# Gold Bullion Securities Limited ## Registered No: 87322 Report and Financial Statements for the ## Year ended 31 December 2021 ![image]() ## Gold Bullion Securities Limited #### Contents Management and Administration 1 Directors’ Report 2-7 Statement of Directors’ Responsibilities 8 Independent Auditor’s Report 9-15 Statement of Profit or Loss and Other Comprehensive Income 16 Statement of Financial Position 17 Statement of Cash Flows 18 Statement of Changes in Equity 19 Notes to the Financial Statements 20-36 www.wisdomtree.eu ![image]() ![image]() ![image]() ### Gold Bullion Securities Limited #### Management and Administration Directors Administrator Stuart Bell Christopher Foulds Steven Ross Peter Ziemba R&H Fund Services (Jersey) Limited Ordnance House PO Box 83 31 Pier Road St Helier Jersey, JE4 8PW Registered Office Registrar Ordnance House 31 Pier Road St Helier Jersey, JE4 8PW Computershare Investor Services (Jersey) Limited 13 Castle Street St Helier Jersey, JE1 1ES Manager Custodian WisdomTree Management Jersey Limited Ordnance House 31 Pier Road St Helier Jersey, JE4 8PW HSBC Bank plc 8 Canada Square London, E14 5HQ United Kingdom Auditor Trustee Ernst & Young LLP Liberation House Castle Street St Helier Jersey, JE1 1EY The Law Debenture Trust Corporation plc Fifth Floor 100 Wood Street London, EC2V 7EX United Kingdom Jersey Legal Advisers Company Secretary Mourant Ozannes 22 Grenville Street St Helier Jersey, JE4 8PX R&H Fund Services (Jersey) Limited Ordnance House 31 Pier Road St Helier Jersey, JE4 8PW - 1 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report The directors of Gold Bullion Securities Limited (“GBS” or the “Company”) submit herewith the annual report and financial statements of the Company for the year ended 31 December 2021. Directors The names and particulars of the directors of the Company during and since the end of the financial year are: Stuart Bell Christopher Foulds Steven Ross Peter Ziemba Directors’ Interests No director has an interest in the Shares of the Company as at the date of this report. Principal Activities The Company’s principal activity is the issue and listing of gold bullion securities (“Gold Securities”). These Gold Securities allow investors to gain exposure to gold without needing to take physical delivery of gold bullion (“Gold Bullion”). It also allows investors to buy and sell that interest through the trading of a security on the London Stock Exchange and any other exchange to which that security may be admitted to trading from time to time. A Gold Security is a secured, undated zero coupon note of the Company, constituted by a trust instrument, with a face value of USD 0.00001. Under the terms of this trust instrument the Gold Securities are secured on an amount of Gold Bullion equivalent to the entitlement of each Gold Security (referred to as the “Gold Entitlement”), which is calculated in accordance with an agreed formula published in the Prospectus. This Gold Bullion is held in custody by designated custodians or their sub-custodians and the subject of a first legal mortgage in favour of the Trustee. Gold Bullion, once deposited, may only be removed after approval from the Trustee. Generally only security holders who have entered into an approved applicant agreement with the Company (“Approved Applicant”) can submit applications and redemptions directly with the Company. A holder of a Gold Security is entitled to require the redemption of that Gold Security and receive an amount of Gold Bullion equal to the Gold Entitlement on the date of redemption (and subject to applicable redemption fees). This redemption may occur: • through an appropriate counterparty (such as an Approved Applicant as described above); or • through a transfer of physical Gold Bullion to the security holders’ own allocated bullion account. The Company earns a management fee by reducing the Gold Entitlement on a daily basis by an agreed amount (the “Gold Sales Charge” or “Management Fee”). The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or the “Manager”) , whereby ManJer is responsible for supplying or procuring the supply of all management and administration services required by the Company (including marketing) as well as the payment of costs relating to the listing and issue of Gold Securities. In return for these services, the Company has an obligation to remunerate ManJer with an amount equal to the Management Fee and the creation and redemption fees earned (the “ManJer Fee”). The Gold Bullion in respect of the Management Fee is transferred in the form of Gold Bullion on a monthly basis (in arrears) following agreement from the Trustee from the Company’s custodian accounts directly to ManJer. In addition, creation and redemption fees are transferred directly to ManJer and there are no cash flows through the Company. - 2 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report (Continued) Review of Operations The most recent Prospectus was issued on 11 November 2021. The Gold Securities are listed on the London Stock Exchange, the Deutsche Börse, the Borsa Italiana, the Euronext Brussels and the NYSE Euronext Paris. As at 31 December 2021, the fair value of assets under management amounted to USD 3,719.4 million (2020: USD 4,623.2 million). The Company recognises its assets (Gold Bullion) and liabilities (Gold Securities) at fair value in the Statement of Financial Position. The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement. Gold Bullion is marked to fair value using the latest price published by the London Bullion Market Association (“LBMA”). The Company has entered into contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The Gold Bullion in respect of each creation and redemption is recorded using the price provided by the LBMA on the transaction date. IFRS 13 requires the Company to identify the principal market and to utilise the available price within that principal market. The directors consider the stock exchanges where the Gold Securities are listed to be the principal market and as a result the fair value of the Gold Securities is the on-exchange price as quoted on the stock exchange demonstrating active trading with the highest trading volume on each day that the price is obtained. As a result of the difference in valuation between Gold Bullion and Gold Securities there is a mis- match between the values recognised, and the results of the Company reflect a gain or loss on the difference between the value of the Gold Bullion (through the application of the price provided by the LBMA against the Gold Entitlement referred to within these financial statements as the “Contractual Value”) and the price of Gold Securities. The gain or loss on Gold Securities and Gold Bullion is recognised through profit or loss in line with the Company’s accounting policy. This is presented in more detail in notes 8 and 9 to these financial statements. The Company’s exposure to risk is disclosed in note 15 to the financial statements. The Company is entitled to: • A Management Fee which is calculated by reducing the Gold Entitlement of the Gold Securities on a daily basis by an agreed amount; and • Creation and redemption fees on the issue and redemption of the Gold Securities. During the year, the Company generated income from Management Fees and creation and redemption fees as follows: 2021 2020 USD USD Creation and Redemption Fees 3,750 12,250 Management Fees 15,415,176 18,635,797 Total Fee Income 15,418,926 18,648,047 Non-GAAP Performance Measures Under the terms of the service agreement with ManJer, the Company accrued expenses equal to the Management Fee and creation and redemption fees, which, after taking into account other operating income and expenses, resulted in a result before fair value movements for the year of USD Nil (2020: USD Nil). As the difference in the valuation of Gold Bullion (held to support the Gold Securities) and Gold Securities would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion (as described further in note 9), the Company presents an adjusted Statement of Profit or Loss and Total Comprehensive Income and an adjusted Statement of Changes in Equity in note 18 of the financial statements. - 3 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report (Continued) Review of Operations (continued) Coronavirus disease (COVID-19) The COVID-19 pandemic continues to persist and the ultimate duration of the pandemic and its short-term and long-term impact on the global economy is unknown. National governments and supranational organisations in multiple states continue taking steps designed to protect their populations from COVID-19, including requiring or encouraging home working, the cancellation of sporting, cultural and other events and restricting or discouraging gatherings of people. COVID-19 has created market turmoil and increased market volatility generally. Mutations in the virus, a setback in vaccine distribution and negative global economic consequences arising from the pandemic, amongst other factors, could have a future adverse impact on the global financial markets. The steps outlined above, and public sentiment, may affect both the volatility and prices of Gold Bullion and hence the prices of the Gold Securities, and such effects may be significant and may be long-term in nature. The directors are closely monitoring the advice and developments relating to the spread of COVID-19, which is fluid and rapidly changing. The WisdomTree group has, and continues to implement measures to maintain the ongoing safety and well-being of employees, whilst continuing to operate business as usual. Going Concern The nature of the Company’s business dictates that the outstanding Gold Securities may be redeemed at any time by only holders of Gold Securities who have entered into an authorised applicant agreement with the Company (“Approved Applicants”) and in certain circumstances by individual holders and also, in certain circumstances, may be compulsorily redeemed by the Company. As the redemption of Gold Securities will always coincide with the transfer of an equal amount (in value) of Gold Bullion, liquidity risk is mitigated such that there is no material residual risk. All other expenses are met by ManJer. The directors closely monitor the financial position and performance of ManJer, its assets under management, and therefore its related revenue streams, in respect of fulfilling the obligations under the services agreement. The directors consider the operations of the Company to be ongoing, with a reasonable expectation that the Company has adequate resources to continue in operational existence until 30 April 2023, and accordingly these financial statements have been prepared on the going concern basis. Future Developments On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The board of directors (the “Board”) is closely monitoring developments that may impact financial markets including sanctions, actions by governments and developments of the crisis. The Board will further assess the impact on the fund’s portfolio operations and valuation and will take any potential actions needed, as facts and circumstances are subject to change and may be specific to investment strategies and jurisdictions. The Board are not aware of any developments that might have a significant effect on the operations of the Company in subsequent financial periods not already disclosed in this report or the attached financial statements. Corporate Social Responsibility Sustainability and corporate responsibility are embedded throughout the business of the WisdomTree group as we believe this benefits shareholders and employees of the WisdomTree group, investors in WisdomTree’s products as well as wider society. Environmental, Social and Governance (“ESG”) investing is guided at the Wisdomtree group level by an ESG Steering Committee, which includes senior leaders from across the Wisdomtree group business, and which included several sub-committees focused on particular ESG considerations, such as improving data and transparency into the ESG attributes of WisdomTree’s products. Particular ESG considerations relevant to the Company’s products are overseen by the directors, leveraging the work undertaken by the ESG Steering Committee. More information on WisdomTree’s corporate social responsibility strategy can be found on the Wisdomtree group website (https://www.wisdomtree.eu/en-gb/wisdomtree-corporate-responsibility). - 4 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report (Continued) Corporate Social Responsibility (continued) The Board acknowledges that climate change and its impact on the global economy is of increasing interest and focus for stakeholders and that, where relevant, stakeholders will seek information from companies regarding how climate change is expected to impact the operations of the business and how climate change risk has been considered in the context of reported results. In acknowledging the above, the Board has considered the Company’s exposure to climate change and determined that due to the nature of the Company and its operations there are no directly observed impacts of climate change on the business. As a result, the Board concluded that there is no basis on which to provide extended information of analysis relating to climate change, including as part of the basis of accounting or individual accounting policies adopted by the Company. In the above determination, the Board has concluded specifically that climate change, including physical and transition risks, does not have a material impact on the recognition and separate measurement considerations of the assets and liabilities in these financial statements as at 31 December 2021. This conclusion is based on the fact that assets are reported at fair value under IFRS, and as set out in note 15 are categorised as level 2 due to the use of observable, verifiable inputs, including use of third party information sources within the agreed pricing formula (set out in the Prospectus). The liabilities are valued utilising listed market prices at the period end. These observable inputs and market prices will reflect wider market sentiment, which inherently includes market perspectives relating to the impact of climate change. The Board recognises that government and societal responses to climate change risks are still developing and the future impact cannot be predicted. Future valuations of assets and liabilities may therefore differ as the market responds to these changing impacts or assesses the impact of current requirements differently. Dividends There were no dividends declared or paid in the year (2020: USD Nil). It is the Company’s policy that dividends will only be declared when the directors are of the opinion that there are sufficient distributable reserves. Employees The Company does not have any employees. It is the Company’s policy to use the services of specialist subcontractors or consultants as far as possible. Auditor The Independent Auditor is Ernst & Young LLP. A resolution to re-appoint Ernst & Young LLP will be proposed at the next Board meeting of the directors. Directors’ Remuneration No director has a service contract with the Company. The directors of the Company who are employees within the WisdomTree Investments, Inc group do not receive separate remuneration in their capacity as directors of the Company. R&H Fund Services (Jersey) Limited (“R&H” or the “Administrator”) receives a fee in respect of the directors of the Company who are employees of R&H. The following directors’ fees have been paid by ManJer on behalf of the Company for the year: 2021 2020 GBP GBP Stuart Bell Nil Nil Christopher Foulds (Appointed 15 April 2020) 8,000 5,685 Hilary Jones (Resigned 15 April 2020) Nil 2,315 Steven Ross 8,000 8,000 Peter Ziemba Nil Nil - 5 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report (Continued) Principal Risks and Uncertainties There is an inherent risk from the point of view of investors as the value of gold, and thus the value of the Gold Securities, may vary widely due to, amongst other things, changing supply and demand for gold, government and monetary policy or intervention, interest rate levels and global or regional political, economic or financial events. The market price of Gold Securities is (and will remain) a function of supply and demand amongst investors wishing to buy and sell Gold Securities and the bid or offer spread that the market makers are willing to quote. The Gold Securities provide investors with exposure to gold. Movements in the value of the underlying Gold Bullion, and thus the value of the Gold Securities, may vary widely which could have an impact on the demand for the Gold Securities issued by the Company. These movements are shown in notes 8 and 9. During the year ended 31 December 2021, the price of gold dropped 3.75%. Coupled with the impact of the Management Fees, the Gold Securities dropped in value by 4.32% between 31 December 2020 and 31 December 2021. Each Gold Security is a debt instrument whose redemption price is linked to the value of the underlying Gold Bullion. The Gold Securities are issued under a limited recourse arrangement whereby the holders have recourse only to the Gold Bullion held to support the Gold Securities and not to the Company. Any movements in the value of the Gold Bullion are wholly attributable to the holders of the Gold Securities, the Company has no residual exposure to movements in the value of the Gold Bullion. From a commercial perspective the Company does not retain any net gains or losses or net risk exposures, as (with the exception of the impact of management fees) the gains or losses on the liability represented by the Gold Securities are matched economically by corresponding losses or gains attributable to the Gold Bullion (see detail on page 3 regarding the accounting mis-match). Furthermore, the Company pays ManJer an amount equal to the management fee and the creation and redemption fees earned (the “ManJer Fee”), which results in the Company recognising a result before fair value movements of nil for each period. As a result, the principal risks and uncertainties to which the Company is exposed has not materially changed during 2021. Additional information on other financial and operational risks and uncertainties faced by the Company, including further details surrounding the value of Gold Securities and the Gold Bullion are disclosed in note 15 of these financial statements. Corporate Governance There is no standard code of corporate governance in Jersey. The operations, as previously described in the Directors’ Report, are such that the directors have determined that the Company is not required to apply, and has elected not to voluntarily apply, the UK Corporate Governance Code. As the Board is small, there is no nomination committee and appointments of new directors are considered by the Board as a whole. The Board does not consider it appropriate that directors should be appointed for a specific term. Furthermore, the structure of the Board is such that it is considered unnecessary to identify a senior non-executive director. The constitution of the Board is disclosed on page 2. The Board meets regularly as required by the operations of the Company, but at least quarterly to review the overall business of the Company and to consider matters specifically reserved for its review. - 6 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Directors’ Report (Continued) Internal Control During the year the Company did not have any employees or subsidiaries, and there is no intention that this will change. The Company, being a special purpose company established for the purpose of issuing Gold Securities, has not undertaken any business, save for issuing and redeeming Gold Securities, entering into the required documents and performing the obligations and exercising its rights in relation thereto, since its incorporation. The Company does not intend to undertake any business other than issuing and redeeming Gold Securities and performing the obligations and exercising its rights in relation thereto. The Company is dependent upon ManJer to provide management and administration services to it. ManJer is licensed under the Financial Services (Jersey) Law 1998 to conduct classes U and Z of Fund Services Business. ManJer outsources the administration services in respect of the Company to the Administrator. Documented contractual arrangements are in place with the Administrator which define the areas where the authority is delegated to them. The performance of the Manager and Administrator are reviewed on an ongoing basis by the Board through their review of periodic reports. ManJer provides management and other services to both the Company and other companies issuing commodity and index tracking securities. The Board, having reviewed the effectiveness of the internal control systems of the Manager and the Administrator, does not consider that there is a need for the Company to establish its own internal audit function. Audit Committee The Board has not established a separate audit committee; instead the Board meets to consider the financial reporting by the Company, the internal controls, and relations with the external auditor. In addition, the Board reviews the independence and objectivity of the auditor. Christopher Foulds Director Jersey 27 April 2022 - 7 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Statement of Directors’ Responsibilities The directors are responsible for preparing the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. With regard to Directive 2004/109/EC, amended by Directive 2013/50/EU (collectively the Transparency Directive), the Central Bank (Investment Market Conduct) Rules of the Central Bank of Ireland and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the directors confirm that to the best of their knowledge that: • the financial statements for the year ended 31 December 2021 give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by law and in accordance with IFRS as issued by the IASB; and • the Directors’ Report gives a fair view of the development and performance of the Company’s business, including financial position and the important events that have occurred during the year, and their impact on these financial statements, together with a description of the principal risks and uncertainties they face. By order of the Board Christopher Foulds Director Jersey 27 April 2022 - 8 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED #### Opinion We have audited the financial statements of Gold Bullion Securities Limited (the “company”) for the year ended 31 December 2021 which comprise the Statement of Profit or Loss and Other Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes 1 to 18, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. In our opinion, the financial statements: ► give a true and fair view of the state of the company’s affairs as at 31 December 2021 and of its profit for the year then ended; ► have been properly prepared in accordance with IFRS; and ► have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991. #### Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements, including the UK FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. #### Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included: ► We obtained an understanding of management’s rationale for using the going concern basis of accounting and confirmed our understanding of management’s Going Concern assessment process including the process they adopted to capture all key factors in their assessment; ► We obtained management’s board approved going concern assessment covering the period of assessment from the date of signing to 30 April 2023. Management’s assessment has focussed on a combination of; ► Assessing the ongoing viability of the company through continued involvement of its Custodian and Authorised Participants; ► Assessing the ongoing ability of WisdomTree Management Jersey Limited (“ManJer”) to continue to meet its obligations as manager and pay all expenses of the company. This includes consideration of the assets under management of all managed issuer entities (“Issuer Platform”) which includes this company. In assessing this ability we considered the fixed and variable operating costs that could be supported under varying levels of total assets under management for the Issuer Platform. - 9 - ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) ► Using our understanding of the business, we evaluated whether the considerations and method adopted by management in assessing going concern was appropriate. ► We performed reverse stress testing on the forecasts to understand how severe the downside scenarios would have to be, and in particular the reduction in platform assets under management, to result in the platform generating insufficient management fees to cover operating costs. We observed significant headroom in management fee income, at current Assets Under Management (“AUM”) levels, in excess of fixed costs which supports management’s assumption that the Issuer Platform is able to absorb heightened levels of volatility in AUM in the current economic climate. ► We considered whether management’s disclosures, in the Annual Report and financial statements, sufficiently and appropriately discloses information required in respect of the going concern assumption applied through consideration of relevant disclosure standards. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern over the period to 30 April 2023. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern. #### Overview of our audit approach Key audit ► Valuation of Financial Liabilities at fair value through profit and loss – Gold matters Securities Materiality ► Overall materiality of US$37.2m which represents 1% of total assets. #### An overview of the scope of our audit Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team. Changes from the prior year There were no scoping changes compared to the prior year. Climate change The company has explained climate-related risks in the Corporate Social Responsibility section of the Directors’ Report. Our procedures on these disclosures therefore consisted solely of considering whether these disclosures are materially inconsistent with the Company’s Financial Statements, or our knowledge obtained in the course of the audit, or otherwise appear to be materially misstated. -10- ![image]() ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) #### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Risk Our response to the risk Key observations communicated to the Board Valuation of Financial Our response to the risk There were no matters identified during our audit work on valuation of Gold Securities that we brought to the attention of the Board of Directors of the company. Liabilities at fair value through comprised: profit or loss – Gold Securities We walked through the USD 3,718,131,075 company’s systems, controls (2020: USD 4,630,387,545) and process implemented in Refer to the Accounting policies (page 22); and Note 9 of the Financial Statements (pages 27- 28) respect of the valuation of Gold Securities. Based on our testing we are satisfied that the valuation of Gold Securities is not materially misstated. An assessment of the design of the company’s systems and controls implemented in respect of Gold Securities valuation. Risk that values of securities in issue are misstated or that valuations are incorrectly In executing our strategy, we captured. adopted a fully substantive The Gold Securities in issue approach. comprise a range of financial Assessed the appropriateness instruments that provide holders of the valuation methodology of issued securities with applied, comprising the use of exposure to movements in traded security prices to value prices of securities without the Gold Securities, against needing to take physical relevant IFRS requirements. delivery. Independently obtained security The Gold Securities are carried prices using external pricing at fair value as a Financial sources at the balance sheet Liability. date. The risk comprises the risk of Recalculated the value of Gold errors in both the valuation Securities held at 31 December methodology applied and, in the 2021, by multiplying the security source, and timing of valuation price by the confirmed security inputs utilised. balance in issue. This The balance of Gold Securities represented 100% of the total value of Gold Securities in represents in excess of 99% of issue. the company’s total liabilities as at 31 December 2021 (2020: 99%) and therefore any error in valuation approach could be significant. -11- ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) Risk Our response to the risk Key observations communicated to the Board The risk has remained consistent with that observed in the prior year. #### Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the company to be US$37.2 million (2020: US$46.2 million), which is 1% (2020: 1%) of Total Assets. We believe that Total Assets provides us with an appropriate basis for audit materiality as Total Assets reflects the relevant exposure of holders of issued securities to the underlying asset base. There has been no change in the basis of materiality used compared to the prior year. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the company’s overall control environment, our judgement was that performance materiality was 75% (2020: 50%) of our materiality, namely US$27.9m (2020: US$23.1m). We had set performance materiality at 50% of our materiality in the prior year based on our prior experience of identifying audit differences. Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Board that we would report to them all uncorrected audit differences in excess of US$1.9m (2020: US$2.3m), which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. -12- ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) #### Other information The other information comprises the information included in the annual report set out on pages 1 to 8, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. #### Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: ► proper accounting records have not been kept by the company, or proper returns adequate for our audit have not been received from branches not visited by us; or ► the financial statements are not in agreement with the company’s accounting records and returns; or ► we have not received all the information and explanations we require for our audit #### Responsibilities of directors As explained more fully in the Statement of Directors’ Responsibilities set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. #### Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. -13- ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and management. ► We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are those that relate to the reporting framework, comprising IFRS and Companies (Jersey) Law 1991. In addition, we concluded that there are certain significant laws and regulations that may have an effect on the presentation and disclosure of the financial statements being the applicable Listing Rules of the UK Listing Authority and the Central Bank of Ireland (Investment Market Conduct) Rules; ► We understood how Gold Bullion Securities Limited is complying with those frameworks by making enquiries of the directors and key management of the administrative service provider. We corroborated our enquiries through our review of minutes of Board meetings, papers provided to the board and correspondence received from regulatory bodies and noted no contradictory evidence; ► We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur by understanding the investment objectives of the Company and discussing with management to understand where reporting was considered susceptible to fraud. Where this risk was considered to be higher, we performed audit procedures in response to the identified fraud risk. These procedures included testing of transactions to supporting documentation, testing of specific accounting journal entries and focussed testing, including that referred to in the key audit matters section above. These procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error; ► Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved a review of board minutes to identify any non-compliance with laws and regulations, a review of any associated reporting submitted to the board on compliance with laws and regulations and enquiries of members of management of the appointed administrative service provider; ► As the Company operates in the asset management industry the Audit Partner reviewed the experience of the engagement team and concluded that the team had the appropriate competence and capabilities. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. -14- ![image]() ![image]() INDEPENDENT AUDITOR’S REPORT #### TO THE MEMBERS OF GOLD BULLION SECURITIES LIMITED (continued) #### Other matters we are required to address ► Following the recommendation from those charged with governance, we were appointed by the company on 3 December 2019 to audit the financial statements for the year ending 31 December 2019 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is 3 years, covering the years ending 31 December 2019 to 31 December 2021. ► The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company and we remain independent of the company in conducting the audit. ► The audit opinion is consistent with the additional report to those charged with governance. #### Use of our report This report is made solely to the company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Christopher David Gordon Barry, FCA for and on behalf of Ernst & Young LLP Jersey, Channel Islands Date: 27 April 2022 -15- ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Statement of Profit or Loss and Other Comprehensive Income Year ended 31 December 2021 2020 Notes USD USD Income 3 15,418,926 18,648,047 Expenses 3 (15,418,926) (18,648,047) Result Before Fair Value Movements 3 - - Change in Fair Value of Gold Bullion 8 (254,639,230) 974,094,680 Change in Fair Value of Gold Securities 9 263,053,981 (983,215,836) Profit / (Loss) for the Year1, 2 8,414,751 (9,121,156) The directors consider the Company’s activities as continuing. 1 A non-statutory and non-GAAP Statement of Profit or Loss and Other Comprehensive Income reflecting adjustments representing the movement in the difference between the value of Gold Bullion and the price of Gold Securities is set out in note 18. 2 There are no items of Other Comprehensive Income, therefore the (Loss) / Profit for the Year also represented the Total Comprehensive Income for the Year. The notes on pages 20 to 36 form part of these financial statements - 16 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Statement of Financial Position As at 31 December 2021 2020 Notes USD USD Assets Gold Bullion 8 3,719,384,708 4,623,226,427 Gold Swing Bar 5 782,643 813,173 Gold Bullion Held in Respect of Securities Awaiting Settlement - 5,079,300 Gold Bullion Held in Respect of Management Fees 6 1,268,269 1,572,334 Trade and Other Receivables 7 143,320 150,845 Total Assets 3,721,578,940 4,630,842,079 Liabilities Gold Securities 9 3,718,131,075 4,630,387,545 Gold Loan 11 782,643 813,173 Amounts Payable on Gold Securities Awaiting Settlement - 5,079,300 Trade and Other Payables 10 1,269,769 1,581,359 Total Liabilities 3,720,183,487 4,637,861,377 Equity Share Capital 12 142 142 Share Premium 13 141,678 141,678 Revaluation Reserve 1,253,633 (7,161,118) Total Equity 1,395,453 (7,019,298) Total Equity and Liabilities 3,721,578,940 4,630,842,079 The assets and liabilities in the above Statement of Financial Position are presented in order of liquidity from most to least liquid. The financial statements on pages 16 to 36 were approved and authorised for issue by the board of directors and signed on its behalf on 27 April 2022. Christopher Foulds Director The notes on pages 20 to 36 form part of these financial statements - 17 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Statement of Cash Flows Year ended 31 December 2021 2020 USD USD Profit / (Loss) for the Year 8,414,751 (9,121,156) Non-cash Reconciling Items Change in Fair Value of Gold Bullion 254,639,230 (974,094,680) Change in Fair Value of Gold Securities (263,053,981) 983,215,836 Revaluation of Gold Swing Bar (30,530) (158,283) Increase in Gold Loan Due to Change in Gold Price 30,530 158,283 (8,414,751) 9,121,156 Cash Generated from Operating Activities - - Net Movement in Cash and Cash Equivalents - - Cash and Cash Equivalents at the Beginning of the Year - - Net Movement in Cash and Cash Equivalents - - Cash and Cash Equivalents at the End of the Year - - Gold Securities are issued through a direct transfer of Gold Bullion from the Approved Applicants to the Custodian or redeemed by the direct transfer of Gold Bullion by the Custodian to the Approved Applicants. As such the Company is not a party to any cash transactions. The creations and redemptions of Gold Securities and additions and disposals of Gold Bullion, which are non-cash transactions for the Company, are disclosed in notes 8 and 9 respectively in the reconciliation of opening to closing Gold Securities and Gold Bullion. The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and administration services required by the Company (including marketing) as well as the payment of costs relating to the listing and issue of Gold Securities. In return for these services, the Company has an obligation to remunerate ManJer with an amount equal to the Management Fee and the creation and redemption fees earned, less expenses (the “ManJer Fee”). The Gold Bullion in respect of the Management Fee is transferred by the Trustee from the Company’s custodian accounts to ManJer’s custodian accounts. In addition, amounts in respect of the creation and redemption fees are transferred directly from the Approved Applicants to ManJer and there are no cash flows through the Company. The notes on pages 20 to 36 form part of these financial statements - 18 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Statement of Changes in Equity Stated Share Retained Revaluation Total Equity Capital Premium Earnings Reserve3 Notes USD USD USD USD USD Opening Balance at 1 January 2020 142 141,678 - 1,960,038 2,101,858 Result and Total Comprehensive Income for the Year - - (9,121,156) - (9,121,156) Transfer to Revaluation Reserve 18 - - 9,121,156 (9,121,156) - Balance at 31 December 20203 142 141,678 - (7,161,118) (7,019,298) Opening Balance at 1 January 2021 142 141,678 - (7,161,118) (7,019,298) Result and Total Comprehensive Loss for the Year - - 8,414,751 - 8,414,751 Transfer to Revaluation Reserve 18 - - (8,414,751) 8,414,751 - Balance at 31 December 20213 142 141,678 - 1,253,633 1,395,453 3 A non-statutory and non-GAAP Statement of Changes in Equity reflecting adjustments representing the difference between the value of Gold Bullion and the price of Gold Securities is set out in note 18. The notes on pages 20 to 36 form part of these financial statements - 19 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements 1. General Information Gold Bullion Securities Limited (the “Company”) is a company incorporated and domiciled in Jersey. The address of the registered office is Ordnance House, 31 Pier Road, St. Helier, Jersey, JE4 8PW. The purpose of the Company is to provide a vehicle that facilitates the issuance and subsequent listing and trading of securities that track the performance of gold without needing to take physical delivery of the gold (“Gold Securities”). The Gold Securities are issued under limited recourse arrangements whereby the holders have recourse only to the gold bullion (“Gold Bullion”) held to support the Gold Securities and not to the Company. The Gold Securities are secured on an amount of Gold Bullion equivalent to the entitlement to that Gold Bullion in respect of each Gold Security (referred to as the “Gold Entitlement”), which is calculated in accordance with an agreed formula published in the Prospectus. The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement. The Company does not make gains from trading in the underlying Gold Bullion. As a result (and with the exception of the impact of Management Fees), from a commercial perspective gains and losses in respect of Gold Bullion will always be offset by corresponding loss or gain on the Gold Securities and therefore commercially the Company does not retain any net gains or losses or net risk exposures. However, the difference in valuation between Gold Bullion and Gold Securities creates a mis-match between the values reported within these financial statements. This difference in valuation would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion. Further details are disclosed within the Accounting Policies and in note 16, with additional information regarding the risks of the Company disclosed in note 15. Furthermore, the Company presents an adjusted Statement of Profit or Loss and Other Comprehensive Income and an adjusted Statement of Changes in Equity in note 18 of the financial statements to reflect the economic results of the Company through the reversal of the difference in valuation between Gold Bullion and Gold Securities given the gain or loss would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion, and therefore will not be realised. Exchange-traded products are not typically actively managed, are significantly lower in cost when compared to actively managed mutual funds and are easily accessible to investors. No active trading of Gold Bullion is required of the Company because the Company only receives or delivers Gold Bullion on the issue and redemption of Gold Securities, and only holds Gold Bullion as determined by the Gold Entitlement to support the Gold Securities. The Company is entitled to: (1) a management fee which is calculated by reducing the Gold Entitlement on a daily basis by an agreed amount, (the “Gold Sales Charge” or the “Management Fee”); and (2) Creation and redemption fees on the issue and redemption of the Gold Securities. No creation or redemption fees are payable to the Company when investors trade in the Gold Securities on a listed market such as the London Stock Exchange. Creation and redemption fees may also be waived with certain approved persons where applicable. The Company has entered into a service agreement with WisdomTree Management Jersey Limited (“ManJer” or the “Manager”), whereby ManJer is responsible for supplying or procuring the supply of all management and administration services required by the Company (including marketing) as well as the payment of costs relating to the listing and issuance of Gold Securities. In return for these services, the Company pays ManJer an amount equal to the Management Fee and the creation and redemption fees earned (the “ManJer Fee”). As a result, the Company recognises a result before fair value movements of nil for each period. 2. Accounting Policies The main accounting policies of the Company are described below. Basis of Preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of Gold Bullion and financial liabilities held at fair value through profit or loss. - 20 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 2. Accounting Policies (continued) Critical Accounting Estimates and Judgements The presentation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key accounting judgements required to prepare these financial statements are: 1. In respect of the presentation of non-statutory and non-GAAP adjustments to the Statement of Profit or Loss and Other Comprehensive Income and the Statement of Changes in Equity, as disclosed in note 18. 2. The determination of the appropriate accounting policy to be applied to Gold Bullion. Under IFRS there is no standard treatment for the classification of physical metals (as they do not meet the definition of a financial asset, cash, inventory or property, plant or equipment) therefore the election of how to treat physical metals is left to some interpretation for companies which hold these assets. The Gold Bullion is held to provide the security holders with the exposure to changes in the fair value of Gold Bullion and therefore the Directors consider that carrying the Gold Bullion at fair value through profit or loss, consistent with the treatment that would be applicable to a financial instrument, reflects the objectives and the purpose of holding the asset. The directors do not consider that any significant estimates have been applied in the preparation of these financial statements. Going Concern The nature of the Company’s business dictates that the outstanding Gold Securities may be redeemed at any time by Approved Applicants and in certain circumstances by individual holders and also, in certain circumstances, may be compulsorily redeemed by the Company. As the redemption of Gold Securities will always coincide with the transfer of an equal amount (in value) of Gold Bullion, and furthermore, the Company will hold the Gold Bullion received to support the Gold Securities issued and will only transfer out Gold Bullion to facilitate the payment of Management Fees or the redemption of Gold Securities, liquidity risk is mitigated such that there is no material residual risk. All other expenses of the Company are met by ManJer. The directors closely monitor the financial position and performance of ManJer, its assets under management, and therefore its related revenue streams, in respect of fulfilling the obligations under the services agreement in place. The directors consider the operations of the Company to be ongoing, with a reasonable expectation that the Company has adequate resources to continue in operational existence until 30 April 2023, and accordingly these financial statements have been prepared on the going concern basis. Accounting Standards (a) Standards, amendments and interpretations considered by the Company: The following standards that have been revised, issued and became effective but are not considered applicable to the Company: • Amendments to IFRS 16 Leases • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 to address the accounting issues that arise when financial instruments are modified from referencing an IBOR There were no other new standards, amendments and interpretations adopted in the current year that resulted in a significant effect on these financial statements. - 21 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 2. Accounting Policies (continued) Accounting Standards (continued) (b) New and revised IFRSs in issue but not yet effective: The Company has not applied the following new and revised IFRSs that have been issued but are not yet effective: • IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2023) • Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2023) • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (effective for annual periods beginning on or after 1 January 2023) • Amendments to IAS 12 Deferred Tax (effective for annual periods beginning on or after 1 January 2023) • Amendments to IAS 16 Property, Plant and Equipment (effective for annual periods beginning on or after 1 January 2022) • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (effective for annual periods beginning on or after 1 January 2022) • Annual Improvements to IFRS (impacting IFRS 1, IFRS 9 and IAS 41) The directors do not expect the adoption of the above standards, amendments and interpretations that are in issue but not yet effective will have a material impact on the financial statements of the Company in future periods. Gold Securities i) Issue and Redemption Each time a Gold Security is issued or redeemed by the Company a corresponding amount of Gold Bullion is transferred into or from the relevant secured account held by the Custodian. Upon initial recognition, the fair value is recorded using the market close price published by the London Bullion Market Association (“LBMA”) applied to the underlying Gold Bullion transferred. Financial liabilities are recognised and de-recognised on the transaction (trade) date. ii) Classification at fair value through Profit or Loss Gold Securities comprise a financial instrument whose redemption price is linked to the value of the underlying Gold Bullion. Gold Securities are classified as liabilities measured at fair value through profit or loss under IFRS 9 due to an embedded derivative. This also significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. iii) Pricing IFRS 13 requires the Company to identify the principal market and to utilise the available price within that principal market. The directors consider the stock exchanges where the Gold Securities are listed to be the principal market and as a result the fair value of the Gold Securities is the on-exchange price as quoted on the stock exchange demonstrating active trading with the highest trading volume on each day that the price is obtained. The Gold Securities are priced using the mid-market price on the Statement of Financial Position date taken at the time the gold fix is set. A difference arises between the value of Gold Bullion (held to support the Gold Securities) and Gold Securities (at market value) presented in the Statement of Financial Position. This difference is reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion. - 22 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 2. Accounting Policies (continued) Gold Bullion The Company holds Gold Bullion equal to the amount due to holders of Gold Securities solely for the purpose of meeting its obligations under the Gold Securities. As described above, under IFRS there is no standard treatment for the classification of physical metals. The Gold Bullion is held to provide the security holders with the exposure to changes in the fair value of Gold Bullion and therefore the Directors consider that carrying the Gold Bullion at fair value through profit or loss, consistent with the treatment that would be applicable to a financial instrument, reflects the objectives and the purpose of holding the asset. Gold Bullion is priced on a daily basis based on the amount of Gold Bullion held using the latest fixing price provided by the LBMA, and is considered to be the fair value of the Gold Bullion. Also on a daily basis an amount is transferred to Gold Bullion held in respect of the Management Fee. The valuation of the Gold Bullion is equivalent to the LBMA fixing price being applied to the total Gold Entitlement of the Gold Securities, and is referred to as the ‘Contractual Value’. Gold Bullion and Gold Securities Awaiting Settlement The issue and redemption of Gold Securities, and the transfer in and out of Gold Bullion, is accounted for on the transaction date. The transaction will not settle until two days after the transaction date. Where transactions are awaiting settlement at the year end, the value of the Gold Bullion and the Gold Securities due to be settled is separately disclosed within the relevant assets and liabilities on the Statement of Financial Position. The fair value of these receivables and payables is considered equivalent to their carrying value. Gold Bullion Held in Respect of Management Fees and Management Fee Payable in Gold Bullion Management Fee income is accrued by reducing the Gold Entitlement of the Gold Securities on a daily basis by an agreed amount. These fees are recognised in Gold Bullion, recorded at fair value through profit or loss in accordance with the accounting judgement set out above in respect of Gold Bullion. The amount recognised at the Statement of Financial Position date is revalued using the latest price published by the LBMA. Management Fees payable are also accrued based on the income accrued in accordance with the agreement with ManJer. These fees are payable in Gold Bullion, recorded at fair value through profit or loss to significantly reduce a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. The payable at the Statement of Financial Position date is revalued using the latest price published by the LBMA. Gold Swing Bar The Company has a loan facility with HSBC Bank USA, N.A. giving the Company the rights, interest and title to a gold bar that is held for the purpose of facilitating the allocation of gold to holders of Gold Securities (the “Gold Swing Bar”). The Gold Swing Bar is denominated in gold ounces. Under IFRS there is no standard treatment for the classification of physical metals. The Directors however consider that the measurement of the Gold Bullion, including the Gold Swing Bar, at fair value through profit or loss is the most appropriate treatment as it most accurately reflects the substance of the asset. The fair value is calculated using the latest price published by the LBMA. Gold Loan The Gold Loan with HSBC Bank USA, N.A. associated with the Gold Swing Bar is also denominated in gold ounces, and has been designated as a financial liability at fair value through profit or loss as this eliminates the potential accounting mismatch that would result from any differing treatment of the Gold Swing Bar and the Gold Loan (should the Gold Loan be measured at amortised cost). The fair value is calculated using the latest price published by the LBMA applied to the amount in gold ounces of the Gold Loan. - 23 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 2. Accounting Policies (continued) Other Financial Assets and Liabilities Other financial assets and liabilities are non-derivative financial assets and liabilities including trade and other receivables and trade and other payables (primarily Creation and Redemption Fees) with a fixed payment amount and are not quoted in an active market. After initial measurement the other financial assets and liabilities are subsequently measured at amortised cost using the effective interest method less any allowance for expected credit losses (in respect of financial assets only). The effective interest method is a method of calculating the amortised cost of an instrument and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Impairment losses, including reversals of impairment losses and impairment gains, are recorded through profit or loss. Reserves A revaluation reserve and a retained earnings reserve are maintained within equity. All profit or loss is taken to the retained earnings reserve at the end of the accounting period to which it relates and the gain or loss relating to the mis-match of accounting values is transferred to the non-distributable revaluation reserve as the balance relates to unrealised gains and losses on Gold Bullion (held to support the Gold Securities) and Gold Securities, which will be reversed on a subsequent redemption of the Gold Securities and the related transfer of Gold Bullion and will therefore not be realised. Income The Company derives its income over time (in respect of Management Fees), and at a point in time (in respect of creation and redemption fees) as follows: i) Management Fees Management Fees are calculated by applying a fixed percentage to reduce the Gold Entitlement of the Gold Securities on a daily basis in accordance with the terms of the Securities issued. The change in the Gold Entitlement reduces the value of the Gold Securities. This reduction equates to the Management Fee amount in Gold Bullion, that is recognised for that day per each Gold Security in issue on that day. The Management Fees are accrued and recognised on a daily basis until invoiced and settled by a transfer of Gold Bullion. The amount recognised as income is calculated by applying the average LBMA fixing price to the total Management Fee accrued on a monthly basis. ii) Creation and Redemption Fees Fees for the issue and redemption of Gold Securities are recognised at the fair value of the consideration expected to be received, on the date on which the transaction becomes legally binding. Accrued creation and redemption fees are invoiced and settled on a quarterly basis. Foreign Currency The financial statements of the Company are presented in the currency in which the majority of the Gold Securities issued by the Company are denominated (its functional currency). For the purpose of the financial statements, the results and financial position of the Company are expressed in United States Dollars, which is the functional currency of the Company and the presentational currency of the financial statements. Transactions in foreign currencies are initially recorded at the spot rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year-end date are translated at rates ruling at that date. Creation and redemption fees are translated at the average rate for the month in which they are incurred. The resulting differences are accounted for through profit or loss. - 24 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 2. Accounting Policies (continued) Segmental Reporting IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the Chief Operating Decision Maker (“CODM”) in order to allocate resources to the segments and to assess their performance. The CODM has been determined as the board of directors. A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Company has not provided segmental information as the Company has only one business or product group, issuing Gold Securities, and one geographical segment which is Europe. In addition, the Company has no single major customer from which greater than 10% of income is generated. All information relevant to the understanding of the Company’s activities is included in these financial statements. 3. Result Before Fair Value Movements Result Before Fair Value Movements for the year comprised: Year ended 31 December 2021 2020 USD USD Creation and Redemption Fees 3,750 12,250 Management Fees 15,415,176 18,635,797 Total Income 15,418,926 18,648,047 ManJer Fees (15,418,926) (18,648,047) Total Operating Expenses (15,418,926) (18,648,047) Result Before Fair Value Movements - - Audit Fees for the year of GBP 25,500 will be met by ManJer (2020: GBP 26,430). 4. Taxation The Company is subject to Jersey Income Tax. During the year the Jersey Income Tax rate applicable to the Company is zero percent (2020: zero percent). 5. Gold Swing Bar Year ended 31 December 20212020 USDUSD Gold Swing Bar 782,643 813,173 The 430 (2020: 430) ounce gold bar held by the Company is held for the purpose of facilitating the allocation of gold to holders of Gold Securities. The gold is recorded at fair value using the last price published by the LBMA being the AM fix rate on 31 December 2021 of USD 1,820.100 per oz. (2020: USD 1,891.100 per oz.). - 25 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 6. Gold Bullion Held in Respect of Management Fees As at 31 December 20212020 USDUSD Management Fees 1,268,269 1,572,334 Management Fees recognised in Gold Bullion and are recorded at fair value. 7. Trade and Other Receivables As at 31 December 2021 2020 USD USD Creation and Redemption Fees 1,500 9,025 Receivable from Related Party 141,820 141,820 143,320 150,845 The fair value of the receivables is equal to the carrying value. The Trade and Other Receivables are due to be recovered within 12 months of the year end. 8. Gold Bullion As at 31 December 20212020 USDUSD Change in Fair Value of Gold Bullion (254,639,230) 974,094,680 Gold Bullion Held at Fair Value 3,719,384,708 4,623,226,427 As at the year end, there can be certain amounts of Gold Bullion awaiting settlement in respect of the creation or redemption of Gold Securities with transaction dates before the year end and settlement dates in the following year: •The amount of Gold Bullion Held as a result of unsettled redemptions is USD Nil (2020: USD 5,079,300). All Gold Bullion assets have been valued using the AM fix on 31 December 2021 as published by the LBMA being the last fix price available for the year. The below reconciliation of changes in the Gold Bullion includes only non-cash changes. Year ended 31 December 2021 2020 USD USD Opening Gold Bullion 4,623,226,427 3,893,624,633 Additions 460,752,422 1,234,589,791 Disposals (1,094,539,735) (1,460,446,880) Gold Bullion Transferred to Gold Bullion Held in Respect of Management Fees (15,415,176) (18,635,797) Change in Fair Value (254,639,230) 974,094,680 Closing Gold Bullion 3,719,384,708 4,623,226,427 -26- www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 9. Gold Securities Gold Securities are secured, undated zero coupon notes with a face value of USD 0.00001. As at 31 December 2021, there were 21,972,822 (2020: 26,181,830) Gold Securities outstanding, with a face value, in aggregate, of USD 220 (2020: USD 262). Whilst the Gold Securities are quoted on the open market, the Company’s ultimate liability relates to its contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The fair value of each creation and redemption of Gold Securities is recorded using the price provided by the LBMA on the transaction date, and is the “Contractual Value”. The issue and redemption of Gold Securities is recorded at a value that corresponds to the value of the Gold Bullion transferred in respect of the issue and redemption. As a result, the Company has no net exposure to gains or losses on the Gold Securities and Gold Bullion. The Company measures the Gold Securities at their fair value in accordance with IFRS 13 rather than at the Contractual Value described above. The fair value is the price quoted on stock exchanges or other markets where the Gold Securities are listed or traded. The fair values and changes thereof during the year based on prices available on the open market as recognised in the financial statements are: As at 31 December 20212020 USDUSD Change in Fair Value of Gold Securities 263,053,981 (983,215,836) Gold Securities at Fair Value 3,718,131,075 4,630,387,545 The contractual values and changes thereof during the year based on the contractual settlement values are: As at 31 December 20212020 USDUSD Change in Contractual Value for the Year (254,639,230) (974,094,680) Gold Securities at Contractual Value 3,719,384,708 4,623,226,427 The gain or loss on the difference between the value of the Gold Bullion and the fair value of Gold Securities would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion. Refer to note 18 for the non-statutory and non-GAAP adjustments which reflect the results of this reversal. As at the year end, there can be certain amounts of Gold Bullion awaiting settlement in respect of the creation or redemption of Gold Securities with transaction dates before the year end and settlement dates in the following year: • The amount payable as a result of unsettled redemptions of Gold Securities is USD Nil (2020: USD 5,079,300). - 27 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 9. Gold Securities (continued) The below reconciliation of changes in the Gold Securities, being liabilities arising from financing activities, includes only non-cash changes. Year ended 31 December 2021 2020 USD USD Opening Gold Securities 4,630,387,545 3,891,664,595 Securities Created 460,752,422 1,234,589,791 Securities Redeemed (1,094,539,735) (1,460,446,880) Management Fee (15,415,176) (18,635,797) Change in Fair Value (263,053,981) 983,215,836 Closing Gold Securities at Fair Value 3,718,131,075 4,630,387,545 10.Trade and Other Payables As at 31 December 20212020 USDUSD ManJer Fees Payable 1,269,769 1,581,359 Management Fees payable by transfer of Gold Bullion are recorded at fair value. The fair value of the remaining payables is equal to the carrying value. The ManJer Fee Payable is due to be settled within 12 months of the year end. 11. Gold Loan Year ended 31 December 20212020 USDUSD Gold Loan 782,643 813,173 The loan is denominated in gold ounces and marked to fair value at the year end with movements recognised in the Statement of Profit or Loss and Other Comprehensive Income. The loan is repayable on demand. The Company intends to maintain the loan as long as the Company continues to operate. 12. Share Capital As at 31 December 20212020 USDUSD 100 Shares, Issued and Fully Paid 142 142 The Company has an authorised capital of 10,000 Ordinary Shares of GBP 1 each. All Shares issued by the Company carry one vote per Share without restriction and carry the right to dividends. All Shares are held by WisdomTree Holdings Jersey Limited (“HoldCo”). - 28 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 13. Share Premium As at 31 December 20212020 USDUSD 100 Shares of GBP 1 Each, Issued at GBP 1,000 Each and Fully Paid 141,678 141,678 14.Related Party Disclosures Entities and individuals which have significant influence over the Company, either through ownership or by virtue of being a director of the Company are considered to be related parties. In addition, entities with common ownership to the Company and entities with common directors are also considered to be related parties. Fees charged by ManJer during the year: Year ended 31 December 20212020 USDUSD ManJer Fees 15,418,926 18,648,047 The following balances were due to ManJer at the year end: As at 31 December 20212020 USDUSD ManJer Fees Payable 1,269,769 1,581,359 At 31 December 2021, USD 141,820 is receivable from ManJer (2020: USD 141,820). As disclosed in the Directors’ Report, ManJer paid Directors’ Fees in respect of the Company of GBP 16,000 (2020: GBP 16,000). Steven Ross is a director of R&H Fund Services (Jersey) Limited (“R&H” or the “Administrator”) and a partner of Rawlinson & Hunter, Jersey Partnership, which wholly owns R&H. Christopher Foulds is a senior employee of R&H. During the year, R&H charged ManJer administration fees in respect of the Company of GBP 67,252 (2020: GBP 67,252), of which GBP 16,813 (2020: GBP 16,813) was outstanding at the year end. Peter Ziemba and Stuart Bell are executive officers of WisdomTree Investments, Inc. 15. Financial Risk Management The Company is exposed to a number of risks arising from its activities, including credit risk, settlement risk, liquidity risk and market risk. The Board is responsible for the overall risk management approach and for approving the risk management strategies and principles. The Board meets frequently to consider the risk exposures of the Company and to determine appropriate management policies. The risk management policies employed by the Company to manage these are discussed below. The Gold Securities are subject to normal market fluctuations and other risks inherent in investing in securities and other financial instruments. There can be no assurance that any appreciation in the value of securities will occur, and the capital value of an investor’s original investment is not guaranteed. The value of investments may go down as well as up, and an investor may not get back the original amount invested. - 29 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 15. Financial Risk Management (continued) The information provided below is not intended to be a comprehensive summary of all the risks associated with the Gold Securities and investors should refer to the most recent Prospectus for a detailed summary of the risks inherent in investing in the Gold Securities. Any data provided should not be used or interpreted as a basis for future forecast or investment performance. (a) Credit Risk Credit risk primarily refers to the risk that Approved Applicants or the Custodian will default on their contractual obligations resulting in financial loss. The Gold Securities are issued under limited recourse arrangements whereby the holders have recourse only to the Gold Bullion (held to support the Gold Securities) and not to the Company, therefore limiting the credit risk of the Company in connection with the issue of the Gold Securities. The total carrying amounts of the amounts receivable awaiting settlement and trade and other receivables best represent the maximum credit risk exposure at the Statement of Financial Position date. At the reporting date the Company’s amounts receivable awaiting settlement and trade and other receivables are detailed on the Statement of Financial Position. Credit risk is managed by the Company by only dealing with Approved Applicants who are believed to be creditworthy. In the event the Approved Applicants fail to complete their obligation, no Gold Securities will be created therefore the Company does not have the risk of loss of the amount expected to be received. Credit risk also includes custodial risk. The custodian is not required to take out insurance and neither is the Trustee. Accordingly, there is a risk that the secured Gold Bullion could be lost, stolen or damaged and the Company would not be able to satisfy its obligations in respect of the Gold Securities. Currently HSBC Bank plc is the only custodian. The Board monitors credit risk exposure to ensure the Company’s exposure is managed and has continued to do so more closely with a focus on any potential impact of, or developments relating to the spread of COVID-19, which is fluid and rapidly changing. (b) Settlement Risk Settlement risk primarily refers to the risk that an Approved Applicant or the Custodian will default on its contractual obligations resulting in financial loss. The directors believe that settlement risk would only be caused by the risk of the Company’s trading counterparty not delivering Gold Bullion or Gold Securities on the settlement date. The Gold Securities settle through the CREST system. The directors feel that this risk is mitigated as Gold Securities are not issued until the required amount of Gold Bullion has been received in the Custodian account, and Gold Bullion is not transferred until the relevant Gold Securities have been delivered in CREST. As a result, each transaction does not settle until both parties have fulfilled their contractual obligations. Amounts outstanding in respect of positions yet to settle are disclosed in notes 8 and 9. (c) Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities as they fall due. The Company’s receivables and payables are all payable on demand and generally settled on a short-term basis. Liquidity risk in respect of receivables and payables related to income and expenses is mitigated as Gold Bullion in respect of the Management Fee is retained by the Company on a daily basis, in order for the related ManJer expense accumulated (for the month, in arrears) to be settled (in Gold Bullion) once invoiced, and amounts in respect of the creation and redemption fees are transferred from the relevant counterparties directly to ManJer and there are no related cash flows through the Company. - 30 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 15. Financial Risk Management (continued) (c) Liquidity Risk (continued) The Gold Securities do not have a contractual maturity date and will only be redeemed at the request of the holder of the security, which may be requested at any time, with the transaction settling through the transfer of Gold Bullion two days after the transaction date, or in the case of a compulsory redemption by either transferring the Gold Bullion, or by realising the Gold Bullion for cash and settling the cash proceeds to holders on a short-term basis. Generally, only Approved Applicants can submit applications and redemptions directly with the Company. When the Gold Securities are redeemed, the Company returns the corresponding amount of Gold Bullion determined by the Gold Entitlement of those Gold Securities, therefore any redemption of Gold Securities would not impact the liquidity of the Company. Consequently, the Company has not presented any tabular information in respect of liquidity risk. (d) Capital Management The primary objective of the Company’s capital management policy is to ensure that it maintains sufficient resources for operational purposes. The capital being managed are the Share Capital and Share Premium, as presented in the Statement of Changes in Equity. Retained Earnings and the Revaluation Reserve, as presented in the Statement of Changes in Equity, are not considered managed capital as these balances relate to unrealised gains and losses on Gold Bullion (held to support the Gold Securities) and Gold Securities, which are reversed on a subsequent redemption of the Gold Securities and the related transfer of Gold Bullion and will therefore not be realised. The Company is not subject to any capital requirements imposed by a regulator and there were no changes in the Company’s approach to capital management during the year. The Company’s principal activity is the issue and listing of Gold Securities. These securities are issued and redeemed as demand requires. The Company holds a corresponding amount of Gold Bullion which matches the total liability of the Gold Securities issued. ManJer supplies or arranges for the supply of all management and administration services to the Company and pays all management and administration costs of the Company, including Trustee and Custodian Fees. In return for these services the Company pays ManJer a fee, which under the terms of the service agreement is equal to the aggregate of the Management Fee and creation and redemption fees earned. As all Gold Securities in issue are supported by an equivalent amount of Gold Bullion held by the Custodian and the running costs of the Company are paid by ManJer, the directors of the Company consider the capital management and its current capital resources are adequate to maintain the ongoing listing and issue of Gold Securities. (e) Sensitivity Analysis IFRS 7 requires disclosure of a “sensitivity analysis” for each type of market risk to which the Company is exposed to at the reporting date, showing how profit or loss and equity would have been affected by a reasonably possible change to the relevant risk variable. The Company’s rights and liabilities in respect of Gold Securities, relate to its contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The fair value of each creation and redemption of Gold Securities is recorded using the price provided by the LBMA on the transaction date. However, under IFRS 13, the liability is recorded at fair value (being the on-exchange price) which results in a mismatch. As described in note 18 this mismatch is reversed on the redemption of Gold Securities. As a result, the Company’s contractual and economic liability in connection with the issue and redemption of Gold Securities is matched by movements in the corresponding Gold Bullion. Whilst sensitivity analysis could be performed on this mismatch, the Company does not ultimately have economic to the on-exchange price, but to the contractual liability of the Gold Securities and consequently, the Company does not have any net exposure to market price risk. Furthermore the result of the numeric sensitivity is considered not material by the directors and in their opinion, no sensitivity analysis is required to be disclosed. - 31 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 15. Financial Risk Management (continued) (f)Market Risk Market risk is the risk that changes in market prices (such as equity and bullion prices, interest rates and foreign exchange rates) will affect the Company’s income, or the value of its financial instruments held or issued. i) Price Risk As described above, Gold Securities provide investors with exposure to gold. During the year ended 31 December 2021, the price of gold dropped 3.75%. Coupled with the impact of the Management Fees, the Gold Securities dropped in value by 4.32% between 31 December 2020 and 31 December 2021. The value of the Company’s liability in respect of the Gold Securities fluctuates according to Gold Bullion prices and the risk of such change in price is managed by the Company by holding Gold Bullion in the same quantity as its liability. Whilst the Gold Securities are quoted on the open market, the Company’s ultimate liability relates to its contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The Company measures the Gold Securities at their fair value in accordance with IFRS 13 rather than at the Contractual Value (as described in the Prospectus). The gain or loss on the difference between the value of the Gold Bullion and the fair value of Gold Securities would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion. Refer to note 9 for the further details regarding fair values. Therefore, the Company bears no residual financial risk from a change in the price of Gold Bullion. Furthermore, the impact of price sensitivity is considered immaterial to these financial statements. However, there is an inherent risk from the point of view of investors as the price of Gold Bullion and the value of the Gold Securities may vary widely due to, amongst other things, changing supply or demand for Gold Bullion, government and monetary policy or intervention and global or regional political, economic or financial events. The market price of Gold Securities is (and will remain) a function of supply and demand amongst investors wishing to buy and sell Gold Securities and the bid-offer spread that the market makers are willing to quote. This is highlighted further in note 18, and below under the Fair Value Hierarchy. Coronavirus disease (COVID-19) The COVID-19 pandemic continues to persist and the ultimate duration of the pandemic and its short- term and long-term impact on the global economy is unknown. National governments and supranational organisations in multiple states continue taking steps designed to protect their populations from COVID- 19, including requiring or encouraging home working, the cancellation of sporting, cultural and other events and restricting or discouraging gatherings of people. COVID-19 has created market turmoil and increased market volatility generally. Mutations in the virus, a setback in vaccine distribution and negative global economic consequences arising from the pandemic, amongst other factors, could have a future adverse impact on the global financial markets. The steps outlined above, and public sentiment, may affect both the volatility and prices of commodities, including gold, and hence the prices of the Gold Securities, and such effects may be significant and may be long- term in nature. The directors closely monitor the financial position and performance of ManJer, its assets under management, and therefore its related revenue streams, in respect of fulfilling the obligations under the services agreement. The directors’ consideration in respect of the going concern position of the Company is set out in note 2. ii) Interest Rate Risk The Company does not have significant exposure to interest rate risk since none of its assets or liabilities bear any interest. iii)Currency Risk The directors do not consider the Company to have a significant exposure to currency risk arising from the current economic uncertainties facing a number of countries around the world as the gains or losses on the liability represented by the Gold Securities are matched economically by corresponding losses or gains attributable to the Gold Bullion. - 32 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited Notes to the Financial Statements (Continued) 15. Financial Risk Management (continued) (f) Fair Value Hierarchy The levels in the hierarchy are defined as follows: • Level 1 • Level 2 • Level 3 fair value based on quoted prices in active markets for identical assets. fair values based on valuation techniques using observable inputs other than quoted prices. fair values based on valuation techniques using inputs that are not based on observable market data. Categorisation within the hierarchy is determined on the basis of the lowest level input that is significant to the fair value measurement of each relevant asset/liability. The Company is required to utilise the available on-market price as the Gold Securities are quoted and actively traded on the open market. Therefore, Gold Securities are classified as Level 1 financial liabilities. The Company holds Gold Bullion to support the Gold Securities as determined by the Gold Entitlement (which is calculated in accordance with an agreed formula published in the Prospectus). Gold Bullion is marked to fair value using the latest price published by the LBMA. The Company has contractual obligations to issue and redeem Gold Securities in exchange for Gold Bullion as determined by the Gold Entitlement on each trading day. The fair value of each creation and redemption of Gold Securities is recorded using the price provided by the LBMA on the transaction date applied to that Gold Entitlement. Therefore, Gold Bullion is classified as a level 2 asset, as the value is calculated using third party pricing sources supported by observable, verifiable inputs. The categorisation of the Company’s assets and (liabilities) are as shown below: Fair Value as at 31 December 2021 2020 USD USD Level 1 Gold Securities 3,718,131,075 (4,630,387,545) Level 2 Gold Bullion 3,719,384,708 4,623,226,427 Gold Swing Bar 782,643 813,173 Gold Loan (782,643) (813,173) 3,719,384,708 4,623,226,427 The Gold Securities and the Gold Bullion are recognised at fair value through profit or loss upon initial recognition and revalued to fair value in line with the Company’s accounting policy. There are no liabilities classified in level 3. Transfers between levels would be recognised if there was a change in circumstances that prevented public information in respect of Level 1 inputs from being available. Any such transfers would be recognised on the date of the change in circumstances that cause the transfer. There were no transfers or reclassifications between Level 1 and Level 2 for any of the assets or liabilities during the year. 16. Ultimate Controlling Party In accordance with the disclosure requirements of IFRS the directors have determined that no entity meets the definition of immediate parent or ultimate controlling party. The holder of issued equity shares is HoldCo, a Jersey registered company. WisdomTree Investments, Inc is the ultimate controlling party of HoldCo. - 33 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 17. Events Occurring After the Reporting Period On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The Management of the Company is closely monitoring developments that may impact financial markets including sanctions, actions by governments and developments of the crisis. The Management of the Company will further assess the impact on the fund’s portfolio operations and valuation and will take any potential actions needed, as facts and circumstances are subject to change and may be specific to investment strategies and jurisdictions. There have been no other significant events that have occurred since the end of the reporting period up to the date of signing the Financial Statements which would impact on the financial position of the Company disclosed in the Statement of Financial Position as at 31 December 2021 or on the results and cash flows of the Company for the year ended on that date. 18. Non-GAAP and Non-Statutory Information As a result of the mis-match in the accounting valuation of Gold Bullion (held to support the Gold Securities) and Gold Securities (as disclosed in notes 8 and 9) the profits and losses and comprehensive income of the Company presented in the Statement of Profit or Loss and Other Comprehensive Income reflect gains and losses which represent the movement in the cumulative difference between the value of the Gold Bullion and the price of Gold Securities. The Statement of Changes in Equity also reflects the fair value movements on both the Gold Bullion (held to support the Gold Securities) and the Gold Securities. These gains or losses on the difference between the value of the Gold Bullion (held to support the Gold Securities) and the price of Gold Securities would be reversed on a subsequent redemption of the Gold Securities and transfer of the corresponding Gold Bullion. Furthermore, the Gold Securities are issued under limited recourse arrangements whereby the holders have recourse only to the relevant Gold Bullion (held to support the Gold Securities) and not to the Company. As a result, the Company does not make gains from trading in the underlying Gold Bullion (held to support the Gold Securities) and, from a commercial perspective (with the exception of the impact of Management Fees) gains and losses in respect of Gold Bullion (held to support the Gold Securities) will always be offset by a corresponding loss or gain on the Gold Securities and the Company does not retain any net gains or losses. The mismatched accounting values are as shown below: Year ended 31 December 20212020 USDUSD Change in Fair Value of Gold Bullion (254,639,230) 974,094,680 Change in Fair Value of Gold Securities 263,053,981 (983,215,836) 8,414,751 (9,121,156) To reflect the commercial results, the Company has presented below a non-GAAP and non-Statutory Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity for the period which reflect an Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Gold Securities, together with those gains or losses being transferred to a separate reserve which is deemed non-distributable. - 34 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 18. Non-GAAP and Non-Statutory Information (continued) (a) Non-GAAP and Non-Statutory Statement of Profit or Loss and Other Comprehensive Income Year ended 31 December 2021 2020 USD USD Income 15,418,926 18,648,047 Expenses (15,418,926) (18,648,047) Result Before Fair Value Movements - - Change in Fair Value of Gold Bullion (254,639,230) 974,094,680 Change in Fair Value of Gold Securities 263,053,981 (983,215,836) Profit / (Loss) for the Year 8,414,751 (9,121,156) Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Gold Securities (8,414,751) 9,121,156 Adjusted Result - - - 35 -www.wisdomtree.eu ![image]() ![image]() ![image]() ## Gold Bullion Securities Limited #### Notes to the Financial Statements (Continued) 18. Non-GAAP and Non-Statutory Information (continued) (b) Non-GAAP and Non-Statutory Statement of Changes in Equity Share Share Retained Revaluation Total Adjusted Capital Premium Earnings Reserve4 Equity Total Equity USD USD USD USD USD USD Opening Balance at 1 January 2020 142 141,678 - 1,960,038 2,101,858 141,820 Result and Total Comprehensive Income for the Year - - (9,121,156) - (9,121,156) (9,121,156) Transfer to Revaluation Reserve - - 9,121,156 (9,121,156) - - Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Gold Securities - - - - - 9,121,156 Balance at 31 December 2020 142 141,678 - (7,161,118) (7,019,298) 141,820 Opening Balance at 1 January 2021 142 141,678 - (7,161,118) (7,019,298) 141,820 Result and Total Comprehensive Loss for the Year - - 8,414,751 - 8,414,751 8,414,751 Transfer to Revaluation Reserve - - (8,414,751) 8,414,751 - - Adjustment from Market Value to Contractual Value (as set out in the Prospectus) of Gold Securities - - - - - (8,414,751) Balance at 31 December 2021 142 141,678 - 1,253,633 1,395,453 141,820 4 This represents the difference between the value of Gold Bullion and the price of Gold Securities. - 36 -www.wisdomtree.eu ![image]() ![image]() ![image]() ![image]() www.wisdomtree.eu ![image]()