28th Apr 2006 12:53
Lyxor Gold Bullion Securities Ltd28 April 2006 GOLD BULLION SECURITIES LIMITED Registered No: 87322 Report and Financial Statements for the Financial Year Ended 31 December 2005 Contents Page Directors' Report Statement Of Directors' Responsibilities Independent Auditors' Report Income Statement Balance Sheet Cash Flow Statement Notes To The Financial Statements Directors' Report The directors of Gold Bullion Securities Limited submit herewith the annualreport and financial statements of the company for the financial year ended 31December 2005. Directors The names and particulars of the directors of the company during or since theend of the financial period are: Mr Graham John Tuckwell Chairman of ETFS Securities Group which specialises inlisting commodities on the world's stock exchangesCorporate Advisor, appointedon 17 March 2004 and serves as non-executive Chairman and is also non-executiveChairman of the parent entity, Gold Bullion Holdings (Jersey) Limited, a Jerseyregistered company. Dr Vincent William John FitzGerald Chairman of The Allen Consulting Group PtyLtd, appointed on 17 March 2004 as a non-executive director and is anon-executive director of the parent entity, Gold Bullion Holdings (Jersey)Limited, a Jersey registered company. Graeme David Ross Partner of Jersey practice of Rawlinson & Hunter, CharteredAccountants and a Director of Computershare Investor Services (Channel Islands)Limited. Appointed on 17 March 2004 as a non-executive director and is also anon-executive director of the parent entity, Gold Bullion Holdings (Jersey)Limited, a Jersey registered company. Craig Andrew Stewart Partner of Jersey practice of Rawlinson & Hunter, CharteredAccountants and a Director of Computershare Investor Services (Channel Islands)Limited. Appointed on 17 March 2004 as a non-executive director and is also anon-executive director of the parent entity, Gold Bullion Holdings (Jersey)Limited, a Jersey registered company. Mr Simon Frederick William Village Co-founder of Specialised InvestmentSolutions LLP. Formerly Managing Director at the World Gold Council, appointedon 17 March 2004 and serves as a non-executive director and is also anon-executive director of the parent entity, Gold Bullion Holdings (Jersey)Limited, a Jersey registered company. The above named directors held office during and since the end of the period. Principal Activities The company's principal activity during the course of the financial yearperiodwas the listing and issue of Gold Bullion Securities ('GBS'), allowing investorsto own and trade physical gold bullion through a listed debt security traded onthe London Stock Exchange. A Gold Bullion Security is a secured, undated zero coupon note with a face valueof US$0.00001 issued by the company, which on redemption entitles the SecurityHolder to payment in gold or cash equal to the Per Security Entitlement to Gold.The underlying gold is held by the company and is subject to a fixed charge infavour of the Trustee (The Law Debenture Trust Corporation p.l.c.) under theSecurity Deed to secure the obligations owed by the company to the Trustee andthe Security Holders in respect of the gold. The gold, to which the holder isentitled, is held by the Custodian Bank (HSBC Bank USA, a National Association)in vaults in London. During the financial period there were no significant changes in the nature ofthe company's activities. Review of Operations The company was incorporated on 17 March 2004 and the Gold Bullion Securitiesissued by the company were admitted to the official list of the UK ListingAuthority on 28 March 2004. Trading of GBS commenced on the London StockExchange on 29 March 2004. A total of 20,393,446 Gold Bullion Securities were on issue at 31 December 2005. During the period, the company generated Creation and Redemption fees connectedwith the issue of and redemption of Gold Bullion Securities. Income from thesesources amounted to £24,475. In addition, the company applied a Gold SalesCharge ('GSC') to holders of outstanding Gold Bullion Securities calculated at33/100,000ths per month of the total ounces of gold held on behalf of theHolders. Income from this source amounted to £1,409,781 with trading incometotalling £1,434,256 for the financial year to 31 December 2005. The operating costs of the company over the same period amounted to £1,434,256. As a result, the company realised a trading result from operations of £ nil. The company's liability in connection with the issue of Gold Bullion Securitiesis tied directly to the price of gold. The movement is reflected on the balancesheet and through the profit and loss account in accordance with the company'saccounting policy. The company holds gold as security for the Gold Bullion Securities on issue andbears no financial risk from the movement in the gold price. The increase inmarket value of gold bullion reflects an appreciation in gold as valued atbalance sheet date compared to the value of gold when deposited with the companythroughout the period. These items effectively cancel each other out and have no net effect on theIncome Statement. Subsequent Events There has been no matter or circumstance, other than that referred to in thefinancial statements or notes thereto, that has arisen since the end of thefinancial period that has significantly affected, or may significantly affect,the operations of the company, the results of those operations, or the state ofaffairs of the company in future financial periods. Future Developments The directors are not aware of any developments that might have a significanteffect on the operations of the company in subsequent financial periods notalready disclosed in this report or the attached financial report. Dividends The directors do not recommend the provision or payment of a dividend to holdersof Ordinary Shares for the period. Share Options Granted to Directors There have been no share options granted to Directors in either this or inpreceding financial years. Employees The company does not have any employees. It is the company's policy to use theservices of specialist subcontractors or consultants as far as possible. Directors' Interests The following table sets out each director's interest in Ordinary shares as atthe date of this report: Directors Fully Paid Ordinary SharesGraham John Tuckwell 23 Directors' Remuneration The following table discloses the remuneration of the directors of the companywhich has been paid by the company or the holding company, Gold Bullion Holdings(Jersey) Limited during the financial period: Name Primary Fees TotalSpecified Directors:Non - Executive DirectorsGraham J Tuckwell Nil NilSimon FW Village Nil NilGraeme D Ross £5,000 £5,000Craig A Stewart £5,000 £5,000Vincent WJ FitzGerald £10,000 £10,000 Auditors A resolution to re-appoint Deloitte & Touche will be proposed at the forthcomingannual general meeting. On behalf of the Directors Graeme D Ross Director Jersey, 26 April 2006 Statement Of Directors' Responsibilities Company law in Jersey requires the directors to prepare financial statements foreach financial period which give a true and fair view of the state of affairs ofthe company as at the end of the financial period and of the profit or loss ofthe company for the period then ended. In preparing those financial statementsthe directors are required to: •apply generally accepted accounting principles; •select suitable accounting policies and then apply them consistently; •state whether applicable accounting standards have been followed; and •prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping accounting records which aresufficient to show and explain its transactions and are such as to disclose withreasonable accuracy at any time the financial position of the company at thattime; and to enable them to ensure that any financial statements prepared complywith the Companies (Jersey) Law. They are also responsible for the system ofinternal control, for safeguarding the assets of the company and hence fortaking reasonable steps for the prevention and detection of fraud and otherirregularities. Independent Auditors' Report To The Shareholders Of Gold Bullion Securities Limited We have audited the accompanying financial statements of Gold Bullion SecuritiesLimited, which comprise the balance sheet as at December 31, 2005, and theincome statement, statement of changes in equity and cash flow statement for theyear then ended, and a summary of significant accounting policies and otherexplanatory notes. This report is made solely to the company's members, as a body, in accordancewith Article 110 of the Companies (Jersey) Law 1991. Our audit work has beenundertaken so that we might state to the company's members those matters we arerequired to state to them in an auditors' report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company and the company's members as a body, for ouraudit work, for this report, or for the opinions we have formed. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial ReportingStandards. This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit in accordance with International Standardson Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of (or"present fairly, in all material respects,") the financial position of GoldBullion Securities Limited as of December 31, 2005, and of its financialperformance and its cash flows for the year then ended in accordance withInternational Financial Reporting Standards. Deloitte & Touche Chartered Accountants St Helier, Jersey 26 April 2006 Income Statement For The Financial Year Ended 31 December 2005 Note 2005 2004 £ £Revenue From Ordinary Activities 2Increase in market value of Gold Bullion 114,799,953 1,189,493Creation and Redemption Fees 24,475 26,291Gold Sales Charge 1,409,781 668,639Profit from Sale of Gold Bar - 2,709 116,234,209 1,887,132 Expenses From Ordinary Activities 2Increase in fair value liability on Gold 114,799,953 1,189,130Bullion Securities on issueIncrease in fair value of gold loan - 363Storage and Insurance Costs 400,505 224,801Legal Expenses 35,162 157,180Service Fees - Administration fee paid to 950,075 147,312parentOther expenses 48,514 65,010 116,234,209 1,783,796 Profit From Ordinary Activities Before - 103,336Income Tax ExpenseIncome tax expense relating to ordinary 4 - -activities Operating Profit after Income Tax - 103,336 Profit for the year - 103,336Retained Profit brought forward 103,336 -Retained Profit carried forward 103,336 103,336 The directors consider the company's activities are continuing. Balance Sheet As At 31 December 2005 Note 2005 2004 £ £Current AssetsCash 215,835 213,220Gold Sales Charges receivable 192,778 90,600Creation Fees receivable 12,895 19,898Gold 'swing bar' 7 127,897 97,585Gold Bullion held for Gold Bullion 8 602,607,351 372,808,853Securities issuedTotal Current Assets 603,156,756 373,230,156 Total Assets 603,156,756 373,230,156 EquityShare Capital 10 100 100Share Premium 99,900 99,900Retained Profits 103,336 103,336Total Equity 203,336 203,336 Current LiabilitiesAdministration Fee payable to Parent 94,391 -Trade Creditors 123,663 99,771Other Creditors - 20,525Gold loan 7 127,897 97,585Gold Bullion Securities on issue 9 602,607,469 372,808,939Total Current Liabilities 602,953,420 373,026,820 Total Equity and Liabilities 603,156,756 373,230,156 The financial statements on pages 1 to 19 were approved by the board ofdirectors and signed on its behalf on 26 April 2006. Graeme D Ross Director Cash Flow Statement For The Financial Year Ended 31 December 2005 Note 2005 2004 £ £Cash Flows From Operating ActivitiesReceipts from customers 31,478 6,393Proceeds from sale of Gold Sales Charge 1,307,603 578,040goldPayments to Suppliers (1,336,498) (474,008)Net cash provided by operating activities 14 2,583 110,425 Cash Flows From Investing ActivitiesPayment for gold bullion (430oz) - (94,716)Proceeds from sale of gold bullion (430oz) - 97,425Net cash provided by/( used in) investing 2,709activities Cash Flows From Financing ActivitiesProceeds from issue of ordinary shares - 100,000Proceeds from issue of Gold Bullion 32 86SecuritiesNet cash provided by/(used in) financing 100,086activities Net Increase In Cash Held 2,615 213,220 Cash At The Beginning Of The Period 213,220 - Cash At The End Of The Period 215,835 213,220 Statement of Changes in Equity as at 31 December 2005 Share capital & premium Accumulated profit Shareholder's equity £ £ £Opening 100,000 103,336 203,336BalanceProfit - - -for theperiodShare - - -capital&premiumissued Balance 100,000 103,336 203,336at 31December2005 Notes To The Financial Statements For The Financial Year Ended 31 December 2005 1.Accounting Policies The financial statements have been prepared in accordance with the Companies(Jersey) Law 1991 (as amended) and International financial reporting standards(IFRS). The main accounting policies of the company are described below. Basis of Preparation of Financial Statements The financial statements are prepared under the historical cost conventionexcept for the revaluation of gold and GBS on issue. Foreign currency translation Transactions of the company that are denominated in foreign currencies aretranslated into GBP at the rates ruling at the date of the transactions.Monetary assets and liabilities denominated in foreign currencies at the balancesheet date are translated at rates ruling at that date. The resultingdifferences are accounted for in the Income Statement. Revenue Fees received for the issue and redemption of securities are recognised at thedate on which the transaction becomes legally binding. The gold sales charge isrecognised on an accruals basis. Gold Bullion Holdings of gold bullion are stated at market value using the last quoteprovided by the London Bullion Market Association. The quote used in theseaccounts is the AM fix rate on 30 December 2005. Gold Bullion Securities The securities on issue are designated as 'fair value through profit and loss'under International Accounting Standard 39. The fair value is calculated usingthe last quote provided by the London Bullion Market Association. The quote usedin these accounts is the AM fix rate on 30 December 2005. 2.Revenue from Ordinary Activities Revenue from ordinary activities includes the following items of revenue andexpense: 2005 2004 £ £a. •Operating Revenue includes: Sales revenue:Creation Fees 23,677 23,937Redemption Fees 798 2,354Gold Sales Charge ('GSC') 1,409,781 668,639Profit on sale of gold bar - 2,709 1,434,256 697,639 Notes to the financial statements (continued) GSC is accrued daily at 0.40% per annum (0.30%pa to 1 July 2005) on the totalounces held on behalf of GBS holders and is deducted at the end of each monthfrom the gold held on behalf of GBS holders stored in the vaults of HSBC BankUSA, a National Association ("HSBC Bank USA, NA") in London. The GSC for theperiod totalled 5,555.234 fine troy ounces of which 4,907.079 ounces were soldat an average prevailing market price of £248.01 per ounce; and the remaining648.155 ounces being receivable at year end the period end was valued at the AMfix rate on 30 December 2005 quoted by the London Bullion Market Association of£297.426 per oz. 2005 2004 £ £• Expenses include:Storage and Insurance Costs 400,505 224,801Legal Expenses 35,162 157,180Service Fees - Administration Fee paid to Parent 950,075 147,312Other expenses 48,514 65,010 1,434,256 594,303 In conducting its business, the company receives and pays for services from anumber of Jersey and UK based suppliers. All the above-mentioned costs have beenincurred in the normal course of business. Legal expenses represent a portion ofthe costs associated with the listing and on-going trading of its Gold BullionSecurities on the London Stock Exchange. With effect from 1 January 2005, a Service Agreement was entered into by thecompany and Gold Bullion Holdings (Jersey) Limited, Jersey registered no 87321("Jersey Holdings"). Pursuant to this Agreement, Jersey Holdings is responsiblefor supplying, at its own expense, the following services required by thecompany: •any advisory or consultancy services required by the company in connection with establishing or running the Programme; •liability insurance; and •any advertising services in connection with the Programme, together with such other services as the parties may from time to time agree. In return for Jersey Holdings performing its obligations under the ServiceAgreement, the company will pay to Jersey Holdings a fee equal to the Gold SalesCharge plus any Creation Fees and Redemption Fees received by the company lessthe company's own expenses in administering the Programme. Notes to the financial statements (continued) 3.Directors' Remuneration The directors of Gold Bullion Securities Limited during the period were: •Mr Graham John Tuckwell •Dr Vincent William John FitzGerald •Mr Simon Frederick William Village •Mr Graeme David Ross •Mr Craig Andrew Stewart The parent entity reviews and revises remuneration packages of all specifieddirectors from time-to-time. The following table discloses the remuneration ofthe directors of the company which have been paid by the company and JerseyHoldings during the period: Name Primary TotalSpecified Directors:Non-Executive DirectorsGraham J Tuckwell Nil NilSimon FW Village Nil NilVincent WJ FitzGerald £10,000 £10,000Graeme D Ross £5,000 £5,000Craig A Stewart £5,000 £5,000 4.Income Tax The company is an "exempt company" within the meaning of Article 123A of theIncome Tax (Jersey) Law 1961, as amended and has paid an exempt company fee of£600 in this respect. 5.Remuneration of Auditors 2005 2004 £ £Auditing of the annual financial statements 10,500 10,000 The fees paid or payable in respect of the company for the financial year periodare paid by the parent entity. 6.Employee Benefits The company has no employees and has paid no remuneration or benefits during theperiod in respect of employees. 7.Gold 'swing bar' The company has an overdraft facility with HSBC Bank USA, NA giving the companythe rights, interest and title to a gold bar. The 430 oz gold bar held by thecompany at the period end was held for the purpose of facilitating theallocation of gold to holders of Gold Bullion Securities. The gold is recordedat market value using the last quote provided by the London Bullion MarketAssociation being the AM fix rate on 30 December 2005. The loan is denominatedin gold ounces and revalued at the period end through the profit and lossaccount to match the fair value movement of the gold bar held. The overdraft isrepayable on demand. The company intends to maintain the overdraft as long as the company continuesto operate. 8.Gold Bullion held as security for GBS issued 2005 2004 £ £Gold Bullion held as security for GBS issued 602,607,351 372,808,853 The amount of gold bullion held on behalf of holders of Gold Bullion Securitiesat the period end was 2,026,074.892oz. The gold is recorded at market valueusing the AM fix rate on 30 December quoted by the London Bullion MarketAssociation of £297.426 per fine troy ounce. The gold is held by the company and is subject to a fixed charge in favour ofthe Trustee (The Law Debenture Trust Corporation p.l.c.) under the Security Deedto secure the obligations owed by the Company to the Trustee and the SecurityHolders in respect of the Gold Bullion. The gold, to which the holder isentitled, is held by the Custodian Bank (HSBC Bank USA, NA) in vaults in London. 9.Gold Bullion Securities on issue 2005 2004 £ £Gold Bullion Securities on issue 602,607,469 372,808,939 The Company issues Gold Bullion Securities which are comprised of a Gold BullionSecurity of nominal value and a beneficial interest in physical gold bullionwhich entitles the holder to approximately 1/10th of a fine troy ounce of goldper note. The Gold Bullion Security is a secured undated zero coupon note issuedby the company at a nominal value of 1/1,000th of one US cent and the GoldBullion Securities are quoted on the London Stock Exchange. 8,722,208 wereissued and 4,805,615 were redeemed during the financial period. 20,393,446secured undated zero coupon notes were outstanding and had a face value of £118at 31 December 2005. The combined entitlement to gold held on behalf of holders of Gold BullionSecurities amounted to 2,026,074.892 oz. (63 tonnes). The securities arerecorded at fair value and the company's liability using the AM fix rate on 30December quoted by the London Bullion Market Association is £602,607,351. Pursuant to the Listing Particulars, Trust Instrument and Security Deed dated 24March 2004; the company owns the gold deposited by Security Holders, withHolders' rights and entitlements protected by a first ranking security held bythe Trustee over all the company's rights in relation to the Secured property. As detailed in the Security Deed, the secured property is the gold held in theSecured Allocated gold accounts maintained with the Custodian. These accountsare controlled exclusively by the Trustee, whereby only the Trustee canauthorise any payment or transfer out of either of the Secured Gold Accounts.Each time the holder transfers a Gold Bullion Security to a new holder, thebeneficial interest in the gold bullion transfers to the new holder. Notes to the financial statements (continued) The value disclosed is the face value of the securities plus the amount of FixedCharge the Trustee holds in accordance with the Security Deed as at 31 December2005. Holders of Gold Bullion Securities have the right to vote: •on any proposal that affects rights attached to the Gold Bullion Security (except the issue of new Gold Bullion Securities, or the redemption of the Gold Bullion Securities on issue); Holders of Gold Bullion Securities are not entitled to: •any right to the payment of any interest. Gold Bullion Securities are redeemable at any time (in accordance with the termsof Redemption) by the holder. Gold Bullion Securities can also be compulsorilyredeemed by the company on provision of 30 days notice or in the case ofinsolvency. Therefore an investment in Gold Bullion Securities may be redeemedearlier than desired by the holder. 10.Issued Share Capital 2005 2004 £ £100 fully paid Ordinary shares (£1 each) 100 100 The company has an Authorised capital of 10,000 Ordinary shares of £1 each. All Ordinary shares issued by Gold Bullion Securities Limited carry one vote pershare without restriction and carry the right to dividends. All Ordinary sharesare held by the parent entity, Gold Bullion Holdings (Jersey) Limited, a Jerseyregistered company. 2005 2004 No: £ No: £Fully Paid Ordinary SharesBalance at beginning of period 100 100 - -Issue of Share capital - - 100 100Share premium on issueds shares 99,900 99,900Balance at end of period 100 100,000 100 100,000 11.Contingent Liabilities and Contingent Assets The company does not have any material contingent liabilities or contingentassets at 31 December 2005. Notes to the financial statements (continued) 12.Related Party Disclosures The immediate and ultimate parent and controlling entity is Gold BullionHoldings (Jersey) Limited, a Jersey company registered No: 87321. Entities which have a significant influence over the company through theownership of Gold Bullion Holdings (Jersey) Limited shares or by virtue of beinga director or trustee of the company or the holding company are related partiesof Gold Bullion Securities Limited. Details of the company's transactions withrelated parties during the period and the balances due to/ (from) those entitiesat the period end are recorded below. World Gold Council - payment and reimbursement of shared expenses (£6,473.50),and £nil balance as at 31 December 2005. Investor Resources Holdings Pty Ltd (former shareholder) EFT Securities Limited- provision of marketing and financial services (£57,499.64) and £ nil balanceas at 31 December 2005. Gold Bullion Investment Trust - Nil transactions 13.Fair value of financial assets and liabilities and financial risk a. Gold 'swing bar' The company has borrowed one "London Good Delivery" gold bar (of 430 fine troyounces) from HSBC Bank USA, NA. This gold swing bar facilitates the effective administration of the Trustee'sallocated gold accounts by acting as a swing factor and ensuring that allholders of Gold Bullion Securities receive allocated gold bullion bars. TheTrustee uses the gold bar to provide any difference necessary to make up aLondon good delivery bar. b. Interest Rate Risk The company does not have significant exposure to interest rate risk since noneof its liabilities bear any interest. c. Financial risk The Gold Bullion Securities bear no interest. The company's liability is relatedto the gold price and is managed by the company by holding gold in exactly thesame quantity as its liability. The company therefore bears no financial riskfrom a change in the price of gold. Notes to the financial statements (continued) 14.Notes to the Cash Flow Statement Reconciliation of Profit From Ordinary Activities After Related Income Tax toNet Cash Flows From Operating Activities 2005 2004 £ £Profit from ordinary activities Nil 103,336after income taxProfit from sale of gold shown Nil (2,709)separatelyChanges in net assets andliabilities(Increase)/decrease in assets:Gold Sales Charge receivable (102,178) (90,600)Creation fees receivable 7,003 (19,898)Gold 'swing bar' (30,312) (97,585)Gold Bullion held as security for (229,798,498) (372,808,853)GBS on issue (229,923,985) (373,016,936)Increase/(decrease) in liabilities:Administration Fee payable to Parent 94,391Trade Creditors 23,892 99,771Other Creditors (20,525) 20,525Gold loan 30,312 97,585Gold Bullion Securities on issue 229,798,498 372,808,853 229,926,568 373,026,734 Net cash from operating activities 2,583 110,425 15.Additional Company Information Gold Bullion Securities Limited is a public company incorporated and operatingin Jersey, Channel Islands, the debt securities of which have been admitted tothe official list of the UK Listing Authority under the debt listing rules andadmitted to trading on the London Stock Exchange (LSE). The company's GoldBullion Securities (LSE Code: GBS) are quoted on the LSE. The company'saddresses are as follows: Registered Office Principal Place of BusinessOrdnance House Ordnance House31 Pier Road 31 Pier RoadSt Helier E4 8PW St Helier JE4 8PWChannel Islands Channel Islands END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Gold Bul