UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
quarterly period ended December 31, 2024
or
☐ TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 001-41435
FRANKLIN TEMPLETON HOLDINGS TRUST
SPONSORED BY FRANKLIN HOLDINGS, LLC
(Exact name of registrant as specified in its charter)
Delaware | | 87-6458919 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
One Franklin
Parkway,
San Mateo, CA
94403-1906
(650) 312-2000
(Address
of principal executive offices, telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Shares of Franklin Responsibly Sourced Gold ETF | | FGDL | | NYSE Arca, Inc. |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | | ☐ | | | | Accelerated Filer | | ☐ |
| Non-Accelerated Filer | | ☒ | | | | Smaller Reporting Company | | ☒ |
| Emerging Growth Company | | ☒ | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The registrant had 3,100,000 outstanding shares as of January 30, 2025.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q includes statements which relate to future events or future performance. In some cases, you can identify such forward-looking statements by terminology such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. All statements (other than statements of historical fact) included in this report that address activities, events or developments that may occur in the future, including such matters as changes in commodity prices and market conditions (for gold and the Shares), the Fund’s operations, the Sponsor’s plans and references to the Fund’s future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by the Sponsor on the basis of its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor’s expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed in this report, general economic, market and business conditions, changes in laws or regulations, including those concerning taxes, made by governmental authorities or regulatory bodies, and other world economic and political developments. All forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments the Sponsor anticipates will be realized or, even if substantially realized, will result in the expected consequences to, or have the expected effects on, the Fund’s operations or the value of the Shares. None of the Trust, the Fund, the Sponsor, or the Trustee or their respective affiliates is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in the Sponsor’s expectations or predictions.
EMERGING GROWTH COMPANY STATUS
The Trust is an “emerging growth company,” as defined in the JOBS Act. For as long as the Trust is an emerging growth company, the Trust may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in the Fund’s periodic reports and audited financial statements in its prospectus, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on “golden parachute” compensation and exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless otherwise determined by the SEC, any new audit rules adopted by the Public Company Accounting Oversight Board.
Under the JOBS Act, the Trust will remain an emerging growth company until the earliest of:
•
the last day of the fiscal year during which the Trust has total annual gross revenues of $1.235 billion or more;
•
the last day of the fiscal year following the fifth anniversary of the completion of this offering;
•
the date on which the Trust has, during the previous three-year period, issued more than $1 billion in non-convertible debt; or
•
the date on which the Trust is deemed to be a “large-accelerated filer” (i.e., an issuer that (1) has more than $700 million in outstanding equity held by non-affiliates and (2) has been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for at least 12 calendar months and has filed at least one annual report on Form 10-K.)
The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.
FRANKLIN RESPONSIBLY SOURCED GOLD ETF
FRANKLIN TEMPLETON HOLDINGS TRUST
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Part I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements of the Trust and the Fund
FRANKLIN RESPONSIBLY SOURCED GOLD ETF
FRANKLIN TEMPLETON HOLDINGS TRUST
Index to Unaudited Financial Statements
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FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Statements of Assets and Liabilities (Unaudited)
| | | | | |
Assets | | | | | | |
Investment in gold, at fair value(a) | | $ | 107,985,202 | | | $ | 62,110,210 | |
Total assets | | | 107,985,202 | | | | 62,110,210 | |
| | | | | | | | |
Liabilities | | | | | | | | |
Sponsor's fee payable | | | 15,213 | | | | 7,579 | |
Total liabilities | | | 15,213 | | | | 7,579 | |
Commitments and contingencies (Note 7) | | | | | | | | |
| | | | | | | | |
Net assets | | $ | 107,969,989 | | | $ | 62,102,631 | |
| | | | | | | | |
Shares issued and outstanding(b) | | | 3,100,000 | | | | 2,100,000 | |
Net asset value per Share | | $ | 34.83 | | | $ | 29.57 | |
See accompanying notes to the unaudited financial statements.
FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Schedules of Investments (Unaudited)
December 31, 2024 | | | | | | | | | | | | |
| | Ounces of Gold | | Cost | | Fair Value | | % of Net Assets |
Investment in gold | | | 41,360.171 | | | $ | 90,663,645 | | | $ | 107,985,202 | | | | 100.01 | % |
Total investments | | | 41,360.171 | | | $ | 90,663,645 | | | $ | 107,985,202 | | | | 100.01 | % |
Less liabilities | | | | | | | | | | | (15,213 | ) | | | (0.01 | )% |
Net assets | | | | | | | | | | $ | 107,969,989 | | | | 100.00 | % |
March 31, 2024 | | | | | | | | | | | | |
| | Ounces of Gold | | Cost | | Fair Value | | % of Net Assets |
Investment in gold | | | 28,048.958 | | | $ | 50,923,216 | | | $ | 62,110,210 | | | | 100.01 | % |
Total investments | | | 28,048.958 | | | $ | 50,923,216 | | | $ | 62,110,210 | | | | 100.01 | % |
Less liabilities | | | | | | | | | | | (7,579 | ) | | | (0.01 | )% |
Net assets | | | | | | | | | | $ | 62,102,631 | | | | 100.00 | % |
See accompanying notes to the unaudited financial statements.
FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Statements of Operations (Unaudited)
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
Expenses | | | | | | | | | | | | |
Sponsor's fee | | $ | 38,441 | | | $ | 24,388 | | | $ | 92,294 | | | $ | 89,459 | |
Total expenses | | | 38,441 | | | | 24,388 | | | | 92,294 | | | | 89,459 | |
Net investment loss | | | (38,441 | ) | | | (24,388 | ) | | | (92,294 | ) | | | (89,459 | ) |
| | | | | | | | | | | | | | | | |
Net realized and change in unrealized gain (loss) on investment in gold | | | | | | | | | | | | | | | | |
Net realized gain (loss) from gold distributed for the redemption of shares and sold to pay expenses | | | 4,249,440 | | | | 1,537,276 | | | | 4,261,209 | | | | 4,786,535 | |
Net change in unrealized appreciation (depreciation) on investment in gold | | | (6,114,720 | ) | | | 5,016,537 | | | | 6,134,563 | | | | (2,812,053 | ) |
Net realized and change in unrealized gain (loss) on investment in gold | | | (1,865,280 | ) | | | 6,553,813 | | | | 10,395,772 | | | | 1,974,482 | |
Net increase (decrease) in net assets resulting from operations | | $ | (1,903,721 | ) | | $ | 6,529,425 | | | $ | 10,303,478 | | | $ | 1,885,023 | |
Net increase (decrease) in net assets per Share(a)(b) | | $ | (0.66 | ) | | $ | 2.67 | | | $ | 4.21 | | | $ | 0.62 | |
See accompanying notes to the unaudited financial statements.
FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Statements of Cash Flows (Unaudited)
| | | For the Nine Months Ended December 31, 2024 | | For the Nine Months Ended December 31, 2023 |
| | | | | | | |
Cash Flows from Operating Activities: | | | | | | |
Proceeds from gold bullion sold to pay expenses | | $ | 84,660 | | | $ | 95,142 | |
Expenses - Sponsor's fee paid | | | (84,660 | ) | | | (95,142 | ) |
Net cash provided by (used in) operating activities | | | - | | | | - | |
Increase (decrease) in cash | | | - | | | | - | |
Cash, beginning of period | | | - | | | | - | |
Cash, end of period | | $ | - | | | $ | - | |
Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Operations to Net Cash
Provided by (Used in) Operating Activities: | | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | $ | 10,303,478 | | | $ | 1,885,023 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used
in) operating activities: | | | | | | | | |
Proceeds from gold bullion sold to pay expenses | | | 84,660 | | | | 95,142 | |
Net realized (gain) loss | | | (4,261,209 | ) | | | (4,786,535 | ) |
Net change in unrealized (appreciation) depreciation | | | (6,134,563 | ) | | | 2,812,053 | |
Change in operating assets and liabilities: | | | | | | | | |
Sponsor's fees payable | | | 7,634 | | | | (5,683 | ) |
Net cash provided by (used in) operating activities | | $ | - | | | $ | - | |
Supplemental disclosure of non-cash financing information: | | | | | | | | |
Gold bullion contributed for Shares issued | | $ | 61,737,195 | | | $ | 2,695,902 | |
Gold bullion distributed for Shares redeemed | | $ | (26,173,315 | ) | | $ | (60,576,749 | ) |
See accompanying notes to the unaudited financial statements.
FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Statements of Changes in Net Assets (Unaudited)
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | | | | | | |
Net assets, beginning of period | | $ | 85,988,207 | | | $ | 64,997,673 | | | $ | 62,102,631 | | | $ | 113,858,013 | |
Net investment loss | | | (38,441 | ) | | | (24,388 | ) | | | (92,294 | ) | | | (89,459 | ) |
Net realized gain (loss) from gold distributed for the redemption of shares and sold to pay expenses | | | 4,249,440 | | | | 1,537,276 | | | | 4,261,209 | | | | 4,786,535 | |
Net change in unrealized appreciation (depreciation) on investment in gold | | | (6,114,720 | ) | | | 5,016,537 | | | | 6,134,563 | | | | (2,812,053 | ) |
Net increase (decrease) in net assets resulting from operations | | | (1,903,721 | ) | | | 6,529,425 | | | | 10,303,478 | | | | 1,885,023 | |
| | | | | | | | | | | | | | | | |
Capital Share Transactions: | | | | | | | | | | | | | | | | |
Contributions for Shares issued | | | 50,058,818 | | | | - | | | | 61,737,195 | | | | 2,695,902 | |
Distributions for Shares redeemed | | | (26,173,315 | ) | | | (13,664,909 | ) | | | (26,173,315 | ) | | | (60,576,749 | ) |
Net increase (decrease) in net assets from capital share transactions | | | 23,885,503 | | | | (13,664,909 | ) | | | 35,563,880 | | | | (57,880,847 | ) |
Net assets, end of period | | $ | 107,969,989 | | | $ | 57,862,189 | | | $ | 107,969,989 | | | $ | 57,862,189 | |
See accompanying notes to the unaudited financial statements.
FRANKLIN TEMPLETON HOLDINGS TRUST
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Franklin Templeton Holdings Trust (the “Trust”) was organized as a Delaware statutory trust on April 19, 2021 and is governed by the Agreement and Declaration of Trust dated as of May 10, 2022. The Trust is not registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and is not a commodity pool for purposes of the Commodity Exchange Act (“CEA”). The accompanying financial statements relate to the Trust, as registrant, and the one series that it currently offers, the Franklin Responsibly Sourced Gold ETF (the “Fund”) presented on a combined basis. Separate, series-level financial statements are provided for the Fund in another section of this report. The Trust had no operations prior to the Fund’s launch, other than in connection with the organization and registration of the Fund’s shares. Franklin Holdings, LLC is the Sponsor of the Trust and the Fund (the “Sponsor”). The Sponsor is not subject to regulation by the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator with respect to the Fund, or a commodity trading advisor with respect to the Fund. The Fund issues shares (the “Shares”), which represent units of fractional undivided beneficial interest in the Fund. The Shares of the Fund are listed on the NYSE Arca, Inc. (“NYSE Arca”). The investment objective of the Fund is for the Shares to reflect the performance of the price of gold bullion, less the Fund’s expenses. The Fund’s only ordinary recurring expense is the Sponsor’s annual fee of 0.15% of the Net Asset Value (“NAV”) of the Fund. The assets of the Fund include only gold bullion and cash, if any. The Fund seeks to hold only responsibly sourced gold in the Fund’s allocated account. The Fund defines responsibly sourced gold for this purpose as London Good Delivery gold bullion bars that were refined on or after January 1, 2012 (also referred to herein as “post-2012 gold”). All post-2012 gold has been refined in accordance with London Bullion Market Association’s (“LBMA”) Responsible Gold Guidance (the “Gold Guidance”). The Shares were first listed for trading on NYSE Arca on June 30, 2022.
BNY Mellon Asset Servicing, a division of The Bank of New York Mellon, or “BNYM,” is the Fund’s Administrator (the “Administrator”) and Transfer Agent (the “Transfer Agent”). BNYM also serves as the custodian of the Fund’s cash, if any. JPMorgan Chase Bank, N.A., London branch (“JPMorgan”), is the custodian (the “Custodian”) of the Fund’s gold bullion. CSC Delaware Trust Company, a subsidiary of Corporation Service Company, is the Trustee of the Trust. Franklin Distributors, LLC is the marketing agent of the Trust (the “Marketing Agent”).
Shares of the Fund are listed on the NYSE Arca under the ticker symbol “FGDL”. The market price of the Shares may be different from the NAV per Share. Shares may be purchased from the Trust only by certain eligible financial institutions called Authorized Participants and only in one or more blocks of 50,000 Shares (“Creation Units”) in exchange for gold. The Fund issues Shares in Creation Units on a continuous basis at the applicable NAV per Share on the creation order date. Except when aggregated in Creation Units, the Shares are not redeemable securities.
The Trust is an “emerging growth company” as that term is used in the Securities Act of 1933, as amended (the “Securities Act”) and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.
The combined accompanying financial
statements of assets and liabilities and combined schedules of investments at December 31, 2024 and March 31, 2024, the combined statements of operations, combined statements of cash flows and combined statements of changes in net assets for the period ended December 31, 2024 and 2023, have been prepared on behalf of the Trust, as registrant, combined with its one currently offered series, the Fund, and for the Fund separately (included below in a separate section of this report), and are unaudited. In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position and results of operations for the three and nine months ended December 31, 2024 and 2023, and for all periods presented, have been made. In addition, interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trust’s and the Fund’s financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
The fiscal year of the Trust and the Fund is March 31st.
2. SIGNIFICANT ACCOUNTING POLICIES
In preparing financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”), management of the Sponsor makes estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of revenue and expenses reported during the period. Actual results could differ from these estimates.
The accompanying unaudited financial statements were prepared in accordance with GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
The following is a summary of significant accounting policies followed by the Trust and the Fund.
2.1. Basis of Presentation
The Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies, and has concluded that solely for accounting purposes, the Trust is classified as an Investment Company as defined in ASC 946. The Trust is not registered as an investment company under the Investment Company Act and is not required to register under such act.
The financial statements are presented for the Trust, as the registrant, combined with the Fund. Financial statements for the Fund presented at the series-level are provided separately in this report. For the periods presented, there were no balances or activity for the Trust except for the Fund’s operations, as its sole series. These notes to the financial statements relate to the Trust, as the registrant, combined with the Fund. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Fund are enforceable only against the assets of the Fund and not against the assets of the Trust generally or any other series that the Trust may establish.
2.2. Valuation of Gold
The Trust and the Fund follow the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Fund’s policy is to value the investment in gold bullion at fair value. The NAV is computed based upon the total value of the assets of the Fund (i.e., gold and cash) less its liabilities. The Administrator generally will value any gold bullion held by the Fund on the basis of the price of an ounce of gold as determined by the ICE Benchmark Administration Limited (“IBA”), a benchmark administrator, which provides an independently administered auction process, as well as the overall administration and governance for the London Bullion Market Association (the “LBMA”). In determining the NAV, the Administrator generally will value the gold bullion held by the Fund on the basis of the LBMA Gold Price PM.
The Administrator calculates the NAV on each day NYSE Arca is open for regular trading, at 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price AM or PM will be used in the determination of the NAV, unless the Sponsor determines that such price is inappropriate to use as the basis for such determination. If the Sponsor determines that such price is inappropriate to use, it shall identify an alternate basis for evaluation of the gold bullion held by the Fund that the Sponsor determines fairly represents the commercial value of the Fund’s gold bullion. Gold bullion held by the Fund is reported at fair value on the combined statements of assets and liabilities.
Once the value of the gold bullion has been determined, the Administrator subtracts all estimated accrued expenses and other liabilities of the Fund from the total value of the gold bullion and all other assets of the Fund. The resulting figure is the NAV. The NAV is used to compute the Sponsor’s fee. The Administrator determines the NAV per Share by dividing the NAV of the Fund by the number of Shares outstanding as of the close of trading on NYSE Arca.
ASC 820 established a hierarchy that prioritized inputs to valuation techniques used to measure fair value. The three levels of inputs are:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and
Level 3: Inputs that are unobservable for the asset or liability, including the Fund’s assumptions used in determining the fair value of investments.
On December 31, 2024 and March 31, 2024, the value of the gold bullion held by the Fund was categorized as Level 1.
2.3. Fees, Expenses, and Realized Gains (Losses)
When selling gold to pay expenses, the Sponsor will endeavor to sell the smallest amount of gold needed to pay expenses to minimize the Fund’s holdings of assets other than gold. A gain or loss is recognized based on the difference between the selling price and the average cost of the gold sold on the trade date, and such amounts are reported as net realized gain (loss) from gold distributed for the redemption of shares and sold to pay expenses in the combined statements of operations. Gold transactions are accounted for on a trade date basis. Realized gains or losses from the sale or disposition of gold are determined on a specific identification basis and recognized in the Combined Statements of Operations in the period in which the sale or disposition occurs, respectively.
The Fund’s only ordinary recurring expense is the Sponsor’s fee of 0.15% of the NAV of the Fund (“Sponsor fee”). The Sponsor fee is calculated on a daily basis (accrued at 1/365 of the applicable percentage of total net assets on that day) and is payable by the Fund monthly in arrears. The Fund’s expenses will reduce the NAV of the Fund. In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Fund, including but not limited to the following: fees charged by the Administrator, the Custodian and the Trustee, NYSE Arca listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, audit fees and expenses, and up to $500,000 per annum in legal fees and expenses and applicable license fees.
The Sponsor is not required to pay any extraordinary or non-routine expenses. The Fund will be responsible for the payment of such expenses to the extent any such expenses are incurred. Extraordinary expenses are fees and expenses which are unexpected or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses also include material expenses which are not currently anticipated obligations of the Fund. Routine operational, administrative and other ordinary expenses are not deemed extraordinary expenses. The Fund will sell gold on an as-needed basis to pay the Sponsor’s fee.
There have been no extraordinary or non-routine expenses during the periods presented.
2.4. Gold Receivable and Payable
Gold receivable or payable represents the quantity of gold covered by contractually binding orders for the creation or redemption of Shares respectively, where the gold has not yet been transferred to or from the Fund’s account. Generally, ownership of the gold is transferred within one business day of the trade date.
2.5. Creations and redemptions of Shares
The Fund creates and redeems Shares from time to time, but only in one or more Creation Units (a Creation Unit equals a block of 50,000 Shares). The creation and redemption of Creation Units is only made in exchange for the delivery to the Fund or the distribution by the Fund of the amount of gold bullion represented by the Creation Units being created or redeemed. The amount of gold bullion required to be delivered to the Fund in connection with any creation, or paid out upon redemption, is based on the combined NAV of the number of Shares included in the Creation Units being created or redeemed as determined on the day the order to create or redeem Creation Units is properly received and accepted. The standard U.S. settlement cycle for most broker-dealer securities transactions is one business day (T+1). Authorized Participants are the only persons that may place orders to create and redeem Creation Units. All gold bullion must be delivered by Authorized Participants to the Fund and distributed by the Fund in unallocated form through credits and debits between Authorized Participants’ unallocated accounts and the Fund Unallocated Account. All gold bullion must be of at least a minimum fineness (or purity) of 995 parts per 1,000 (99.5%) and otherwise conform to the rules, regulations, practices and customs of the LBMA, including the specifications for a London Good Delivery Bar. The Transfer Agent receives a transaction processing fee in connection with orders from Authorized Participants to create or redeem Creation Units in the amount of $500 per order. These transaction processing fees are paid directly by the Authorized Participants and not by the Fund.
Prior to initiating any creation or redemption order, an Authorized Participant must have an existing unallocated account with a London Precious Metals Clearing Limited (“LPMCL”) clearing bank identified by the Authorized Participant to the Custodian and the Sponsor, or an agreement with the Custodian itself establishing an unallocated account in London. An unallocated account is an account with a bullion dealer, which may also be a bank, to which a fine weight amount of gold bullion is credited. Transfers to or from an unallocated account are made by crediting or debiting the number of ounces of gold bullion being deposited or withdrawn. The account holder is entitled to direct the bullion dealer to deliver an amount of physical gold bullion equal to the amount of gold bullion standing to the credit of the unallocated account holder. Gold bullion held in an unallocated account is not segregated from the Custodian’s assets. The account holder therefore has no ownership interest in any specific bars of gold bullion that the bullion dealer holds or owns. The account holder is an unsecured creditor of the bullion dealer, and credits to an unallocated account are at risk of the bullion dealer’s insolvency, in which event it may not be possible for a liquidator to identify any gold bullion held in an unallocated account as belonging to the account holder rather than to the bullion dealer.
Changes in the Shares for the quarter from October 1, 2024 to December 31, 2024 are as follows:
| | | Shares | | Amount^ |
Balance at October 1, 2024
| | | 2,450,000 | | | $ | 57,969,731 | |
Creation of Shares
| | | 1,400,000 | | | | 50,058,818 | |
Redemption of Shares
| | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024
| | | 3,100,000 | | | $ | 81,855,234 | |
Changes in the Shares for the quarter from October 1, 2023 to December 31, 2023 are as follows:
| | | Shares
| | Amount^
|
Balance at October 1, 2023
| | | 2,600,000 | | | $ | 59,956,263 | |
Creation of Shares
| | | - | | | | - | |
Redemption of Shares
| | | (500,000 | ) | | | (13,664,909 | ) |
Balance at December 31, 2023
| | | 2,100,000 | | | $ | 46,291,354 | |
Changes in the Shares for the nine months from April 1, 2024 to December 31, 2024 are as follows:
| | | Shares
| | Amount^
|
Balance at April 1, 2024
| | | 2,100,000 | | | $ | 46,291,354 | |
Creation of Shares
| | | 1,750,000 | | | | 61,737,195 | |
Redemption of Shares
| | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024
| | | 3,100,000 | | | $ | 81,855,234 | |
Changes in the Shares for the nine months from April 1, 2023 to December 31, 2023 are as follows:
| | | Shares
| | Amount^
|
Balance at April 1, 2023
| | | 4,300,000 | | | $ | 104,172,201 | |
Creation of Shares
| | | 100,000 | | | | 2,695,902 | |
Redemption of Shares
| | | (2,300,000 | ) | | | (60,576,749 | ) |
Balance at December 31, 2023
| | | 2,100,000 | | | $ | 46,291,354 | |
^
2.6. Income Taxes
The Fund is classified as a “grantor trust” for United States federal income tax purposes. As a result, the Trust and the Fund are not subject to United States federal income tax. Instead, the Fund’s income, gain, losses, and expenses will “flow through” to the shareholders, and the Administrator reports these to the Internal Revenue Service on that basis.
The Sponsor has analyzed applicable tax laws and regulations and their application to the Trust and the Fund as of December 31, 2024 and March 31, 2024 and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
2.7 Recently Issued Accounting Pronouncements
In November 2023, the FASB issued an Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The ASU enhances segment reporting by requiring public companies to disclose additional information about their reportable segments. This includes expanded disclosures on significant segment expenses, segment profit or loss, and specific segment-level information that helps financial statement users better understand the entity's financial performance and resource allocation. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Trust and the Fund are in the process of evaluating the impact of this ASU.
3. INVESTMENT IN GOLD
The following represents the changes in ounces of gold held and the respective fair value during the quarter from October 1, 2024 to December 31, 2024:
| | | Amount in ounces
| | Amount in US$
|
Balance at October 1, 2024
| | | 32,699.485 | | | $ | 85,998,011 | |
Gold received for the creation of Shares
| | | 18,678.465 | | | | 50,058,818 | |
Gold distributed for the redemption of Shares
| | | (10,005.285 | ) | | | (26,173,315 | ) |
Principal on gold sales to pay expenses
| | | (12.494 | ) | | | (33,032 | ) |
Net realized gain (loss) from gold distributed for the redemptions of shares and sold to pay expenses
| | | - | | | | 4,249,440 | |
Net change in unrealized appreciation (depreciation) on investment in gold
| | | - | | | | (6,114,720 | ) |
Balance at December 31, 2024
| | | 41,360.171 | | | $ | 107,985,202 | |
The following represents the changes in ounces of gold held and the respective fair value during the quarter from October 1, 2023 to December 31, 2023:
| | | Amount in ounces | | Amount in US$ |
Balance at October 1, 2023
| | | 34,753.193 | | | $ | 65,005,848 | |
Gold received for the creation of Shares
| | | - | | | | - | |
Gold distributed for the redemption of Shares
| | | (6,680.800 | ) | | | (13,664,909 | ) |
Principal on gold sales to pay expenses
| | | (12.927 | ) | | | (24,909 | ) |
Net realized gain (loss) from gold distributed for the redemptions of shares and sold to pay expenses
| | | - | | | | 1,537,276 | |
Net change in unrealized appreciation (depreciation) on investment in gold
| | | - | | | | 5,016,537 | |
Balance at December 31, 2023
| | | 28,059.466 | | | $ | 57,869,843 | |
The following represents the changes in ounces of gold held and the respective fair value during the nine months from April 1, 2024 to December 31, 2024:
| | | Amount in ounces | | Amount in US$ |
Balance at April 1, 2024
| | | 28,048.958 | | | $ | 62,110,210 | |
Gold received for the creation of Shares
| | | 23,350.560 | | | | 61,737,195 | |
Gold distributed for the redemption of Shares
| | | (10,005.285 | ) | | | (26,173,315 | ) |
Principal on gold sales to pay expenses
| | | (34.062 | ) | | | (84,660 | ) |
Net realized gain (loss) from gold distributed for the redemptions of shares and sold to pay expenses
| | | - | | | | 4,261,209 | |
Net change in unrealized appreciation (depreciation) on investment in gold
| | | - | | | | 6,134,563 | |
Balance at December 31, 2024
| | | 41,360.171 | | | $ | 107,985,202 | |
The following represents the changes in ounces of gold held and the respective fair value during the nine months from April 1, 2023 to December 31, 2023:
| | | Amount in ounces | | Amount in US$ |
Balance at April 1, 2023
| | | 57,519.498 | | | $ | 113,871,350 | |
Gold received for the creation of Shares
| | | 1,337.286 | | | | 2,695,902 | |
Gold distributed for the redemption of Shares
| | | (30,748.616 | ) | | | (60,576,749 | ) |
Principal on gold sales to pay expenses
| | | (48.702 | ) | | | (95,142 | ) |
Net realized gain (loss) from gold distributed for the redemptions of shares and sold to pay expenses
| | | - | | | | 4,786,535 | |
Net change in unrealized appreciation (depreciation) on investment in gold
| | | - | | | | (2,812,053 | ) |
Balance at December 31, 2023
| | | 28,059.466 | | | $ | 57,869,843 | |
4. RELATED PARTIES
The Sponsor is a related party of the Trust and the Fund. The Fund pays the Sponsor a unitary fee for services performed pursuant to the Sponsor Agreement. The Marketing Agent is an affiliate of the Sponsor. Expenses payable to the Marketing Agent, if any, are paid through the Sponsor’s fee.
The Trust also considers Franklin Resources, Inc., the ultimate parent company of the Sponsor, to be a related party of the Trust and the Fund. As of December 31, 2024, no shares of the Fund were held by any related party.
The Sponsor of the Trust is Franklin Holdings, LLC. The Sponsor is responsible for establishing the Trust and for the registration of the Shares. The Sponsor generally oversees the performance of the Fund’s principal service providers but does not exercise day-to-day oversight over such service providers. The Sponsor, with assistance and support from the Administrator, is responsible for preparing and filing periodic reports on behalf of the Fund with the SEC and will provide any required certification for such reports. The Sponsor has designated the independent registered public accounting firm of the Trust on behalf of the Fund and may from time to time employ legal counsel for the Fund.
Franklin Distributors, LLC serves as the Marketing Agent of the Fund. The Sponsor and the Marketing Agent are affiliates and each is considered to be a related party to the Trust and the Fund. Franklin Resources, Inc. (“FRI”) is the ultimate parent company of the Sponsor and the Marketing Agent. FRI is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments.
In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Fund, including but not limited to the following: fees charged by the Administrator, the Marketing Agent, the Custodian and the Trustee, NYSE Arca listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, audit fees and expenses, and up to $500,000 per annum in legal fees and expenses and applicable license fees. The Sponsor bears expenses in connection with the issuance and distribution of the securities being registered. The Sponsor is not required to pay any extraordinary or non-routine expenses.
5. CONCENTRATION OF RISK
The Fund’s sole business activity is the investment in gold bullion. Several factors could affect the price of gold: (i) global gold supply and demand, which is influenced by such factors as forward selling by gold producers, purchases made by gold producers to unwind gold hedge positions, central bank purchases and sales, and production and cost levels in major gold-producing countries, and new production projects; (ii) investors’ expectations regarding future inflation rates; (iii) currency exchange rate volatility; (iv) interest rate volatility; and (v) political, economic, global or regional incidents. In addition, there is no assurance that gold will maintain its long-term value in terms of purchasing power in the future. In the event that the price of gold declines, the Sponsor expects the value of an investment in the shares to decline proportionately. Each of these events could have a material effect on the Trust’s and the Fund’s financial position and results of operations.
6. FINANCIAL HIGHLIGHTS
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | | | | | | |
Net asset value per Share, beginning of period | | $ | 35.10 | | | $ | 25.00 | | | $ | 29.57 | | | $ | 26.48 | |
Net investment loss(a) | | | (0.01 | ) | | | (0.01 | ) | | | (0.04 | ) | | | (0.03 | ) |
Net realized and unrealized gain (loss) on investment in gold | | | (0.26 | ) | | | 2.56 | | | | 5.30 | | | | 1.10 | |
Net change in net assets from operations(b) | | | (0.27 | ) | | | 2.55 | | | | 5.26 | | | | 1.07 | |
Net asset value per Share, end of period | | $ | 34.83 | | | $ | 27.55 | | | $ | 34.83 | | | $ | 27.55 | |
| | | | | | | | | | | | | | | | |
Total return, at net asset value(c) | | | (0.77 | )% | | | 10.20 | % | | | 17.79 | % | | | 4.04 | % |
| | | | | | | | | | | | | | | | |
Ratio to average net assets(d) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net investment loss | | | (0.15 | )% | | | (0.15 | )% | | | (0.15 | )% | | | (0.15 | )% |
Net expenses | | | 0.15 | % | | | 0.15 | % | | | 0.15 | % | | | 0.15 | % |
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Trust, on behalf of the Fund, may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
8. INDEMNIFICATION
The Sponsor will not be liable to the Trust, the Trustee or any Shareholder for any action taken or for refraining from taking any action in good faith, or for errors in judgment or for depreciation or loss incurred by reason of the sale of any gold bullion or other assets of the Fund or the Trust. However, the preceding liability exclusion will not protect the Sponsor against any liability resulting from its own gross negligence, bad faith, or willful misconduct.
The Sponsor and each of its shareholders, members, directors, officers, employees, affiliates and subsidiaries will be indemnified by the Trust and held harmless against any losses, liabilities or expenses incurred in the performance of its duties under the Declaration of Trust without gross negligence, bad faith, or willful misconduct. The Sponsor may rely in good faith on any paper, order, notice, list, affidavit, receipt, evaluation, opinion, endorsement, assignment, draft or any other document of any kind prima facie properly executed and submitted to it by the Trustee, the Trustee’s counsel or by any other person for any matters arising under the Declaration of Trust. The Sponsor shall in no event be deemed to have assumed or incurred any liability, duty, or obligation to any Shareholder or to the Trustee other than as expressly provided for in the Declaration of Trust. Such indemnity includes payment from the Trust of the costs and expenses incurred in defending against any indemnified claim or liability under the Declaration of Trust.
The Trustee will not be liable or accountable to the Trust or any other person or under any agreement to which the Trust or any series of the Trust is a party, except for the Trustee’s breach of its obligations pursuant to the Declaration of Trust or its own willful misconduct, bad faith or gross negligence. The Trustee and each of the Trustee’s officers, affiliates, directors, employees, and agents will be indemnified by the Trust from and against any losses, claims, taxes, damages, reasonable expenses, and liabilities incurred with respect to the creation, operation or termination of the Trust, the execution, delivery or performance of the Declaration of Trust or the transactions contemplated thereby; provided that the indemnified party acted without willful misconduct, bad faith or gross negligence.
9. SUBSEQUENT EVENTS
The Trust and the Fund have evaluated subsequent events through the issuance of the financial statements and determined that no such events have occurred that require disclosure.
FRANKLIN RESPONSIBLY SOURCED GOLD ETF
A SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Statements of Assets and Liabilities (Unaudited)
| | | December 31, 2024
| | March 31, 2024
|
Assets | | | | | | |
Investment in gold, at fair value(a) | | $ | 107,985,202 | | | $ | 62,110,210 | |
Total assets | | | 107,985,202 | | | | 62,110,210 | |
| | | | | | | | |
Liabilities | | | | | | | | |
Sponsor's fee payable
| | | 15,213 | | | | 7,579 | |
Total liabilities | | | 15,213 | | | | 7,579 | |
Commitments and contingencies (Note 7)
| | | | | | | | |
| | | | | | | | |
Net assets | | $ | 107,969,989 | | | $ | 62,102,631 | |
| | | | | | | | |
Shares issued and outstanding(b) | | | 3,100,000 | | | | 2,100,000 | |
Net asset value per Share
| | $ | 34.83 | | | $ | 29.57 | |
| | |
|
(a)
|
Cost of investment in gold bullion: $90,663,645 at December 31, 2024 and $50,923,216 at March 31, 2024.
|
|
(b)
|
No par value, unlimited amount authorized.
|
See accompanying notes to the unaudited financial statements.
FRANKLIN
RESPONSIBLY SOURCED GOLD ETF
A
SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Schedules
of Investments (Unaudited)
December 31,
2024 | | | | | | | | | | | | |
| | Ounces of Gold | | Cost | | Fair Value | | % of Net Assets |
Investment in gold | | | 41,360.171 | | | $ | 90,663,645 | | | $ | 107,985,202 | | | | 100.01 | % |
Total investments | | | 41,360.171 | | | $ | 90,663,645 | | | $ | 107,985,202 | | | | 100.01 | % |
Less liabilities | | | | | | | | | | | (15,213 | ) | | | (0.01 | )% |
Net assets | | | | | | | | | | $ | 107,969,989 | | | | 100.00 | % |
March 31, 2024 | | | | | | | | | | | | |
| | Ounces of Gold | | Cost | | Fair Value | | % of Net Assets |
Investment in gold | | | 28,048.958 | | | $ | 50,923,216 | | | $ | 62,110,210 | | | | 100.01 | % |
Total investments | | | 28,048.958 | | | $ | 50,923,216 | | | $ | 62,110,210 | | | | 100.01 | % |
Less liabilities | | | | | | | | | | | (7,579 | ) | | | (0.01 | )% |
Net assets | | | | | | | | | | $ | 62,102,631 | | | | 100.00 | % |
See accompanying
notes to the unaudited financial statements.
FRANKLIN
RESPONSIBLY SOURCED GOLD ETF
A
SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Statements
of Operations (Unaudited)
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
Expenses | | | | | | | | | | | | |
Sponsor's fee | | $ | 38,441 | | | $ | 24,388 | | | $ | 92,294 | | | $ | 89,459 | |
Total expenses | | | 38,441 | | | | 24,388 | | | | 92,294 | | | | 89,459 | |
Net investment loss | | | (38,441 | ) | | | (24,388 | ) | | | (92,294 | ) | | | (89,459 | ) |
| | | | | | | | | | | | | | | | |
Net realized and change in unrealized gain (loss) on investment in gold | | | | | | | | | | | | | | | | |
Net realized gain (loss) from gold distributed for the redemption of shares and sold to pay expenses | | | 4,249,440 | | | | 1,537,276 | | | | 4,261,209 | | | | 4,786,535 | |
Net change in unrealized appreciation (depreciation) on investment in gold | | | (6,114,720 | ) | | | 5,016,537 | | | | 6,134,563 | | | | (2,812,053 | ) |
Net realized and change in unrealized gain (loss) on investment in gold | | | (1,865,280 | ) | | | 6,553,813 | | | | 10,395,772 | | | | 1,974,482 | |
Net increase (decrease) in net assets resulting from operations | | $ | (1,903,721 | ) | | $ | 6,529,425 | | | $ | 10,303,478 | | | $ | 1,885,023 | |
Net increase (decrease) in net assets per Share(a)(b) | | $ | (0.66 | ) | | $ | 2.67 | | | $ | 4.21 | | | $ | 0.62 | |
| | |
|
(a)
|
Net increase (decrease) in
net assets per Share based on average shares outstanding during the period.
|
|
(b)
|
The amount
shown for a share outstanding may not agree with the change in the aggregate
gains and losses on investment for the period because of the timing of
transactions in the Fund’s shares in relation to fluctuating market values
for the Fund’s underlying investment.
|
See accompanying
notes to the unaudited financial statements.
FRANKLIN
RESPONSIBLY SOURCED GOLD ETF
A
SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Statements
of Cash Flows (Unaudited)
| | For the Nine Months Ended December 31, 2024 | | For the Nine Months Ended December 31, 2023 |
| | | | | |
Cash Flows from Operating Activities: | | | | |
Proceeds from gold bullion sold to pay expenses | | $ | 84,660 | | | $ | 95,142 | |
Expenses - Sponsor's fee paid | | | (84,660 | ) | | | (95,142 | ) |
Net cash provided by (used in) operating activities | | | - | | | | - | |
Increase (decrease) in cash | | | - | | | | - | |
Cash, beginning of period | | | - | | | | - | |
Cash, end of period | | $ | - | | | $ | - | |
Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Operations to Net Cash
Provided by (Used in) Operating Activities: | | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | $ | 10,303,478 | | | $ | 1,885,023 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by
(used in) operating activities: | | | | | | | | |
Proceeds from gold bullion sold to pay expenses | | | 84,660 | | | | 95,142 | |
Net realized (gain) loss | | | (4,261,209 | ) | | | (4,786,535 | ) |
Net change in unrealized (appreciation) depreciation | | | (6,134,563 | ) | | | 2,812,053 | |
Change in operating assets and liabilities: | | | | | | | | |
Sponsor's fees payable | | | 7,634 | | | | (5,683 | ) |
Net cash provided by (used in) operating activities | | $ | - | | | $ | - | |
Supplemental disclosure of non-cash financing information: | | | | | | | | |
Gold bullion contributed for Shares issued | | $ | 61,737,195 | | | $ | 2,695,902 | |
Gold bullion distributed for Shares redeemed | | $ | (26,173,315 | ) | | $ | (60,576,749 | ) |
See accompanying
notes to the unaudited financial statements.
FRANKLIN
RESPONSIBLY SOURCED GOLD ETF
A
SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Statements
of Changes in Net Assets (Unaudited)
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | | | | | | |
Net assets, beginning of period | | $ | 85,988,207 | | | $ | 64,997,673 | | | $ | 62,102,631 | | | $ | 113,858,013 | |
Net investment
loss | | | (38,441 | ) | | | (24,388 | ) | | | (92,294 | ) | | | (89,459 | ) |
Net realized
gain (loss) from gold distributed for the redemption of shares and sold to
pay expenses | | | 4,249,440 | | | | 1,537,276 | | | | 4,261,209 | | | | 4,786,535 | |
Net change in unrealized
appreciation (depreciation) on investment in gold | | | (6,114,720 | ) | | | 5,016,537 | | | | 6,134,563 | | | | (2,812,053 | ) |
Net increase
(decrease) in net assets resulting from operations | | | (1,903,721 | ) | | | 6,529,425 | | | | 10,303,478 | | | | 1,885,023 | |
Capital Share Transactions: | | | | | | | | | | | | | | | | |
Contributions
for Shares issued | | | 50,058,818 | | | | - | | | | 61,737,195 | | | | 2,695,902 | |
Distributions
for Shares redeemed | | | (26,173,315 | ) | | | (13,664,909 | ) | | | (26,173,315 | ) | | | (60,576,749 | ) |
Net increase
(decrease) in net assets from capital share transactions | | | 23,885,503 | | | | (13,664,909 | ) | | | 35,563,880 | | | | (57,880,847 | ) |
Net assets, end of period | | $ | 107,969,989 | | | $ | 57,862,189 | | | $ | 107,969,989 | | | $ | 57,862,189 | |
See accompanying
notes to the unaudited financial statements.
FRANKLIN
RESPONSIBLY SOURCED GOLD ETF
A
SERIES OF FRANKLIN TEMPLETON HOLDINGS TRUST
Notes
to Financial Statements (Unaudited)
1.
ORGANIZATION
The
Franklin Templeton Holdings Trust (the “Trust”) was organized as a Delaware
statutory trust on April 19, 2021 and is governed by the Agreement and
Declaration of Trust dated as of May 10, 2022. The Trust is not registered as
an investment company under the Investment Company Act of 1940, as amended (the
“Investment Company Act”) and is not a commodity pool for purposes of the
Commodity Exchange Act (“CEA”). The Trust currently offers a single series, the
Franklin Responsibly Sourced Gold ETF (the “Fund”). The accompanying financial
statements relate to the one series that the Trust currently offers, the
Franklin Responsibly Sourced Gold ETF (the “Fund”). The Trust had no operations
prior to the commencement of operations of the Fund, other than matters
relating to its organization and the registration of the Fund under the
Securities Act of 1933, as amended (the “Securities Act”). Franklin Holdings,
LLC is the Sponsor of the Trust (the “Sponsor”). The Sponsor is not subject to
regulation by the Commodity Futures Trading Commission (“CFTC”) as a commodity
pool operator with respect to the Fund, or a commodity trading advisor with
respect to the Fund. The Fund issues shares (the “Shares”), which represent
units of fractional undivided beneficial interest in the Fund. The Shares of
the Fund are listed on the NYSE Arca, Inc. (“NYSE Arca”). The investment
objective of the Fund is for the Shares to reflect the performance of the price
of gold bullion, less the Fund’s expenses. The Fund’s only ordinary recurring expense
is the Sponsor’s annual fee of 0.15% of the Net Asset Value (“NAV”) of the
Fund. The assets of the Fund include only gold bullion and cash, if any. The
Fund seeks to hold only responsibly sourced gold in the Fund’s allocated
account. The Fund defines responsibly sourced gold for this purpose as London
Good Delivery gold bullion bars that were refined on or after January 1, 2012
(also referred to herein as “post-2012 gold”). All post-2012 gold has been
refined in accordance with London Bullion Market Association’s (“LBMA”)
Responsible Gold Guidance (the “Gold Guidance”). The Shares were first listed
for trading on NYSE Arca on June 30, 2022.
BNY
Mellon Asset Servicing, a division of The Bank of New York Mellon, or “BNYM,”
is the Fund’s Administrator (the “Administrator”) and Transfer Agent (the
“Transfer Agent”). BNYM also serves as the custodian of the Fund’s cash, if
any. JPMorgan Chase Bank, N.A., London branch (“JPMorgan”), is the custodian
(the “Custodian”) of the Fund’s gold bullion. CSC Delaware Trust Company, a
subsidiary of Corporation Service Company, is the Trustee of the Trust.
Franklin Distributors, LLC is the marketing agent of the Trust (the “Marketing
Agent”).
Shares
of the Fund are listed on the NYSE Arca under the ticker symbol “FGDL”. The
market price of the Shares may be different from the NAV per Share. Shares may
be purchased from the Trust only by certain eligible financial institutions
called Authorized Participants and only in one or more blocks of 50,000 Shares
(“Creation Units”) in exchange for gold. The Fund issues Shares in Creation
Units on a continuous basis at the applicable NAV per Share on the creation
order date. Except when aggregated in Creation Units, the Shares are not
redeemable securities.
The
Trust is an “emerging growth company” as that term is used in the Securities
Act of 1933, as amended (the “Securities Act”) and, as such, the Trust may
elect to comply with certain reduced public company reporting requirements.
The
accompanying financial statements of assets and liabilities and schedules of investments at December
31, 2024 and March 31, 2024, the statements of operations, statements of cash flows and statements of changes in net assets for the period ended December 31, 2024 and 2023, have been
prepared on behalf of the Trust, as registrant, combined with its one currently
offered series, the Fund (included above in a separate section of this report),
and for the Fund separately, and are unaudited. In the opinion of management of
the Sponsor of the Trust, all adjustments (which include normal recurring
adjustments) necessary to state fairly the financial position and results of
operations for the three and nine months ended December 31, 2024 and 2023, and for all
periods presented, have been made. In addition, interim period results are not
necessarily indicative of results for a full-year period. These financial
statements and the notes thereto should be read in conjunction with the Fund’s
financial statements included in its Annual Report on Form 10-K for the fiscal
year ended March 31, 2024.
The
fiscal year of the Trust and the Fund is March 31st.
2.
SIGNIFICANT ACCOUNTING POLICIES
In
preparing financial statements in conformity with accounting principles
generally accepted in the United States (“GAAP”), management of the Sponsor
makes estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amount of revenue and
expenses reported during the period. Actual results could differ from these
estimates.
The
accompanying unaudited financial statements were prepared in accordance with
GAAP for interim financial information and with the instructions for Form 10-Q
and the rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”).
The following is a summary of significant accounting
policies followed by the Trust and the Fund.
2.1.
Basis of Presentation
The Sponsor has determined that the Trust falls within
the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 946, Financial Services—Investment Companies, and has
concluded that solely for accounting purposes, the Trust is classified as an
Investment Company as defined in ASC 946. The Trust is not registered as an
investment company under the Investment Company Act and is not required
to register under such act.
The financial statements are presented for the Trust,
as the registrant, combined with the Fund (in a separate section of this
report) and for the Fund individually. For the periods presented, there were no
balances or activity for the Trust except for the Fund’s operations, as its
sole series. These notes to the financial statements relate to the Fund
individually. The debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to the Fund are enforceable
only against the assets of the Fund and not against the assets of the Trust
generally or any other series that the Trust may establish.
2.2. Valuation of Gold
The Trust and the Fund follow the provisions of ASC
820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for
determining fair value and requires increased disclosure regarding the inputs
to valuation techniques used to measure fair value. ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date.
The
Fund’s policy is to value the investment in gold bullion at fair value. The NAV
is computed based upon the total value of the assets of the Fund (i.e., gold
and cash) less its liabilities. The Administrator generally will value any gold
bullion held by the Fund on the basis of the price of an ounce of gold as
determined by the ICE Benchmark Administration Limited (“IBA”), a benchmark
administrator, which provides an independently administered auction process, as
well as the overall administration and governance for the London Bullion Market
Association (the “LBMA”). In determining the NAV, the Administrator generally
will value the gold bullion held by the Fund on the basis of the LBMA Gold
Price PM.
The
Administrator calculates the NAV on each day NYSE Arca is open for regular
trading, at 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on
a particular evaluation day or if the LBMA Gold Price PM has not been announced
by 12:00 PM New York time on a particular evaluation day, the next most recent
LBMA Gold Price AM or PM will be used in the determination of the NAV, unless
the Sponsor determines that such price is inappropriate to use as the basis for
such determination. If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation of the gold bullion
held by the Fund that the Sponsor determines fairly represents the commercial
value of the Fund’s gold bullion. Gold bullion held by the Fund is reported at
fair value on the statements of assets and liabilities.
Once
the value of the gold bullion has been determined, the Administrator subtracts
all estimated accrued expenses and other liabilities of the Fund from the total
value of the gold bullion and all other assets of the Fund. The resulting
figure is the NAV. The NAV is used to compute the Sponsor’s fee. The
Administrator determines the NAV per Share by dividing the NAV of the Fund by
the number of Shares outstanding as of the close of trading on NYSE Arca.
ASC
820 established a hierarchy that prioritized inputs to valuation techniques
used to measure fair value. The three levels of inputs are:
Level
1: Unadjusted quoted prices in active markets for identical assets or
liabilities;
Level
2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not considered
to be active, inputs other than quoted prices that are observable for the asset
or liability, and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and
Level
3: Inputs that are unobservable for the asset or liability,
including the Fund’s assumptions used in determining the fair value of
investments.
On December 31, 2024 and March 31, 2024, the value of
the gold bullion held by the Fund was categorized as Level 1.
2.3.
Fees, Expenses, and Realized Gains (Losses)
When selling gold to pay expenses, the Sponsor will endeavor to
sell the smallest amount of gold needed to pay expenses to minimize the Fund’s
holdings of assets other than gold. A gain or loss is recognized based on the
difference between the selling price and the average cost of the gold sold on
the trade date, and such amounts are reported as net realized gain (loss) from
gold distributed for the redemption of shares and sold to pay expenses in the
statements of operations. Gold transactions are accounted for on a trade date basis. Realized gains or losses from the sale or disposition of gold are determined on a specific identification basis and recognized in the Combined Statements of Operations in the period in which the sale or disposition occurs, respectively.
The Fund’s only ordinary recurring expense is the Sponsor’s fee
of 0.15% of the NAV of the Fund (“Sponsor fee”). The Sponsor fee is calculated
on a daily basis (accrued at 1/365 of the applicable percentage of total net
assets on that day) and is payable by the Fund monthly in arrears. The Fund’s
expenses will reduce the NAV of the Fund. In exchange for the Sponsor’s fee,
the Sponsor has agreed to assume the ordinary fees and expenses incurred by the
Fund, including but not limited to the following: fees charged by the
Administrator, the Custodian and the Trustee, NYSE Arca listing fees, typical
maintenance and transaction fees of the DTC, SEC registration fees, printing
and mailing costs, audit fees and expenses, and up to $500,000 per annum in
legal fees and expenses and applicable license fees.
The Sponsor is not required to pay any extraordinary or
non-routine expenses. The Fund will be responsible for the payment of such
expenses to the extent any such expenses are incurred. Extraordinary expenses are fees and expenses which are
unexpected or unusual in nature, such as legal claims and liabilities and
litigation costs or indemnification or other unanticipated expenses.
Extraordinary fees and expenses also include material expenses which are not
currently anticipated obligations of the Fund. Routine operational,
administrative and other ordinary expenses are not deemed extraordinary
expenses. The Fund will sell gold on an as-needed basis to pay the Sponsor’s
fee.
There have been no extraordinary or
non-routine expenses during the periods presented.
2.4.
Gold Receivable and Payable
Gold receivable or payable represents the quantity of gold
covered by contractually binding orders for the creation or redemption of
Shares respectively, where the gold has not yet been transferred to or from the
Fund’s account. Generally, ownership of the gold is transferred within one
business day of the trade date.
2.5.
Creations and redemptions of Shares
The
Fund creates and redeems Shares from time to time, but only in one or more
Creation Units (a Creation Unit equals a block of 50,000 Shares). The creation
and redemption of Creation Units is only made in exchange for the delivery to
the Fund or the distribution by the Fund of the amount of gold bullion
represented by the Creation Units being created or redeemed. The amount of gold
bullion required to be delivered to the Fund in connection with any creation,
or paid out upon redemption, is based on the combined NAV of the number of
Shares included in the Creation Units being created or redeemed as determined
on the day the order to create or redeem Creation Units is properly received
and accepted. The standard U.S. settlement cycle for most broker-dealer
securities transactions is one business day (T+1). Authorized Participants are
the only persons that may place orders to create and redeem Creation Units. All
gold bullion must be delivered by Authorized Participants to the Fund and
distributed by the Fund in unallocated form through credits and debits between
Authorized Participants’ unallocated accounts and the Fund Unallocated Account.
All gold bullion must be of at least a minimum fineness (or purity) of 995
parts per 1,000 (99.5%) and otherwise conform to the rules, regulations,
practices and customs of the LBMA, including the specifications for a London
Good Delivery Bar. The Transfer Agent receives a transaction processing fee in
connection with orders from Authorized Participants to create or redeem
Creation Units in the amount of $500 per order. These transaction processing
fees are paid directly by the Authorized Participants and not by the Fund.
Prior
to initiating any creation or redemption order, an Authorized Participant must
have an existing unallocated account with a London Precious Metals Clearing
Limited (“LPMCL”) clearing bank identified by the Authorized Participant to the
Custodian and the Sponsor, or an agreement with the Custodian itself
establishing an unallocated account in London. An unallocated account is an
account with a bullion dealer, which may also be a bank, to which a fine weight
amount of gold bullion is credited. Transfers to or from an unallocated account
are made by crediting or debiting the number of ounces of gold bullion being
deposited or withdrawn. The account holder is entitled to direct the bullion
dealer to deliver an amount of physical gold bullion equal to the amount of
gold bullion standing to the credit of the unallocated account holder. Gold
bullion held in an unallocated account is not segregated from the Custodian’s
assets. The account holder therefore has no ownership interest in any specific
bars of gold bullion that the bullion dealer holds or owns. The account holder
is an unsecured creditor of the bullion dealer, and credits to an unallocated
account are at risk of the bullion dealer’s insolvency, in which event it may
not be possible for a liquidator to identify any gold bullion held in an
unallocated account as belonging to the account holder rather than to the
bullion dealer.
Changes
in the Shares for the quarter from October 1, 2024 to December
31, 2024 are as follows:
| | | | | |
Balance at October 1, 2024 | | | 2,450,000 | | | $ | 57,969,731 | |
Creation of Shares | | | 1,400,000 | | | | 50,058,818 | |
Redemption of Shares | | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024 | | | 3,100,000 | | | $ | 81,855,234 | |
Changes
in the Shares for the quarter from October 1, 2023 to December
31, 2023 are as follows:
| | | | | |
Balance at October 1, 2023 | | | 2,600,000 | | | $ | 59,956,263 | |
Creation of Shares | | | - | | | | - | |
Redemption of Shares | | | (500,000 | ) | | | (13,664,909 | ) |
Balance at December 31, 2023 | | | 2,100,000 | | | $ | 46,291,354 | |
Changes
in the Shares for the nine months from April 1, 2024 to December 31, 2024 are as follows:
| | | | | |
Balance at April 1, 2024 | | | 2,100,000 | | | $ | 46,291,354 | |
Creation of Shares | | | 1,750,000 | | | | 61,737,195 | |
Redemption of Shares | | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024 | | | 3,100,000 | | | $ | 81,855,234 | |
Changes
in the Shares for the nine months from April 1, 2023 to December 31, 2023 are as follows:
| | | | | |
Balance at April 1, 2023 | | | 4,300,000 | | | $ | 104,172,201 | |
Creation of Shares | | | 100,000 | | | | 2,695,902 | |
Redemption of Shares | | | (2,300,000 | ) | | | (60,576,749 | ) |
Balance at December 31, 2023 | | | 2,100,000 | | | $ | 46,291,354 | |
^
2.6. Income Taxes
The Fund is classified as a “grantor trust” for United
States federal income tax purposes. As a result, the Trust and the Fund are not
subject to United States federal income tax. Instead, the Fund’s income, gain,
losses, and expenses will “flow through” to the shareholders, and the
Administrator reports these to the Internal Revenue Service on that basis.
The Sponsor has analyzed applicable tax laws and
regulations and their application to the Fund as of December 31, 2024 and March
31, 2024 and does not believe that there are any uncertain tax positions that
require recognition of a tax liability.
2.7 Recently Issued Accounting Pronouncements
In November 2023, the FASB issued an Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The ASU enhances segment reporting by requiring public companies to disclose additional information about their reportable segments. This includes expanded disclosures on significant segment expenses, segment profit or loss, and specific segment-level information that helps financial statement users better understand the entity's financial performance and resource allocation. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Trust and the Fund are in the process of evaluating the impact of this ASU.
3.
INVESTMENT IN GOLD
The
following represents the changes in ounces of gold held and the respective fair
value during the quarter from October 1, 2024 to December 31, 2024:
| | | | | |
Balance at October
1, 2024 | | | 32,699.485 | | | $ | 85,998,011 | |
Gold received
for the creation of Shares | | | 18,678.465 | | | | 50,058,818 | |
Gold
distributed for the redemption of Shares | | | (10,005.285 | ) | | | (26,173,315 | ) |
Principal on
gold sales to pay expenses | | | (12.494 | ) | | | (33,032 | ) |
Net realized
gain (loss) from gold distributed for the redemptions of shares and sold to
pay expenses | | | - | | | | 4,249,440 | |
Net change in
unrealized appreciation (depreciation) on investment in gold | | | - | | | | (6,114,720 | ) |
Balance at December
31, 2024 | | | 41,360.171 | | | $ | 107,985,202 | |
The
following represents the changes in ounces of gold held and the respective fair
value during the quarter from October 1, 2023 to December
31, 2023:
| | | | | |
Balance at October
1, 2023 | | | 34,753.193 | | | $ | 65,005,848 | |
Gold received
for the creation of Shares | | | - | | | | - | |
Gold
distributed for the redemption of Shares | | | (6,680.800 | ) | | | (13,664,909 | ) |
Principal on
gold sales to pay expenses | | | (12.927 | ) | | | (24,909 | ) |
Net realized
gain (loss) from gold distributed for the redemptions of shares and sold to
pay expenses | | | - | | | | 1,537,276 | |
Net change in
unrealized appreciation (depreciation) on investment in gold | | | - | | | | 5,016,537 | |
Balance at December
31, 2023 | | | 28,059.466 | | | $ | 57,869,843 | |
The
following represents the changes in ounces of gold held and the respective fair
value during the nine months from April 1, 2024 to December
31, 2024:
| | | | | |
Balance at April
1, 2024 | | | 28,048.958 | | | $ | 62,110,210 | |
Gold received
for the creation of Shares | | | 23,350.560 | | | | 61,737,195 | |
Gold
distributed for the redemption of Shares | | | (10,005.285 | ) | | | (26,173,315 | ) |
Principal on
gold sales to pay expenses | | | (34.062 | ) | | | (84,660 | ) |
Net realized
gain (loss) from gold distributed for the redemptions of shares and sold to
pay expenses | | | - | | | | 4,261,209 | |
Net change in
unrealized appreciation (depreciation) on investment in gold | | | - | | | | 6,134,563 | |
Balance at December
31, 2024 | | | 41,360.171 | | | $ | 107,985,202 | |
The
following represents the changes in ounces of gold held and the respective fair
value during the nine months from April 1, 2023 to December
31, 2023:
| | | | | |
Balance at April
1, 2023 | | | 57,519.498 | | | $ | 113,871,350 | |
Gold received
for the creation of Shares | | | 1,337.286 | | | | 2,695,902 | |
Gold
distributed for the redemption of Shares | | | (30,748.616 | ) | | | (60,576,749 | ) |
Principal on
gold sales to pay expenses | | | (48.702 | ) | | | (95,142 | ) |
Net realized
gain (loss) from gold distributed for the redemptions of shares and sold to
pay expenses | | | - | | | | 4,786,535 | |
Net change in
unrealized appreciation (depreciation) on investment in gold | | | - | | | | (2,812,053 | ) |
Balance at December
31, 2023 | | | 28,059.466 | | | $ | 57,869,843 | |
4. RELATED PARTIES
The Sponsor is a related party of the Trust and the
Fund. The Fund pays the Sponsor a unitary fee for services performed pursuant
to the Sponsor Agreement. The Marketing Agent is an affiliate of the Sponsor.
Expenses payable to the Marketing Agent, if any, are paid through the Sponsor’s
fee.
The Trust also considers Franklin Resources, Inc., the
ultimate parent company of the Sponsor, to be a related party of the Trust and
the Fund. As of December 31, 2024, no shares of the Fund were held by any
related party.
The Sponsor of the Trust is Franklin Holdings, LLC. The
Sponsor is responsible for establishing the Trust and for the registration of
the Shares. The Sponsor generally oversees the performance of the Fund’s
principal service providers but does not exercise day-to-day oversight over
such service providers. The Sponsor, with assistance and support from the
Administrator, is responsible for preparing and filing periodic reports on
behalf of the Fund with the SEC and will provide any required certification for
such reports. The Sponsor has designated the independent registered public
accounting firm of the Trust on behalf of the Fund and may from time to time employ legal counsel for
the Fund.
Franklin Distributors, LLC serves as the Marketing
Agent of the Fund. The Sponsor and the Marketing Agent are affiliates and each
is considered to be a related party to the Trust and the Fund. Franklin
Resources, Inc. (“FRI”) is the ultimate parent company of the Sponsor and the
Marketing Agent. FRI is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments.
In exchange for the Sponsor’s fee, the Sponsor has
agreed to assume the ordinary fees and expenses incurred by the Fund, including
but not limited to the following: fees charged by the Administrator, the Marketing Agent, the
Custodian and the Trustee, NYSE Arca listing fees, typical maintenance and
transaction fees of the DTC, SEC registration fees, printing and mailing costs,
audit fees and expenses, and up to $500,000 per annum in legal fees and
expenses and applicable license fees. The Sponsor bears expenses in connection
with the issuance and distribution of the securities being registered. The
Sponsor is not required to pay any extraordinary or non-routine expenses.
5. CONCENTRATION OF RISK
The Fund’s sole business activity is the investment in
gold bullion. Several factors could affect the price of gold: (i) global gold
supply and demand, which is influenced by such factors as forward selling by
gold producers, purchases made by gold producers to unwind gold hedge
positions, central bank purchases and sales, and production and cost levels in
major gold-producing countries, and new production projects; (ii) investors’
expectations regarding future inflation rates; (iii) currency exchange rate volatility;
(iv) interest rate volatility; and (v) political, economic, global or regional
incidents. In addition, there is no assurance that gold will maintain its
long-term value in terms of purchasing power in the future. In the event that
the price of gold declines, the Sponsor expects the value of an investment in
the shares to decline proportionately. Each of these events could have a
material effect on the Fund’s financial position and results of operations.
6. FINANCIAL HIGHLIGHTS
| | | For the Three Months Ended December 31, | | For the Nine Months Ended December 31, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | | | | | | |
Net asset value per Share, beginning of period | | $ | 35.10 | | | $ | 25.00 | | | $ | 29.57 | | | $ | 26.48 | |
Net investment
loss(a) | | | (0.01 | ) | | | (0.01 | ) | | | (0.04 | ) | | | (0.03 | ) |
Net realized
and unrealized gain (loss) on investment in gold | | | (0.26 | ) | | | 2.56 | | | | 5.30 | | | | 1.10 | |
Net change in
net assets from operations(b) | | | (0.27 | ) | | | 2.55 | | | | 5.26 | | | | 1.07 | |
Net asset value per Share, end of period | | $ | 34.83 | | | $ | 27.55 | | | $ | 34.83 | | | $ | 27.55 | |
| | | | | | | | | | | | | | | | |
Total return, at net asset value(c) | | | (0.77 | )% | | | 10.20 | % | | | 17.79 | % | | | 4.04 | % |
| | | | | | | | | | | | | | | | |
Ratio to average net assets(d) | | | | | | | | | | | | | | | | |
Net investment
loss | | | (0.15 | )% | | | (0.15 | )% | | | (0.15 | )% | | | (0.15 | )% |
Net expenses | | | 0.15 | % | | | 0.15 | % | | | 0.15 | % | | | 0.15 | % |
| |
|
(a)
|
Calculated using average Shares outstanding.
|
|
(b)
|
The amount shown for a share outstanding may not agree with the change in the aggregate gains and losses on investment for the period because of the timing of transactions in the Fund’s shares in relation to fluctuating market values for the Fund’s underlying investment.
|
|
(c)
|
Calculation based on the change in net asset value of a Share during the period. Total return for periods of less than a year are not annualized.
|
|
(d)
|
Annualized.
|
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Trust, on behalf
of the Fund, may enter into contracts with service providers that contain
general indemnification clauses. The Fund’s maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred.
8. INDEMNIFICATION
The Sponsor will not be liable to the Trust, the
Trustee or any Shareholder for any action taken or for refraining from taking
any action in good faith, or for errors in judgment or for depreciation or loss
incurred by reason of the sale of any gold bullion or other assets of the Fund
or the Trust. However, the preceding liability exclusion will not protect the
Sponsor against any liability resulting from its own gross negligence, bad
faith, or willful misconduct.
The Sponsor and each of its shareholders, members,
directors, officers, employees, affiliates and subsidiaries will be indemnified
by the Trust and held harmless against any losses, liabilities or expenses
incurred in the performance of its duties under the Declaration of Trust
without gross negligence, bad faith, or willful misconduct. The Sponsor may
rely in good faith on any paper, order, notice, list, affidavit, receipt,
evaluation, opinion, endorsement, assignment, draft or any other document of any
kind prima facie properly executed and submitted to it by the Trustee, the
Trustee’s counsel or by any other person for any matters arising under the
Declaration of Trust. The Sponsor shall in no event be deemed to have assumed
or incurred any liability, duty, or obligation to any Shareholder or to the
Trustee other than as expressly provided for in the Declaration of Trust. Such
indemnity includes payment from the Trust of the costs and expenses incurred in
defending against any indemnified claim or liability under the Declaration of
Trust.
The Trustee will not be liable or accountable to the
Trust or any other person or under any agreement to which the Trust or any
series of the Trust is a party, except for the Trustee’s breach of its
obligations pursuant to the Declaration of Trust or its own willful misconduct,
bad faith or gross negligence. The Trustee and each of the Trustee’s officers,
affiliates, directors, employees, and agents will be indemnified by the Trust
from and against any losses, claims, taxes, damages, reasonable expenses, and
liabilities incurred with respect to the creation, operation or termination of
the Trust, the execution, delivery or performance of the Declaration of Trust
or the transactions contemplated thereby; provided that the indemnified party
acted without willful misconduct, bad faith or gross negligence.
9. SUBSEQUENT EVENTS
The Trust and the Fund have evaluated subsequent events
through the issuance of the financial statements and determined that no such
events have occurred that require disclosure.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the financial
statements and notes included in Item 1 of Part I of this Form 10-Q. This Form
10-Q contains “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and such forward-looking statements involve
risks and uncertainties. All statements (other than statements of historical
fact) included in this Form 10-Q that address activities, events or developments
that may occur in the future, including such matters as future gold prices,
gold sales, costs, objectives, changes in commodity prices and market
conditions (for gold and the shares), the Fund’s operations, the Sponsor’s
plans and references to the Fund’s future success and other similar matters are
forward-looking statements. Words such as “could,” “would,” “may,” “expect,”
“intend,” “estimate,” “predict,” and variations on such words or negatives
thereof, and similar expressions that reflect our current views with respect to
future events and Fund performance, are intended to identify such
forward-looking statements. These forward-looking statements are only
predictions, subject to risks and uncertainties that are difficult to predict
and many of which are outside of our control, and actual results could differ
materially from those discussed. Forward-looking statements involve risks and
uncertainties that could cause actual results or outcomes to differ materially
from those expressed therein. We express our estimates, expectations, beliefs,
and projections in good faith and believe them to have a reasonable basis.
However, we make no assurances that management’s estimates, expectations,
beliefs, or projections will be achieved or accomplished. These forward-looking
statements are based on assumptions about many important factors that could
cause actual results to differ materially from those in the forward-looking
statements. We do not intend to update any forward-looking statements even if
new information becomes available or other events occur in the future, except
as required by the federal securities laws.
Organization and Trust Overview
The Franklin
Templeton Holdings Trust (the “Trust”) was organized as a Delaware statutory
trust on April 19, 2021. Franklin Holdings, LLC is the Sponsor of the Trust
(the “Sponsor”). The Trust currently offers a single series, the Franklin
Responsibly Sourced Gold ETF (the “Fund”). The Fund issues common units of
beneficial interest (“Shares”), which represent units of fractional undivided
beneficial interest in and ownership of the Fund. The Shares are listed on NYSE
Arca, Inc. (“NYSE Arca”) under the symbol “FGDL.” Shares are not obligations
of, and are not guaranteed by, the Sponsor or any of its subsidiaries or
affiliates. The investment objective of the Fund is for the Shares to reflect
the performance of the price of gold bullion, less the Fund’s expenses. The
assets of the Fund include only gold bullion and cash, if any.
The Fund seeks
to hold only responsibly sourced gold in the Fund’s allocated account. The Fund
defines responsibly sourced gold for this purpose as London Good Delivery gold
bullion bars that were refined on or after January 1, 2012 (also referred to
herein as “post-2012 gold”). All post-2012 gold has been refined in accordance
with London Bullion Market Association’s (“LBMA”) Responsible Gold Guidance
(the “Gold Guidance”), described further herein. To facilitate this, in transferring
gold into and out of the Fund’s allocated account, the Custodian will, on a
best efforts basis and subject to available liquidity, seek to allocate
post-2012 gold. If, due to a lack of liquidity, the Custodian is unable to
allocate post-2012 gold to the Fund’s allocated account, the Custodian will do
so as soon as reasonably practicable.
The Fund issues
Shares on a continuous basis. Shares are issued by the Fund only in one or more
blocks of 50,000 Shares (a block of 50,000 Shares is called a “Creation Unit”)
in exchange for gold from Authorized Participants, which is then allocated to the
Fund and stored safely by the Custodian. The Fund issues and redeems Creation
Units on an ongoing basis at Net Asset Value to Authorized Participants who
have entered into an agreement with the Sponsor and the Administrator.
The Fund pays
the Sponsor a fee that accrues daily at an annualized rate equal to 0.15% of
the daily Net Asset Value of the Fund, paid monthly in arrears (the “Sponsor
Fee”). The Sponsor Fee is accrued in and payable in U.S. dollars.
The NAV is
computed based upon the total value of the assets of the Fund (i.e., gold and
cash) less its liabilities. To determine the Fund’s NAV, the Administrator
generally will value the gold bullion held by the Fund on the basis of the LBMA
Gold Price PM as published by the IBA. IBA operates electronic auctions for
spot, unallocated loco London gold, providing a market-based platform for
buyers and sellers to trade. The auctions are run at 10:30 a.m. and 3:00 p.m.
London time for gold. The final auction prices are published to the market as
the LBMA Gold Price AM and the LBMA Gold Price PM, respectively. The
Administrator will calculate the NAV on each day NYSE Arca is open for regular
trading, at 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on
a particular evaluation day or if the LBMA Gold Price PM has not been announced
by 12:00 PM New York time on a particular evaluation day, the next most recent
LBMA Gold Price AM or PM will be used in the determination of the NAV, unless
the Sponsor determines that such price is inappropriate to use as the basis for
such determination. If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation of the gold bullion
held by the Fund that the Sponsor determines fairly represents the commercial
value of the Fund’s gold bullion.
Once the value
of the gold bullion has been determined, the Administrator subtracts all
estimated accrued expenses and other liabilities of the Fund from the total
value of the gold bullion and any cash of the Fund. The resulting figure is the
NAV. The Administrator determines the NAV per Share by dividing the NAV of the
Fund by the number of Shares outstanding as of the close of trading on NYSE
Arca.
Critical
Accounting Policy
The financial
statements and accompanying notes are prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements relies on estimates and assumptions that impact
the Fund’s as well as the Trust’s financial position and results of operations.
These estimates and assumptions affect the Fund’s as well as the Trust’s
application of accounting policies. Below we describe the valuation of gold
bullion, a critical accounting policy that we believe is important to
understanding the results of operations and financial position. In addition,
please refer to Note 2 to the Financial Statements for further discussion of
the accounting policies followed by the Fund and the Trust.
The gold
bullion held on behalf of the Fund at the vaults of the Gold Custodian is
audited each year generally coinciding with the Fund’s financial year end at
March 31. On April 2, 2024, Bureau Veritas Commodities UK LTD concluded the
audit inspection procedures with respect to the Fund’s gold bullion held by the
Gold Custodian. The audit findings did not identify non-conformities.
Results of Operations
At December 31, 2024, the Custodian held 41,360.171
ounces of gold on behalf of the Fund in its vault, with a market value of $107,985,202 (cost: $90,663,645)
based on the LBMA Gold Price PM at period end.
For the Three
Months Ended December 31, 2024
For the three
months ended December 31, 2024, 1,400,000 Shares were issued in exchange for
18,678.465 ounces of gold and (750,000) Shares were redeemed in exchange for (10,005.285)
ounces of gold. The Fund’s NAV per Share began the period at $35.10 and ended
the period at $34.83. The (0.77)% decrease in the Fund's NAV from $35.10 at
September 30, 2024 to $34.83 at December 31, 2024 is directly related to the
(0.73)% decrease in the price of gold. The Fund's NAV decreased slightly more than
the price of gold on a percentage basis due to the Sponsor's fee, which was
$(38,441) for the quarter.
Net realized
and unrealized loss on investment in gold for the three months ended December
31, 2024, was approximately $(1,865,280) which includes a realized gain of $8,230
on the sale of gold to pay the Sponsor Fee, net realized gain on investment in
gold sold for redemptions of $4,241,210, and net change in unrealized
appreciation (depreciation) on investment in gold of approximately $(6,114,720).
Net realized and unrealized gain on investment in gold for the period was
driven by gold price depreciation from $2,629.95 per ounce as of September 30,
2024 to $2,610.85 per ounce as of December 31, 2024. Net decrease in net assets
resulting from operations was approximately $(1,903,721) for the three months
ended December 31, 2024, which consisted of the net realized and unrealized loss
on investment in gold of $(1,865,280), and payment of the Sponsor Fee of $(38,441).
Net assets increased to approximately $107,969,989 on December 31, 2024. The increase in net assets primarily
resulted from net capital share transactions of approximately
$23,885,503, offset by the aforementioned gold price depreciation.
For the Three
Months Ended December 31, 2023
For the three
months ended December 31, 2023, no Shares were issued and (500,000) Shares were
redeemed in exchange for (6,680.800) ounces of gold. The Fund’s NAV per Share
began the period at $25.00 and ended the period at $27.55. The increase in NAV
per Share was due to a higher price of gold of $2,062.40 at period end, which
represented an increase of 10.26% from $1,870.50 at September 30, 2023.
The change in
net assets from operations for the three months ended December 31, 2023 was
$6,529,425, which was due to (i) the Sponsor Fee of $(24,388), (ii) net
realized gain from gold distributed for the redemption of shares and sold to
pay expenses of $1,537,276 and (iii) a net change in unrealized appreciation
(depreciation) on investment of gold of $5,016,537. Other than the Sponsor Fee
the Fund had no expenses during the three months ended December 31, 2023.
For the Nine
months Ended December 31, 2024
For the nine
months ended December 31, 2024, 1,750,000 Shares were issued in exchange for
23,350.560 ounces of gold and (750,000) Shares were redeemed in exchange for (10,005.285) ounces of gold. The Fund’s NAV per
Share began the period at $29.57 and ended the period at $34.83. The 17.79%
increase in the Fund's NAV from $29.57 at March 31, 2024 to $34.83 at December
31, 2024 is directly related to the 17.91% increase in the price of gold. The
Fund's NAV increased slightly less than the price of gold on a percentage basis
due to the Sponsor's fee, which was $(92,294) for the period.
Net realized
and unrealized gain on investment in gold for the nine months ended December
31, 2024, was approximately $10,395,772 which includes a realized gain of $19,999
on the sale of gold to pay the Sponsor Fee, net realized gain on investment in
gold sold for redemptions of $4,241,210, and net change in unrealized
appreciation (depreciation) on investment in gold of approximately $6,134,563.
Net realized and unrealized gain on investment in gold for the period was
driven by gold price appreciation from $2,214.35 per ounce as of March 31, 2024
to $2,610.85 per ounce as of December 31, 2024. Net increase in net assets
resulting from operations was approximately $10,303,478 for the nine months
ended December 31, 2024, which consisted of the net realized and unrealized
gain on investment in gold of $10,395,772, and payment of the Sponsor Fee of
$(92,294). Net assets increased to approximately $107,969,989 on December 31,
2024. The increase in net
assets primarily resulted from the aforementioned gold price appreciation and net
capital share transactions of approximately $35,563,880.
For the Nine
Months Ended December 31, 2023
For the nine
months ended December 31, 2023, 100,000 Shares were issued in exchange for
1,337.286 ounces of gold and (2,300,000) Shares were redeemed in exchange for
(30,748.616) ounces of gold. The Fund’s NAV per Share began the period at
$26.48 and ended the period at $27.55. The increase in NAV per Share was due to
a higher price of gold of $2,062.40 at period end, which represented an
increase of 4.18% from $1,979.70 at March 31, 2023.
The change in
net assets from operations for the nine months ended December 31, 2023 was
$1,885,023, which was due to (i) the Sponsor Fee of $(89,459), (ii) net
realized gain from gold distributed for the redemption of shares and sold to
pay expenses of $4,786,535 and (iii) a net change in unrealized appreciation
(depreciation) on investment of gold of $(2,812,053). Other than the Sponsor
Fee the Fund had no expenses during the nine months ended December 31, 2023.
Liquidity and Capital
Resources
The Fund is not
aware of any trends, demands, commitments, events or uncertainties that are
reasonably likely to result in material changes to its liquidity needs. The
Fund’s only ordinary recurring expense is the fee paid to the Sponsor at an
annual rate of 0.15% of the daily net asset value of the Fund. The Sponsor’s
annual fee accrues daily and is payable by the Fund monthly in arrears. In
exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary
fees and expenses incurred by the Fund, including but not limited to the
following: fees charged by the Administrator, the Marketing Agent, the Custodian and the Trustee,
NYSE Arca listing fees, typical maintenance and transaction fees of the DTC,
SEC registration fees, printing and mailing costs, audit fees and expenses and
up to $500,000 per annum in legal fees and expenses and applicable license
fees. The Sponsor may determine in its sole discretion to assume legal fees and
expenses of the Fund in excess of the $500,000 per annum stipulated in the
Sponsor Agreement.
The Sponsor is
not required to pay any extraordinary or non-routine expenses. Extraordinary
expenses are fees and expenses which are unexpected or unusual in nature, such
as legal claims and liabilities and litigation costs or indemnification or
other unanticipated expenses. Extraordinary fees and expenses also include
material expenses which are not currently anticipated obligations of the Fund.
The Fund will be responsible for the payment of such expenses to the extent any
such expenses are incurred. Routine operational, administrative and other
ordinary expenses are not deemed extraordinary expenses. The Fund will sell
gold on an as-needed basis to pay the Sponsor’s fee.
The
Administrator will, at the direction of the Sponsor, sell the Fund’s gold as
necessary to pay the Fund’s expenses not otherwise assumed by the Sponsor. When
selling gold to pay the Sponsor’s fee and other expenses, if any, the
Administrator endeavors to sell the exact amount of gold needed to pay expenses
to minimize the Fund’s holdings of cash. At December 31, 2024, the Trust and
the Fund did not have any cash balances.
Off-Balance Sheet Arrangements
At December 31,
2024, the Fund as well as the Trust do not have any off-balance sheet
arrangements.
Analysis of Movements
in the Price of Gold
As movements in the price of gold are expected to
directly affect the price of the Fund’s shares, it is important for investors
to understand and follow movements in the price of gold. Past movements in the
gold price are not indicators of future movements.
The following chart shows movements in the price of
gold based on the LBMA Gold Price PM in U.S. dollars per ounce over the period
from October 1, 2024 to December 31, 2024.
The average, high, low and end-of-period gold prices
based on the LBMA Gold Price PM for the period are below:
|
Period
|
Average
|
High
|
Date
|
Low
|
Date
|
End of
period (1)
|
Last
business day
|
|
October 1, 2024 to December 31, 2024
|
2,661.34 |
2,777.80 |
October
30, 2024
|
2,567.30 |
November
14, 2024
|
2,610.85 |
December
31, 2024
|
(1) The end of period gold price is the LBMA Gold Price PM on the last business
day of the period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Fund is a passive investment vehicle. It is not
actively managed. The investment objective of the Fund is for the Shares to
reflect the performance of the price of gold bullion, less the Fund’s expenses.
Accordingly, fluctuations in the price of gold will affect the value of the
Fund’s Shares.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The duly
authorized officers of the Sponsor, performing functions equivalent to those a
principal executive officer and principal financial officer of the Trust would
perform if the Trust had any officers, have evaluated the effectiveness of the
Trust’s disclosure controls and procedures, and have concluded as of the end of
the period covered by this report on Form 10-Q that the disclosure controls and
procedures of the Trust operated effectively at reasonable assurance levels.
The disclosure
controls and procedures are designed to provide reasonable assurance that
information required to be disclosed in the reports that the Trust files or
submits under the Securities Exchange Act of 1934, as amended, are recorded,
processed, summarized and reported, within the time period specified in the
applicable rules and forms, and that such information is accumulated and
communicated to the duly authorized officers of the Sponsor performing
functions equivalent to those a principal executive officer and principal
financial officer of the Trust would perform if the Trust had any officers, as
appropriate, to allow timely decisions regarding required disclosure. It is
important to note that no set of controls, no matter how reasonably designed,
can detect every error.
The duly
authorized officers of the Sponsor, performing functions equivalent to those a
principal executive officer and principal financial officer of the Trust would
perform if the Trust had any officers, have evaluated the effectiveness of the
Fund’s disclosure controls and procedures, and have concluded as of the end of
the period covered by this report on Form 10-Q that the disclosure controls and
procedures of the Fund operated effectively at reasonable assurance levels.
The disclosure controls and procedures are designed to
provide reasonable assurance that information required to be disclosed in the
reports that the Trust files or submits under the Securities Exchange Act of
1934, as amended, on behalf of the Fund, are recorded, processed, summarized
and reported, within the time period specified in the applicable rules and
forms, and that such information is accumulated and communicated to the duly
authorized officers of the Sponsor performing functions equivalent to those a
principal executive officer and principal financial officer of the Trust would
perform if the Trust had any officers, as appropriate, to allow timely
decisions regarding required disclosure. It is important to note that no set of
controls, no matter how reasonably designed, can detect every error.
Internal Control over Financial Reporting
There were no
changes in the Trust’s and the Fund’s internal control over financial reporting
that occurred during the fiscal quarter covered by this report that have
materially affected, or are reasonably likely to materially affect, the Trust’s
and/or the Fund’s internal control over financial reporting.
Each of the
Sarbanes-Oxley certifications included as exhibits to this filing apply with
respect to both the operations of both the Fund, as the sole series of the
Trust, and the Trust as registrant.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to
time, the Trust and/or the Fund may be a party to certain legal proceedings in
the ordinary course of business. As of February 12, 2025, the Trust and the
Fund are not subject to any material legal proceedings, nor, to our knowledge,
are any material legal proceeding threatened against the Trust or Fund.
You should
carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in
our Annual Report on Form 10-K filed with the SEC for the fiscal year ended
March 31, 2024, which could materially affect our
business, financial condition or future results. There have been no
material changes in our risk factors from those disclosed in our 2024 Annual
Report on Form 10-K.
The risks
described in our Annual Report on Form 10-K are not the only risks facing the
Trust and the Fund. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| | |
|
a)
|
None.
|
| |
|
|
b)
|
Not applicable.
|
| |
|
|
c)
|
The Fund does not purchase Shares directly from its Shareholders; rather, the Fund transacts directly at net asset value only with Authorized Participants. In connection with its redemption of Creation Units held by Authorized Participants, the Fund redeemed 15 Creation Units (comprising 750,000 Shares) during the quarter ended December 31, 2024. The following table summarizes the redemptions by Authorized Participants during the period:
|
Period | | Total Shares Redeemed | | Average Price Per Share |
October 1, 2024 – October 31, 2024 | | | - | | | $ | - | |
November 1, 2024 – November 30, 2024 | | | - | | | | - | |
December 1, 2024 – December 31, 2024 | | | 750,000 | | | | 34.90 | |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
No officers or
directors of the Sponsor have adopted, modified or terminated trading plans
under either a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement (as such
terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933)
for the three-month period ended December 31, 2024.
See the Exhibit Index below, which is incorporated by reference herein.
EXHIBIT INDEX
|
Exhibit
No.
| |
Description
of Exhibit
|
|
| |
Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| |
Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
| |
Certification of Principal Executive Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
| |
Certification of Principal Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
| |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
|
101.SCH
| |
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
| |
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
|
|
101.LAB
| |
Inline XBRL Taxonomy Extension Label Linkbase
Document
|
|
101.PRE
| |
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
|
|
101.DEF
| |
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
104
| |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
*
Filed herewith.
Signatures
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned in the capacities* indicated thereunto duly
authorized.
Franklin Holdings, LLC
Sponsor of the Franklin Templeton Holdings Trust
(registrant)
| | | |
|
By:
|
/s/
David Mann
|
|
| |
David
Mann*
|
|
| |
President
and Chief Executive Officer
|
|
| |
(serving
in the capacity of principal executive officer)
|
|
| |
|
|
|
By:
|
/s/
Matthew Hinkle
|
|
| |
Matthew
Hinkle*
|
|
| |
Chief
Financial Officer
|
|
| |
(serving
in the capacity of principal financial officer)
|
|
Date: February 12, 2025
| * | The
registrant is a trust and the person is signing in his capacity as an
officer of Franklin Holdings, LLC, the Sponsor of the registrant. |
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In connection with this Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 (the “Report”) of Franklin Templeton Holdings Trust (the “Registrant”) as filed with the U.S. Securities and Exchange Commission on the date hereof, I, David Mann, the Principal Executive Officer of the Sponsor of the Registrant, hereby certify, to the best of my knowledge, that:
In connection with this Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 (the “Report”) of Franklin Templeton Holdings Trust (the “Registrant”) as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Matthew Hinkle, the Principal Financial Officer of the Sponsor of the Registrant, hereby certify, to the best of my knowledge, that:
Accounting Policies, by Policy (Policies)
|
9 Months Ended |
Dec. 31, 2024 |
|---|
| Accounting Policies, by Policy (Policies) [Line Items] |
|
| Basis of Presentation |
2.1. Basis of Presentation
The Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies, and has concluded that solely for accounting purposes, the Trust is classified as an Investment Company as defined in ASC 946. The Trust is not registered as an investment company under the Investment Company Act and is not required to register under such act.
The financial statements are presented for the Trust, as the registrant, combined with the Fund. Financial statements for the Fund presented at the series-level are provided separately in this report. For the periods presented, there were no balances or activity for the Trust except for the Fund’s operations, as its sole series. These notes to the financial statements relate to the Trust, as the registrant, combined with the Fund. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Fund are enforceable only against the assets of the Fund and not against the assets of the Trust generally or any other series that the Trust may establish.
|
| Valuation of Gold |
2.2. Valuation of Gold
The Trust and the Fund follow the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Fund’s policy is to value the investment in gold bullion at fair value. The NAV is computed based upon the total value of the assets of the Fund (i.e., gold and cash) less its liabilities. The Administrator generally will value any gold bullion held by the Fund on the basis of the price of an ounce of gold as determined by the ICE Benchmark Administration Limited (“IBA”), a benchmark administrator, which provides an independently administered auction process, as well as the overall administration and governance for the London Bullion Market Association (the “LBMA”). In determining the NAV, the Administrator generally will value the gold bullion held by the Fund on the basis of the LBMA Gold Price PM.
The Administrator calculates the NAV on each day NYSE Arca is open for regular trading, at 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 PM New York time on a particular evaluation day, the next most recent LBMA Gold Price AM or PM will be used in the determination of the NAV, unless the Sponsor determines that such price is inappropriate to use as the basis for such determination. If the Sponsor determines that such price is inappropriate to use, it shall identify an alternate basis for evaluation of the gold bullion held by the Fund that the Sponsor determines fairly represents the commercial value of the Fund’s gold bullion. Gold bullion held by the Fund is reported at fair value on the combined statements of assets and liabilities.
Once the value of the gold bullion has been determined, the Administrator subtracts all estimated accrued expenses and other liabilities of the Fund from the total value of the gold bullion and all other assets of the Fund. The resulting figure is the NAV. The NAV is used to compute the Sponsor’s fee. The Administrator determines the NAV per Share by dividing the NAV of the Fund by the number of Shares outstanding as of the close of trading on NYSE Arca.
ASC 820 established a hierarchy that prioritized inputs to valuation techniques used to measure fair value. The three levels of inputs are:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and
Level 3: Inputs that are unobservable for the asset or liability, including the Fund’s assumptions used in determining the fair value of investments.
On December 31, 2024 and March 31, 2024, the value of the gold bullion held by the Fund was categorized as Level 1.
|
| Fees, Expenses, and Realized Gains (Losses) |
2.3. Fees, Expenses, and Realized Gains (Losses)
When selling gold to pay expenses, the Sponsor will endeavor to sell the smallest amount of gold needed to pay expenses to minimize the Fund’s holdings of assets other than gold. A gain or loss is recognized based on the difference between the selling price and the average cost of the gold sold on the trade date, and such amounts are reported as net realized gain (loss) from gold distributed for the redemption of shares and sold to pay expenses in the combined statements of operations. Gold transactions are accounted for on a trade date basis. Realized gains or losses from the sale or disposition of gold are determined on a specific identification basis and recognized in the Combined Statements of Operations in the period in which the sale or disposition occurs, respectively.
The Fund’s only ordinary recurring expense is the Sponsor’s fee of 0.15% of the NAV of the Fund (“Sponsor fee”). The Sponsor fee is calculated on a daily basis (accrued at 1/365 of the applicable percentage of total net assets on that day) and is payable by the Fund monthly in arrears. The Fund’s expenses will reduce the NAV of the Fund. In exchange for the Sponsor’s fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Fund, including but not limited to the following: fees charged by the Administrator, the Custodian and the Trustee, NYSE Arca listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, audit fees and expenses, and up to $500,000 per annum in legal fees and expenses and applicable license fees.
The Sponsor is not required to pay any extraordinary or non-routine expenses. The Fund will be responsible for the payment of such expenses to the extent any such expenses are incurred. Extraordinary expenses are fees and expenses which are unexpected or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses also include material expenses which are not currently anticipated obligations of the Fund. Routine operational, administrative and other ordinary expenses are not deemed extraordinary expenses. The Fund will sell gold on an as-needed basis to pay the Sponsor’s fee.
There have been no extraordinary or non-routine expenses during the periods presented.
|
| Gold Receivable and Payable |
2.4. Gold Receivable and Payable
Gold receivable or payable represents the quantity of gold covered by contractually binding orders for the creation or redemption of Shares respectively, where the gold has not yet been transferred to or from the Fund’s account. Generally, ownership of the gold is transferred within one business day of the trade date.
|
| Stockholders' Equity, Policy [Policy Text Block] |
2.5. Creations and redemptions of Shares The Fund creates and redeems Shares from time to time, but only in one or more Creation Units (a Creation Unit equals a block of 50,000 Shares). The creation and redemption of Creation Units is only made in exchange for the delivery to the Fund or the distribution by the Fund of the amount of gold bullion represented by the Creation Units being created or redeemed. The amount of gold bullion required to be delivered to the Fund in connection with any creation, or paid out upon redemption, is based on the combined NAV of the number of Shares included in the Creation Units being created or redeemed as determined on the day the order to create or redeem Creation Units is properly received and accepted. The standard U.S. settlement cycle for most broker-dealer securities transactions is one business day (T+1). Authorized Participants are the only persons that may place orders to create and redeem Creation Units. All gold bullion must be delivered by Authorized Participants to the Fund and distributed by the Fund in unallocated form through credits and debits between Authorized Participants’ unallocated accounts and the Fund Unallocated Account. All gold bullion must be of at least a minimum fineness (or purity) of 995 parts per 1,000 (99.5%) and otherwise conform to the rules, regulations, practices and customs of the LBMA, including the specifications for a London Good Delivery Bar. The Transfer Agent receives a transaction processing fee in connection with orders from Authorized Participants to create or redeem Creation Units in the amount of $500 per order. These transaction processing fees are paid directly by the Authorized Participants and not by the Fund. Prior to initiating any creation or redemption order, an Authorized Participant must have an existing unallocated account with a London Precious Metals Clearing Limited (“LPMCL”) clearing bank identified by the Authorized Participant to the Custodian and the Sponsor, or an agreement with the Custodian itself establishing an unallocated account in London. An unallocated account is an account with a bullion dealer, which may also be a bank, to which a fine weight amount of gold bullion is credited. Transfers to or from an unallocated account are made by crediting or debiting the number of ounces of gold bullion being deposited or withdrawn. The account holder is entitled to direct the bullion dealer to deliver an amount of physical gold bullion equal to the amount of gold bullion standing to the credit of the unallocated account holder. Gold bullion held in an unallocated account is not segregated from the Custodian’s assets. The account holder therefore has no ownership interest in any specific bars of gold bullion that the bullion dealer holds or owns. The account holder is an unsecured creditor of the bullion dealer, and credits to an unallocated account are at risk of the bullion dealer’s insolvency, in which event it may not be possible for a liquidator to identify any gold bullion held in an unallocated account as belonging to the account holder rather than to the bullion dealer.
Changes in the Shares for the quarter from October 1, 2024 to December 31, 2024 are as follows: | | | Shares | | Amount^ |
Balance at October 1, 2024
| | | 2,450,000 | | | $ | 57,969,731 | |
Creation of Shares
| | | 1,400,000 | | | | 50,058,818 | |
Redemption of Shares
| | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024
| | | 3,100,000 | | | $ | 81,855,234 | |
Changes in the Shares for the quarter from October 1, 2023 to December 31, 2023 are as follows: | | | Shares
| | Amount^
|
Balance at October 1, 2023
| | | 2,600,000 | | | $ | 59,956,263 | |
Creation of Shares
| | | - | | | | - | |
Redemption of Shares
| | | (500,000 | ) | | | (13,664,909 | ) |
Balance at December 31, 2023
| | | 2,100,000 | | | $ | 46,291,354 | |
Changes in the Shares for the nine months from April 1, 2024 to December 31, 2024 are as follows: | | | Shares
| | Amount^
|
Balance at April 1, 2024
| | | 2,100,000 | | | $ | 46,291,354 | |
Creation of Shares
| | | 1,750,000 | | | | 61,737,195 | |
Redemption of Shares
| | | (750,000 | ) | | | (26,173,315 | ) |
Balance at December 31, 2024
| | | 3,100,000 | | | $ | 81,855,234 | |
Changes in the Shares for the nine months from April 1, 2023 to December 31, 2023 are as follows: | | | Shares
| | Amount^
|
Balance at April 1, 2023
| | | 4,300,000 | | | $ | 104,172,201 | |
Creation of Shares
| | | 100,000 | | | | 2,695,902 | |
Redemption of Shares
| | | (2,300,000 | ) | | | (60,576,749 | ) |
Balance at December 31, 2023
| | | 2,100,000 | | | $ | 46,291,354 | |
^ Dollar amount of balance represents the cumulative fair value of creation of shares less the redemption of shares, at the time of the specific creation or redemption.
|
| Income Taxes |
2.6. Income Taxes
The Fund is classified as a “grantor trust” for United States federal income tax purposes. As a result, the Trust and the Fund are not subject to United States federal income tax. Instead, the Fund’s income, gain, losses, and expenses will “flow through” to the shareholders, and the Administrator reports these to the Internal Revenue Service on that basis.
The Sponsor has analyzed applicable tax laws and regulations and their application to the Trust and the Fund as of December 31, 2024 and March 31, 2024 and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
|
| Recently Issued Accounting Pronouncements |
2.7 Recently Issued Accounting Pronouncements In November 2023, the FASB issued an Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The ASU enhances segment reporting by requiring public companies to disclose additional information about their reportable segments. This includes expanded disclosures on significant segment expenses, segment profit or loss, and specific segment-level information that helps financial statement users better understand the entity's financial performance and resource allocation. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Trust and the Fund are in the process of evaluating the impact of this ASU.
|
| Franklin Responsibly Sourced Gold ETF [Member] |
|
| Accounting Policies, by Policy (Policies) [Line Items] |
|
| Basis of Presentation |
2.1.
Basis of Presentation The Sponsor has determined that the Trust falls within
the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 946, Financial Services—Investment Companies, and has
concluded that solely for accounting purposes, the Trust is classified as an
Investment Company as defined in ASC 946. The Trust is not registered as an
investment company under the Investment Company Act and is not required
to register under such act. The financial statements are presented for the Trust,
as the registrant, combined with the Fund (in a separate section of this
report) and for the Fund individually. For the periods presented, there were no
balances or activity for the Trust except for the Fund’s operations, as its
sole series. These notes to the financial statements relate to the Fund
individually. The debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to the Fund are enforceable
only against the assets of the Fund and not against the assets of the Trust
generally or any other series that the Trust may establish.
|
| Valuation of Gold |
2.2. Valuation of Gold The Trust and the Fund follow the provisions of ASC
820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for
determining fair value and requires increased disclosure regarding the inputs
to valuation techniques used to measure fair value. ASC 820 defines fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. The
Fund’s policy is to value the investment in gold bullion at fair value. The NAV
is computed based upon the total value of the assets of the Fund (i.e., gold
and cash) less its liabilities. The Administrator generally will value any gold
bullion held by the Fund on the basis of the price of an ounce of gold as
determined by the ICE Benchmark Administration Limited (“IBA”), a benchmark
administrator, which provides an independently administered auction process, as
well as the overall administration and governance for the London Bullion Market
Association (the “LBMA”). In determining the NAV, the Administrator generally
will value the gold bullion held by the Fund on the basis of the LBMA Gold
Price PM. The
Administrator calculates the NAV on each day NYSE Arca is open for regular
trading, at 12:00 PM New York time. If no LBMA Gold Price (AM or PM) is made on
a particular evaluation day or if the LBMA Gold Price PM has not been announced
by 12:00 PM New York time on a particular evaluation day, the next most recent
LBMA Gold Price AM or PM will be used in the determination of the NAV, unless
the Sponsor determines that such price is inappropriate to use as the basis for
such determination. If the Sponsor determines that such price is inappropriate
to use, it shall identify an alternate basis for evaluation of the gold bullion
held by the Fund that the Sponsor determines fairly represents the commercial
value of the Fund’s gold bullion. Gold bullion held by the Fund is reported at
fair value on the statements of assets and liabilities. Once
the value of the gold bullion has been determined, the Administrator subtracts
all estimated accrued expenses and other liabilities of the Fund from the total
value of the gold bullion and all other assets of the Fund. The resulting
figure is the NAV. The NAV is used to compute the Sponsor’s fee. The
Administrator determines the NAV per Share by dividing the NAV of the Fund by
the number of Shares outstanding as of the close of trading on NYSE Arca. ASC
820 established a hierarchy that prioritized inputs to valuation techniques
used to measure fair value. The three levels of inputs are: Level
1: Unadjusted quoted prices in active markets for identical assets or
liabilities; Level
2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not considered
to be active, inputs other than quoted prices that are observable for the asset
or liability, and inputs that are derived principally from or corroborated by
observable market data by correlation or other means; and Level
3: Inputs that are unobservable for the asset or liability,
including the Fund’s assumptions used in determining the fair value of
investments. On December 31, 2024 and March 31, 2024, the value of
the gold bullion held by the Fund was categorized as Level 1.
|
| Fees, Expenses, and Realized Gains (Losses) |
2.3.
Fees, Expenses, and Realized Gains (Losses) When selling gold to pay expenses, the Sponsor will endeavor to
sell the smallest amount of gold needed to pay expenses to minimize the Fund’s
holdings of assets other than gold. A gain or loss is recognized based on the
difference between the selling price and the average cost of the gold sold on
the trade date, and such amounts are reported as net realized gain (loss) from
gold distributed for the redemption of shares and sold to pay expenses in the
statements of operations. Gold transactions are accounted for on a trade date basis. Realized gains or losses from the sale or disposition of gold are determined on a specific identification basis and recognized in the Combined Statements of Operations in the period in which the sale or disposition occurs, respectively. The Fund’s only ordinary recurring expense is the Sponsor’s fee
of 0.15% of the NAV of the Fund (“Sponsor fee”). The Sponsor fee is calculated
on a daily basis (accrued at 1/365 of the applicable percentage of total net
assets on that day) and is payable by the Fund monthly in arrears. The Fund’s
expenses will reduce the NAV of the Fund. In exchange for the Sponsor’s fee,
the Sponsor has agreed to assume the ordinary fees and expenses incurred by the
Fund, including but not limited to the following: fees charged by the
Administrator, the Custodian and the Trustee, NYSE Arca listing fees, typical
maintenance and transaction fees of the DTC, SEC registration fees, printing
and mailing costs, audit fees and expenses, and up to $500,000 per annum in
legal fees and expenses and applicable license fees. The Sponsor is not required to pay any extraordinary or
non-routine expenses. The Fund will be responsible for the payment of such
expenses to the extent any such expenses are incurred. Extraordinary expenses are fees and expenses which are
unexpected or unusual in nature, such as legal claims and liabilities and
litigation costs or indemnification or other unanticipated expenses.
Extraordinary fees and expenses also include material expenses which are not
currently anticipated obligations of the Fund. Routine operational,
administrative and other ordinary expenses are not deemed extraordinary
expenses. The Fund will sell gold on an as-needed basis to pay the Sponsor’s
fee. There have been no extraordinary or
non-routine expenses during the periods presented.
|
| Gold Receivable and Payable |
2.4.
Gold Receivable and Payable Gold receivable or payable represents the quantity of gold
covered by contractually binding orders for the creation or redemption of
Shares respectively, where the gold has not yet been transferred to or from the
Fund’s account. Generally, ownership of the gold is transferred within one
business day of the trade date.
|
| Stockholders' Equity, Policy [Policy Text Block] |
2.5.
Creations and redemptions of Shares The
Fund creates and redeems Shares from time to time, but only in one or more
Creation Units (a Creation Unit equals a block of 50,000 Shares). The creation
and redemption of Creation Units is only made in exchange for the delivery to
the Fund or the distribution by the Fund of the amount of gold bullion
represented by the Creation Units being created or redeemed. The amount of gold
bullion required to be delivered to the Fund in connection with any creation,
or paid out upon redemption, is based on the combined NAV of the number of
Shares included in the Creation Units being created or redeemed as determined
on the day the order to create or redeem Creation Units is properly received
and accepted. The standard U.S. settlement cycle for most broker-dealer
securities transactions is one business day (T+1). Authorized Participants are
the only persons that may place orders to create and redeem Creation Units. All
gold bullion must be delivered by Authorized Participants to the Fund and
distributed by the Fund in unallocated form through credits and debits between
Authorized Participants’ unallocated accounts and the Fund Unallocated Account.
All gold bullion must be of at least a minimum fineness (or purity) of 995
parts per 1,000 (99.5%) and otherwise conform to the rules, regulations,
practices and customs of the LBMA, including the specifications for a London
Good Delivery Bar. The Transfer Agent receives a transaction processing fee in
connection with orders from Authorized Participants to create or redeem
Creation Units in the amount of $500 per order. These transaction processing
fees are paid directly by the Authorized Participants and not by the Fund. Prior
to initiating any creation or redemption order, an Authorized Participant must
have an existing unallocated account with a London Precious Metals Clearing
Limited (“LPMCL”) clearing bank identified by the Authorized Participant to the
Custodian and the Sponsor, or an agreement with the Custodian itself
establishing an unallocated account in London. An unallocated account is an
account with a bullion dealer, which may also be a bank, to which a fine weight
amount of gold bullion is credited. Transfers to or from an unallocated account
are made by crediting or debiting the number of ounces of gold bullion being
deposited or withdrawn. The account holder is entitled to direct the bullion
dealer to deliver an amount of physical gold bullion equal to the amount of
gold bullion standing to the credit of the unallocated account holder. Gold
bullion held in an unallocated account is not segregated from the Custodian’s
assets. The account holder therefore has no ownership interest in any specific
bars of gold bullion that the bullion dealer holds or owns. The account holder
is an unsecured creditor of the bullion dealer, and credits to an unallocated
account are at risk of the bullion dealer’s insolvency, in which event it may
not be possible for a liquidator to identify any gold bullion held in an
unallocated account as belonging to the account holder rather than to the
bullion dealer. Changes
in the Shares for the quarter from October 1, 2024 to December
31, 2024 are as follows: | | | | | | Balance at October 1, 2024 | | | 2,450,000 | | | $ | 57,969,731 | | Creation of Shares | | | 1,400,000 | | | | 50,058,818 | | Redemption of Shares | | | (750,000 | ) | | | (26,173,315 | ) | Balance at December 31, 2024 | | | 3,100,000 | | | $ | 81,855,234 | |
Changes
in the Shares for the quarter from October 1, 2023 to December
31, 2023 are as follows: | | | | | | Balance at October 1, 2023 | | | 2,600,000 | | | $ | 59,956,263 | | Creation of Shares | | | - | | | | - | | Redemption of Shares | | | (500,000 | ) | | | (13,664,909 | ) | Balance at December 31, 2023 | | | 2,100,000 | | | $ | 46,291,354 | |
Changes
in the Shares for the nine months from April 1, 2024 to December 31, 2024 are as follows: | | | | | | Balance at April 1, 2024 | | | 2,100,000 | | | $ | 46,291,354 | | Creation of Shares | | | 1,750,000 | | | | 61,737,195 | | Redemption of Shares | | | (750,000 | ) | | | (26,173,315 | ) | Balance at December 31, 2024 | | | 3,100,000 | | | $ | 81,855,234 | |
Changes
in the Shares for the nine months from April 1, 2023 to December 31, 2023 are as follows: | | | | | | Balance at April 1, 2023 | | | 4,300,000 | | | $ | 104,172,201 | | Creation of Shares | | | 100,000 | | | | 2,695,902 | | Redemption of Shares | | | (2,300,000 | ) | | | (60,576,749 | ) | Balance at December 31, 2023 | | | 2,100,000 | | | $ | 46,291,354 | |
^ Dollar amount of balance represents the
cumulative fair value of creation of shares less the redemption of shares, at
the time of the specific creation or redemption.
|
| Income Taxes |
2.6. Income Taxes The Fund is classified as a “grantor trust” for United
States federal income tax purposes. As a result, the Trust and the Fund are not
subject to United States federal income tax. Instead, the Fund’s income, gain,
losses, and expenses will “flow through” to the shareholders, and the
Administrator reports these to the Internal Revenue Service on that basis. The Sponsor has analyzed applicable tax laws and
regulations and their application to the Fund as of December 31, 2024 and March
31, 2024 and does not believe that there are any uncertain tax positions that
require recognition of a tax liability.
|
| Recently Issued Accounting Pronouncements |
2.7 Recently Issued Accounting Pronouncements
In November 2023, the FASB issued an Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The ASU enhances segment reporting by requiring public companies to disclose additional information about their reportable segments. This includes expanded disclosures on significant segment expenses, segment profit or loss, and specific segment-level information that helps financial statement users better understand the entity's financial performance and resource allocation. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Trust and the Fund are in the process of evaluating the impact of this ASU.
|
