10-K: Franklin Responsibly Sourced Gold ETF Annual Report Shows Increase in Net Asset Value Despite Share Redemptions

The Franklin Responsibly Sourced Gold ETF's annual report for the fiscal year ended March 31, 2024, reveals a net asset value increase despite significant share redemptions.

Summary

• The Franklin Responsibly Sourced Gold ETF, a series of Franklin Templeton Holdings Trust, released its annual report for the fiscal year ending March 31, 2024.
• The fund's net asset value (NAV) per share increased from $26.48 to $29.57 during the fiscal year.
• This increase was primarily driven by a rise in the price of gold, which increased by 11.85% over the year.
• The fund experienced a net decrease in shares outstanding, with 100,000 shares issued and 2,300,000 shares redeemed.
• The fund's total gold holdings decreased from 57,519.498 ounces to 28,048.958 ounces over the year.
• The fund's total net assets decreased from $113,858,013 to $62,102,631 due to share redemptions.
• The fund's only recurring expense is a 0.15% annual fee paid to the sponsor, which is paid monthly in arrears.
• The fund sells gold as needed to cover its expenses.

Sentiment

Score: 7

Explanation: The document presents a positive picture of the fund's performance with an increase in NAV, but also highlights risks and challenges, resulting in a moderately positive sentiment.

Positives

• The fund experienced a significant increase in net asset value per share, indicating positive performance.
• The increase in gold prices positively impacted the fund's overall value.
• The fund maintains a policy of holding only responsibly sourced gold bullion.

Negatives

• The fund experienced a significant decrease in total gold holdings and net assets due to share redemptions.
• The fund's value is directly tied to the price of gold, making it susceptible to market volatility.
• The fund's expenses are paid by selling gold, which reduces the amount of gold represented by each share over time.

Risks

• The fund is subject to market risk, with the price of gold being historically unpredictable.
• Large-scale sales of gold by official sectors could negatively impact the price of gold and the fund's value.
• The fund is not actively managed, meaning it does not attempt to buy or sell gold to take advantage of price fluctuations.
• The fund is subject to responsible sourcing due diligence risk, and there is no guarantee that all gold held is 100% ethically sourced.
• The fund relies on a custodian for safekeeping of its gold, and any failure by the custodian could result in a loss.
• The fund does not insure its gold, exposing shareholders to the risk of loss for which no person is liable.
• The fund's shares may trade at a price above or below the net asset value per share.
• The amount of gold represented by each share will decrease over time due to the sale of gold to pay expenses.
• The fund may be required to terminate and liquidate at a time that is disadvantageous to shareholders.
• The fund is exposed to various operational risks, including human error and information technology failures.

Future Outlook

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

Management Comments

• The Sponsor believes that the size and operation of the gold bullion market make it unlikely that an Authorized Participants direct activities in the gold or securities markets will impact the price of gold or the price of the Shares.
• 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.

Industry Context

The fund operates within the broader gold investment market, competing with other gold-backed securities and direct gold investments. The fund's performance is directly influenced by global gold supply and demand, as well as investor sentiment towards gold.

Comparison to Industry Standards

• The fund's expense ratio of 0.15% is competitive with other physically-backed gold ETFs.
• The fund's reliance on the LBMA Gold Price PM for valuation is standard practice in the industry.
• The fund's policy of holding only responsibly sourced gold aligns with increasing investor interest in ethical investments.
• The fund's structure as a grantor trust is common for commodity-backed ETFs, providing tax transparency to investors.
• The fund's creation and redemption mechanism through authorized participants is a standard feature of ETFs, designed to maintain a close correlation between the market price and the NAV.

Related Party Transactions

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

Stakeholder Impact

• Shareholders experienced an increase in the net asset value per share, but also face risks associated with gold price volatility.
• Authorized Participants are responsible for the creation and redemption of shares, and are subject to transaction fees.
• The Sponsor is responsible for the management and oversight of the fund, and receives a fee for its services.
• The Custodian is responsible for the safekeeping of the fund's gold bullion, and is subject to certain liabilities.
• The Trustee has limited duties and liabilities to the fund.

Next Steps

• The Sponsor will continue to monitor the fund's performance and market conditions.
• The Sponsor will continue to sell gold as needed to cover the fund's expenses.
• The Sponsor will continue to seek to allocate post-2012 gold to the Fund Allocated Account.

Key Dates

Keywords

Gold ETF, Responsibly Sourced Gold, Gold Bullion, Net Asset Value, FGDL, Franklin Templeton, Investment, Precious Metals, LBMA Gold Price, Exchange Traded Fund