10-Q: Franklin Responsibly Sourced Gold ETF Sees Net Asset Increase Despite Share Redemptions in Q3 2023

The Franklin Responsibly Sourced Gold ETF experienced a net asset increase driven by rising gold prices, despite a decrease in outstanding shares due to redemptions during the quarter ended December 31, 2023.

Summary

• The Franklin Responsibly Sourced Gold ETF (FGDL) reported its financial results for the quarter and nine months ended December 31, 2023.
• The ETF's net assets decreased from $113.86 million on March 31, 2023, to $57.86 million on December 31, 2023.
• The number of shares outstanding decreased from 4,300,000 on March 31, 2023, to 2,100,000 on December 31, 2023.
• The net asset value (NAV) per share increased from $26.48 on March 31, 2023, to $27.55 on December 31, 2023.
• For the three months ended December 31, 2023, the ETF experienced a net increase in net assets resulting from operations of $6.53 million, or $2.67 per share.
• This increase was primarily driven by a net change in unrealized appreciation on investment in gold of $5.02 million and a net realized gain of $1.54 million.
• The Sponsor's fee for the quarter was $24,388.
• During the quarter, 500,000 shares were redeemed.
• For the nine months ended December 31, 2023, the net increase in net assets resulting from operations was $1.89 million, or $0.62 per share.
• This was impacted by a net change in unrealized depreciation on investment in gold of $2.81 million, offset by a net realized gain of $4.79 million.
• The Sponsor's fee for the nine-month period was $89,459.
• During the nine-month period, 100,000 shares were created and 2,300,000 shares were redeemed.
• The ETF's investment objective is to reflect the performance of the price of gold bullion, less expenses, by holding responsibly sourced gold.
• The Fund defines responsibly sourced gold as London Good Delivery gold bullion bars that were refined on or after January 1, 2012.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the ETF experienced share redemptions, the NAV per share increased due to rising gold prices, indicating a positive impact on existing shareholders. The focus on responsibly sourced gold is also a positive factor.

Positives

• The ETF experienced a net increase in net assets resulting from operations for both the three and nine months ended December 31, 2023.
• The NAV per share increased during the quarter ended December 31, 2023, driven by an increase in the price of gold.
• The ETF holds responsibly sourced gold, aligning with ethical sourcing standards.
• The Sponsor covers most of the ETF's operating expenses in exchange for the Sponsor's fee.

Negatives

• The ETF experienced a significant decrease in net assets and shares outstanding during the nine months ended December 31, 2023, due to share redemptions.
• The ETF experienced a net change in unrealized depreciation on investment in gold of $2.81 million for the nine months ended December 31, 2023.
• The Fund's value is highly dependent on the price of gold, making it susceptible to market fluctuations.

Risks

• The price of gold is subject to various factors, including global supply and demand, inflation expectations, currency exchange rate volatility, and political and economic events.
• A decline in the price of gold could lead to a proportional decrease in the value of the ETF's shares.
• The ETF is not actively managed, so it may not be able to respond to changes in the market as effectively as an actively managed fund.
• The ETF is an emerging growth company and may take advantage of certain exemptions from reporting requirements, which could reduce transparency for investors.

Future Outlook

The report contains forward-looking statements regarding future gold prices, market conditions, and the Fund's operations, which are subject to risks and uncertainties.

Management Comments

• The duly authorized officers of the Sponsor have evaluated the effectiveness of the Trusts disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report.

Industry Context

This announcement provides insight into the performance of a gold-backed ETF, reflecting trends in the gold market and investor sentiment towards precious metals as an investment.

Comparison to Industry Standards

• Comparable gold ETFs include the SPDR Gold Trust (GLD) and iShares Gold Trust (IAU).
• The Sponsor fee of 0.15% is competative with other similar gold ETFs.
• The Franklin Responsibly Sourced Gold ETF differentiates itself by focusing on responsibly sourced gold, which may appeal to socially conscious investors.

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 and is considered a related party.
• Franklin Resources, Inc. (FRI) is the ultimate parent company of the Sponsor and the Marketing Agent and is considered a related party.

Stakeholder Impact

• Shareholders: The increase in NAV per share benefits shareholders who held shares during the quarter.
• Authorized Participants: The creation and redemption activity affects Authorized Participants who facilitate the buying and selling of Creation Units.
• Sponsor: The Sponsor receives a fee based on the NAV of the Fund.

Key Dates

Keywords

gold, ETF, Franklin Responsibly Sourced Gold ETF, FGDL, gold bullion, net asset value, responsible sourcing, financial results, shares, redemption