. At the reporting date the exposure to the custodians was split approximately 73.3% and 26.7% (2022:
73.5% and 26.5%) respectively.
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13.
Financial Risk Management (continued)
(a)
Credit Risk (continued)
Metal Bullion held with the custodians is held either in allocated or unallocated form.
Allocated: An allocated account evidences that uniquely identifiable bars of bullion have been
“allocated” to the customer and are segregated from other metal held in the custodian’s vault. An
allocated account is held in the customer’s name (which, for the Metal Securities, means in the name of
the Trustee as legal mortgagee pursuant to the Security and in its capacity as trustee for the Security
Holders). The customer has full title to the bullion held in the allocated account. As a result, allocated
Bullion does not entail any credit risk exposure to the custodian, and the credit exposure to the
custodians is therefore limited to the amounts held in unallocated accounts.
Unallocated: Unlike bullion held in an allocated account, bullion in an unallocated account does not
entitle the customer to a particular bar of bullion and the customer’s holding is not segregated from that
of other customers or the custodian. Instead, the books and records of the custodian record that the
customer is entitled to a specific amount of bullion. As the bullion is not segregated, the customer has a
credit risk exposure to the custodian. Bullion in unallocated form is easier to transfer as it simply
requires an update of the custodian’s books and records rather than movements of physical bullion and
for this reason transfers in connection with creation and redemption of Metal Securities are carried out
in unallocated form.
The Metal Securities are backed by physical Metal Bullion in allocated accounts to the extent possible. A small
portion may be held in unallocated form on a short term basis when Metal Bullion is in the process of being
allocated or de-allocated for a creation or redemption, or (in respect of Metal Bullion other than gold) where it
cannot be held in whole bars. Once the level of Metal Bullion in an unallocated account reaches an amount
equal to one bar, that bar can be transferred to an allocated account.
The Company has entered the Overdraft Facility to ensure all WisdomTree Physical Swiss Gold Securities,
WisdomTree Physical Gold Securities and WisdomTree Core Physical Gold Securities, respectively, are
supported by holdings of gold in allocated form, and therefore the unallocated gold balances relate to the Metal
Bullion drawn on the Overdraft Facility (see note 9). For Metal Bullion other than gold, the unallocated account
will be less than 1 physical bar (of each type of Metal Bullion) and immaterial in value.
The Metal Bullion held at the custodians to back the Metal Securities is audited twice a year by an independent
metal audit firm – Inspectorate International – who inspect the Metal Bullion held at the custodians to ensure
that it matches in all respects the Metal Bullion disclosed as held on the Bar List. The first audit takes place at
the start of each year in respect of the Metal Bullion held at the end of the previous year and then a second audit
is carried out at random at a later point in the year.
The Board monitors credit risk exposure, including through an assessment of the credit rating of the custodians
(HSBC: AA- (2022: AA-) (Fitch, 8 September 2023) and JPMorgan: AA- (2022: AA) (Fitch, 15 September
2023)) , to ensure the Company’s exposure is managed, and has continued to do so more closely with a focus
on any potential impact of, or developments relating to the Ukraine Crisis.
(b)
Settlement Risk
Settlement risk primarily refers to the risk that an Authorised Participant will default on its contractual
obligations resulting in financial loss.
The directors believe that settlement risk would only be caused by the Company’s trading counterparty not
delivering Metal Bullion or Metal Securities on the settlement date. The Metal Securities settle through the
CREST system. The directors feel that this risk is mitigated as Metal Securities are not issued until the required
amount of Metal Bullion has been received in the custodian account, and Metal Bullion is not transferred until
the relevant Metal Securities have been delivered in CREST. As a result, each transaction does not settle until
both parties have fulfilled their contractual obligations.
Amounts outstanding in respect of positions yet to settle are disclosed in notes 7 and 8.
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13.
Financial Risk Management (continued)
(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 payables are all payable on demand and generally settled
on a short term basis. Liquidity risk in respect of payables related to expenses is mitigated as Metal Bullion in
respect of the Management Fees are retained by the Company on a daily basis, in order for the related ManJer
expense accumulated (for the month, in arrears) to be settled (in Metal Bullion) once invoiced, and amounts in
respect of the creation and redemption fees are transferred from the relevant counterparties directly to ManJer
and there are no related cash flows through the Company.
The Metal Securities do not have a contractual maturity date and will only be redeemed at the request of the
holder of the security, which may be requested at any time, with the transaction settling through the transfer of
the required Metal Bullion two days after the transaction date, or in the case of a compulsory redemption by
either transferring the required Metal Bullion, or by realising the Metal Bullion for cash and settling the cash
proceeds to holders on a short-term basis. Generally, only holders of Metal Securities who have entered into
an authorised participant agreement with the Company can submit applications and redemptions directly with
the Company.
When Metal Securities are redeemed, the Company returns the corresponding amount of Metal Bullion
determined by the Metal Entitlement of those Metal Securities, therefore the redemption of Metal Securities
would not impact the liquidity of the Company. Consequently, the Company has not presented any tabular
information in respect of liquidity risk.
(d)
Capital Management
The primary objective of the Company’s capital management policy is to ensure that it maintains sufficient
resources for operational purposes. The capital being managed 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 Metal Bullion (held to support the Metal Securities) and Metal Securities, which are
reversed on a subsequent redemption of the Metal Securities and the related transfer of Metal Bullion and will
therefore not be realised. The Company is not subject to any capital requirements imposed by a regulator and
there were no changes in the Company’s approach to capital management during the year.
The Company’s principal activity is the issue and listing of Metal Securities. These securities are issued and
redeemed as demand requires. The Company holds a corresponding amount of Metal Bullion which matches
the total contractual liability of the Metal Securities issued. ManJer supplies or arranges the supply of all
management and administration services to the Company and pays all management and administration costs
of the Company, including Trustee and custodian fees. In return for these services the Company has an
obligation to remunerate ManJer, which under the terms of the service agreement by an amount which is equal
to the aggregate of the Management Fee and creation and redemption fees earned.
As all Metal Securities on issue are supported by an equivalent amount of physical bullion held by the custodian
and the running costs of the Company were 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 Metal
Securities.
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13.
Financial Risk Management (continued)
(e)
Market Risk
Market risk is the risk that changes in market prices (such as bullion prices, interest rates and foreign exchange
rates) will affect the Company’s income or the value of its financial instruments held or issued.
i)
Price Risk
As described above, Metal Securities provide investors with exposure to precious metals. Movements in
the value of the underlying Metal Bullion may vary widely which could have an impact on the demand for
the Metal Securities issued by the Company. The movements in the prices of Metal Bullion are:
The value of the Company’s liability in respect of the Metal Securities fluctuates according to the Metal
Bullion prices and the risk of such change in price is managed by the Company by holding Metal Bullion in
the same quantity as its liability. Whilst the Metal Securities are quoted on the open market, the Company’s
ultimate liability relates to its contractual obligations to issue and redeem Metal Securities in exchange for
Metal Bullion as determined by the Metal Entitlement on each trading day. The Company measures the
Metal 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 Metal Bullion and
the fair value of Metal Securities would be reversed on a subsequent redemption of the Metal Securities
and transfer of the corresponding Metal Bullion. Refer to note 8 for the further details regarding fair values.
Therefore, the Company bears no residual financial risk from a change in the price of Metal Bullion.
Furthermore, the impact of price sensitivity is considered immaterial to these financial statements.
However, there is an inherent risk from the point of view of investors as the price of Metal Bullion and the
value of the Metal Securities may vary widely due to, amongst other things, changing supply or demand for
Metal Bullion, government and monetary policy or intervention and global or regional political, economic or
financial events. The market price of Metal Securities is (and will remain) a function of supply and demand
amongst investors wishing to buy and sell Metal Securities and the bid or offer spread that the market
makers are willing to quote. This is highlighted further in note 16, and below under the Fair Value Hierarchy.
Ukraine Invasion
Russia has continued military action in the sovereign territory of Ukraine throughout the year ended 31
December 2023 (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.
On 7 March 2022 and in response to sanctions imposed on Russia by the United Kingdom, United States
and European Union as a result of the Crisis, the LBMA suspended six Russian refiners (the “Russian
Refiners”) from the Good Delivery List (the “Suspension”). On 8 March 2023 the Company entered into an
agreement with the Trustee and the Custodian to enable the Custodian to remove the gold bars within the
Company’s custody accounts manufactured by Russian refiners and to replace them with bars that are not
manufactured by Russian refiners. The exchange was completed on the same working day, with no impact
on the total amount and value of gold held. As a result there are currently no gold bars held from Russian
Refineries.
The Company will only accept Metal Bullion bars which constitute Good Delivery and meet the Good
Delivery Rules set by the LBMA. Therefore, as a result of the Suspension, the Company does not accept
Metal Bullion bars that the Russian Refineries produced after 7 March 2022 (until there is an amendment to
the Good Delivery Rules). Any further changes to the Good Delivery Rules set by the LBMA may impact
the price and liquidity of existing and newly sourced Good Delivery Metal Bullion bars and hence may
adversely affect the trading market and price for Metal Securities and may cause the value of Metal
Securities to decline or increase in value.
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13.
Financial Risk Management (continued)
(e)
Market Risk (continued)
i)
Price Risk (continued)
As the Crisis continues, the Board also continues to closely monitor and assess the impact on the
Company’s portfolio operations and valuation and will take any further actions needed or as required under
the terms of the Prospectus, as facts and circumstances are subject to change and may be specific to
investment strategies and jurisdictions. Whilst it is not currently possible to predict future market conditions
and therefore determine if any further action may be required, the action that may be required includes, but
is not limited to, temporarily not accepting applications for Metal Securities, temporarily suspending Metal
Securities from trading on Stock Exchanges or a compulsory redemption of Metal Securities.
Other than as described above, the Company has not initiated any of these further actions during the
current year or subsequently to date. Any such action will be undertaken in accordance with the
constitutive documents of the Metal Securities.
ii)
Interest Rate Risk
The Company does not have significant exposure to interest rate risk as neither the Metal Bullion or the
Metal Securities bear any interest.
iii)
Currency Risk
The directors do not consider the Company to have a significant exposure to currency risk arising from the
current economic uncertainties facing a number of countries around the world as the gains or losses on the
liability represented by the Metal Securities are matched economically by corresponding losses or gains
attributable to the Metal Bullion.
(f)
Sensitivity Analysis
IFRS 7 requires disclosure of a sensitivity analysis for each type of market risk to which the entity is exposed to
at the reporting date, showing how profit or loss and equity would have been affected by a reasonably possible
change to the relevant risk variable.
The Company’s rights and liabilities in respect of Metal Securities, relate to its contractual obligations to issue
and redeem Metal Securities in exchange for Metal Bullion as determined by the Metal Entitlement on each
trading day. The fair value of each creation and redemption of Metal Securities is recorded using the price
published by the LBMA on the transaction date. However, under IFRS 13, the liability is recorded at fair value
(being the on-exchange price) which results in a mismatch. As described in note 16 this mismatch is reversed
on the redemption of Metal Securities.
As a result, the Company’s contractual and economic liability in connection with the issue and redemption of
Metal Securities is matched by movements in the corresponding Metal Bullion. Whilst sensitivity analysis could
be performed on this mismatch, the Company does not ultimately have economic exposure to the on-exchange
price, but to the contractual liability of the Metal Securities and consequently, the Company does not have any
net exposure to market price risk. Furthermore the result of the numeric sensitivity is considered not material
by the directors and in their opinion, no sensitivity analysis is required to be disclosed.
(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.
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13.
Financial Risk Management (continued)
(g)
Fair Value Hierarchy (continued)
The Company is required to utilise the available on-market price as the Metal Securities are quoted and actively
traded on the open market. Therefore, Metal Securities are classified as Level 1 financial liabilities.
The Company holds Metal Bullion to support the Metal Securities as determined by the Metal Entitlement
(which is calculated in accordance with an agreed formula published in the Prospectus). Metal Bullion is
marked to fair value using the latest price published by the LBMA. The Company has contractual obligations to
issue and redeem Metal Securities in exchange for Metal Bullion as determined by the Metal Entitlement of
each class of Metal Security on each trading day. The fair value of each creation and redemption of Metal
Securities is recorded using the price published by the LBMA on the transaction date applied to that Metal
Entitlement. Therefore, Metal Bullion is classified as a level 2 asset, as the value is calculated using third party
pricing sources supported by observable, verifiable inputs.
As disclosed in notes 2 and 9, the Company holds Metal Bullion on Loan under the Overdraft Facility, which are
recorded at fair value using the latest price published by the LBMA. Therefore, Metal Bullion on Loan is
classified as a level 2 asset, as the value is calculated using third party pricing sources, and the Overdraft
Facilities are classified as a Level 2 liability as the value is calculated using third party pricing sources
supported by observable, verifiable inputs.
The categorisation of the Company’s assets and (liabilities) measured at fair value are as shown below:
Each of the Metal Securities, Overdraft Facility, the Metal Bullion on Loan and the Metal Bullion are recognised
at fair value upon initial recognition and revalued to fair value in line with the Company’s accounting policy.
There are no 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 are to be recognised if the primary market on which the 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 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.
14.
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.
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15.
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 2023, or on the results and cash flows of the Company for
the year ended on that date.
16.
Non-GAAP and Non-Statutory Information
As a result of the mis-match in the accounting valuation of Metal Bullion (held to support the Metal Securities)
and Metal Securities (as disclosed in notes 7 and 8) 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 Metal Bullion and
the price of Metal Securities. The Statement of Changes in Equity also reflects the fair value movements on
both the Metal Bullion (held to support the Metal Securities) and the Metal Securities.
These gains or losses on the difference between the value of the Metal Bullion (held to support the Metal
Securities) and the price of Metal Securities would be reversed on a subsequent redemption of the Metal
Securities and transfer of the corresponding Metal Bullion.
Furthermore, each class of Metal Security is issued under limited recourse arrangements whereby the holders
have recourse only to the relevant Metal Bullion (held to support the Metal Securities) and not to the Metal
Bullion of any other class of Metal Security or to the Company. As a result, the Company does not make gains
from trading in the underlying Metal Bullion (held to support the Metal Securities) and, from a commercial
perspective (with the exception of the impact of Management Fees) gains and losses in respect of Metal Bullion
(held to support the Metal Securities) will always be offset by a corresponding loss or gain on the Metal
Securities and the Company does not retain any net gains or losses.
The mismatched accounting values are as shown below:
To reflect the commercial results, the Company has presented below a non-GAAP and non-Statutory
Statement of Profit or Loss and Total 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
Metal Securities, together with those gains or losses being transferred to a separate reserve which is deemed
non-distributable.
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16.
Non-GAAP and Non-Statutory Information (continued)
(a)
Non-GAAP and Non-Statutory Statement of Profit or Loss and Other Comprehensive Income
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16.
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 Metal Bullion and the price of Metal Securities.
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