10-K/A: Franklin Responsibly Sourced Gold ETF Amends Annual Report, Clarifies Valuation Practices

Franklin Responsibly Sourced Gold ETF files an amendment to its annual report to clarify valuation practices and include separate financial statements for the Trust and the Fund.

Summary

• The Franklin Responsibly Sourced Gold ETF filed an amendment to its annual report on Form 10-K for the fiscal year ended March 31, 2023.
• The amendment addresses comments from the SEC regarding controls and procedures, valuation practices, and the presentation of financial statements.
• The fund's investment objective is to reflect the performance of gold bullion, less expenses, holding only responsibly sourced gold.
• The fund defines responsibly sourced gold as London Good Delivery gold bullion bars refined on or after January 1, 2012.
• The fund's net asset value (NAV) is calculated using the LBMA Gold Price PM, published by the IBA.
• As of March 31, 2023, the fund held 57,519.498 ounces of gold, valued at $113,871,350, with a cost of $104,131,755.
• The fund's net asset value per share was $26.48 at the end of the period, up from $25.00 at inception.
• The fund's total annual expense ratio is 0.15%, which is the fee paid to the sponsor.
• The fund had a net increase in net assets from operations of $9,685,812 for the period from May 24, 2022 to March 31, 2023.
• The fund issued 4,300,000 shares in exchange for 57,542.226 ounces of gold during the period.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing factual information about the fund's operations and financial performance. While there are inherent risks associated with gold investments, the document does not express any particular optimism or pessimism.

Positives

• The fund's NAV per share increased during the reporting period, reflecting a rise in gold prices.
• The fund's expense ratio is relatively low at 0.15%.
• The fund adheres to responsible sourcing guidelines for its gold holdings.
• The fund's operations are transparent, with clear valuation and expense policies.

Negatives

• The fund is not actively managed, so it does not attempt to buy or sell gold to take advantage of price fluctuations.
• The fund's value is directly tied to the price of gold, making it susceptible to market volatility.
• The fund's expenses are paid by selling gold, which reduces the amount of gold represented by each share over time.
• The fund is exposed to operational risks, including potential issues with the custodian or other service providers.

Risks

• The fund is subject to market risk, with the price of gold being historically unpredictable.
• The fund is not diversified, making it more volatile than other investments.
• The fund's gold may be sold at low prices to pay expenses.
• The fund is subject to responsible sourcing due diligence risk, with no guarantee that all gold is 100% ethically sourced.
• An active and liquid market for the shares may not be sustained.
• The shares may trade at a price above or below the NAV per share.
• The amount of gold represented by each share will decrease over time due to the sale of gold to pay expenses.
• The fund is exposed to various operational risks, including human error and technology failures.
• The fund relies on the custodian for safekeeping of its gold, and any failure by the custodian could result in a loss.
• The fund does not insure its gold, exposing shareholders to the risk of loss for which no person is liable.
• The fund is subject to tax risks, with gains on the sale of shares held for more than a year taxed at a maximum rate of 28%.

Future Outlook

The document contains forward-looking statements regarding future gold prices, sales, costs, and market conditions, but the fund does not intend to update these statements even if new information becomes available.

Management Comments

• The Sponsor concluded that the disclosure controls and procedures were effective at reasonable levels of assurance as of the end of the period covered by this report.
• The Sponsor believes that the size and operation of the gold bullion market make it unlikely that an Authorized Participants direct activities in the gold or securities markets will impact the price of gold or the price of the Shares.

Industry Context

This filing is part of the regulatory reporting requirements for exchange-traded funds (ETFs) that track the price of gold. The document provides transparency into the fund's operations, holdings, and financial performance, which is important for investors in this sector.

Comparison to Industry Standards

• The fund's expense ratio of 0.15% is competitive with other gold ETFs.
• The fund's use of the LBMA Gold Price PM for valuation is standard practice in the industry.
• The fund's focus on responsibly sourced gold aligns with increasing investor interest in ethical investments.
• The fund's structure as a grantor trust is common for commodity-based ETFs.

Related Party Transactions

• The Sponsor is a related party of the Trust and the Fund.
• The Marketing Agent is an affiliate of the Sponsor.
• Franklin Resources, Inc., the ultimate parent company of the Sponsor, is considered a related party.

Stakeholder Impact

• Shareholders are exposed to the risks and rewards of gold price fluctuations.
• Authorized Participants are responsible for the creation and redemption of shares.
• The Sponsor is responsible for the management and oversight of the fund.
• The Custodian is responsible for the safekeeping of the fund's gold bullion.

Next Steps

• The fund will continue to operate in accordance with its stated investment objective and policies.
• The fund will continue to file periodic reports with the SEC as required.
• The fund will continue to monitor market conditions and adjust its operations as necessary.

Key Dates

Keywords

Gold ETF, Responsibly Sourced Gold, Gold Bullion, LBMA Gold Price, NYSE Arca, Franklin Templeton, Investment, ETF