Franklin Templeton Digital Holdings Trust 10-Q, filed Feb 23, 2024
Franklin Templeton Digital Holdings Trust (EZBC)
About this 10-Q
Franklin Templeton Digital Holdings Trust filed this 10-Q on February 23, 2024, covering the quarter ended December 31, 2023.
Table of Contents
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| Title of each class: |
Trading Symbol(s) |
Name of each exchange on which registered: | ||
Large Accelerated Filer |
☐ | Accelerated Filer |
☐ | |||
| ☒ | Smaller Reporting Company |
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Emerging Growth Company |
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Table of Contents
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This interim 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 bitcoin 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.
Table of Contents
FRANKLIN BITCOIN ETF
A SERIES OF FRANKLIN TEMPLETON DIGITAL HOLDINGS TRUST
TABLE OF CONTENTS
| Part I. FINANCIAL INFORMATION |
Page | |||
| 1 | ||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
15 | |||
| 15 | ||||
| Part II. OTHER INFORMATION |
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| 16 | ||||
| 16 | ||||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
16 | |||
| 16 | ||||
| 16 | ||||
| 16 | ||||
| 17 | ||||
| 18 | ||||
Table of Contents
Page | ||
2 | ||
3 | ||
4 | ||
5 | ||
6 | ||
December 31, 2023* |
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(Unaudited) |
||||
Assets: |
||||
Investment in bitcoin, at fair value (cost $ |
$ | |||
Cash |
||||
Total assets |
$ | |||
Liabilities: |
||||
Sponsor’s fee payable |
$ | |||
Total liabilities |
||||
Net assets |
$ | |||
Net assets consist of: |
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Paid-in-capital |
$ | |||
Distributable earnings (loss) |
||||
| $ | ||||
Shares issued and outstanding, |
||||
Net asset value per Share |
$ | |||
* |
No comparative period presented as fund inception was December 15, 2023. |
December 31, 2023* |
||||||||||||||||
(Unaudited) |
Quantity of bitcoin |
Cost |
Fair Value |
% of Net Assets |
||||||||||||
Investment in bitcoin |
$ | $ | % | |||||||||||||
Total Investment |
$ | |||||||||||||||
Assets in excess of other liabilities |
||||||||||||||||
Net assets |
$ | % | ||||||||||||||
* |
No comparative period presented as fund inception was December 15, 2023. |
For the period December 15, 2023 (Initial Seed Creation Date) through December 31, 2023* |
||||
| Net assets, beginning of period |
||||
| Net investment loss |
$ | |||
| Net realized gain on investment in bitcoin |
||||
| Net change in unrealized appreciation (depreciation) |
||||
| |
|
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| Net increase (decrease) in net assets resulting from operations |
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| |
|
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| Increase (decrease) in net assets from capital share transactions: |
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| Creation of Units |
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| Redemption of Units |
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| |
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| Net increase in net assets resulting from capital share transactions |
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| Total increase (decrease) in net assets from financing and capital share transactions |
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| Net assets, end of period |
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| Changes in Shares outstanding |
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| Shares outstanding at beginning of period |
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| Shares issued |
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| Shares redeemed |
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| Net increase (decrease) in Shares |
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| Shares outstanding at end of period |
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| |
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* |
No comparative period presented as fund inception was December 15, 2023. |
For the period December 15, 2023 (Initial Seed Creation Date) through December 31, 2023* |
||||
| Cash Flows from Financing Activities: |
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| Proceeds from creation or redemption of units |
$ | |||
| |
|
|||
| Net cash provided by (used in) financing activities |
||||
| |
|
|||
| Increase (decrease) in cash |
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| Cash, beginning of period |
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| |
|
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| Cash, end of period |
$ | |||
| |
|
|||
| Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions to Net Cash Provided by (Used in) Financing Activities: |
||||
| Net increase (decrease) in net assets resulting from capital share transactions |
$ | |||
| Adjustments to reconcile net increase (decrease) in net assets resulting from capital share transactions to net cash provided by (used in) financing activities: |
||||
| + Proceeds from creation or redemption of units |
||||
| Net realized gain (loss) |
– | |||
| Net change in unrealized appreciation (depreciation) |
– | |||
| |
|
|||
| Net cash provided by (used in) financing activities |
$ | |||
| |
|
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| ^ | The amount represents the initial seed on December 15, 2023. |
* |
No comparative period presented as fund inception was December 15, 2023. |
1. |
ORGANIZATION |
2. |
SIGNIFICANT ACCOUNTING POLICIES |
3. |
RELATED PARTIES - SPONSOR |
4. |
CONCENTRATION OF RISK |
5. |
FINANCIAL HIGHLIGHTS |
For the period December 15, 2023 (Initial Seed Creation Date) through December 31, 2023* |
||||
Net asset value per Share, beginning of period |
$ |
(1) | ||
Net investment loss (2) |
||||
Net realized and unrealized gain (loss) |
||||
Net change in net assets from operations |
||||
Net asset value per Share, end of period |
$ |
(1) | ||
Net asset, beginning of period |
||||
Net asset, end of period |
||||
Total return, at net asset value |
% | |||
Ratio to average net assets |
||||
Net investment loss |
% (3) | |||
Net expenses |
% (3) | |||
| 1 | The amount represents the initial seed creation and the NAV at which the initial shares were acquired on December 15, 2023. |
| 2 | Calculated using average Shares outstanding. |
| 3 | Annualized based on the period from December 15, 2023 (initial seed creation) to December 31, 2023. |
| * | No comparative period presented fund inception was December 15, 2023. |
6. |
COMMITMENT AND CONTINGENT LIABILITIES |
7. |
INDEMNIFICATION |
8. |
SUBSEQUENT EVENTS |
Table of Contents
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, 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 Digital Holdings Trust (the “Trust”) was formed as a Delaware statutory trust on September 6, 2023, and is governed by the provisions of an Agreement and Declaration of Trust dated as of January 5, 2024. 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 Bitcoin ETF (the “Fund”). The Sponsor of the Trust and the Fund (the “Sponsor”) is Franklin Holdings, LLC. 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 Cboe BZX Exchange, Inc. (“Cboe BZX Exchange” or the “Exchange”).
On December 15, 2023, the Seed Capital Investor purchased 4,000 Shares at a per-Share price equal to $25.00 (the “Initial Seed Shares”). Delivery of the Initial Seed Shares was made on December 15, 2023. Total proceeds to the Fund from the sale of the Initial Seed Shares were $100,000. On January 8, 2024, the Initial Seed Shares were redeemed for $100,000 and the Seed Capital Investor purchased two creation units in a cash transaction comprised of a total of 100,000 Shares at a per-Share price based on 29.00000000 bitcoins per Creation Unit (or 0.00058 bitcoins per Share), for a total of 58.00000000 bitcoins (the “Seed Creation Units”). The cash proceeds to the Fund from the sale of the Seed Creation Units were used by the Fund to purchase 58.00000000 bitcoins at the price of $44,973.58 per bitcoin on January 8, 2024. The transaction and other costs incurred in connection with the Seed Creation Units were paid by the Seed Capital Investor and not borne by the Fund. Thus, the ultimate total proceeds to the Fund from the sale of the Seed Creation Units were $2,608,467.81 (an amount representing 58.00000000 bitcoins).
The Fund seeks to reflect generally the performance of the price of bitcoin. The Fund seeks to reflect such performance before payment of the Fund’s expenses and liabilities. The Shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding, and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange. The Fund is a passive investment vehicle and is not a leveraged product. The Sponsor does not actively manage the bitcoin held by the Fund.
The Fund issues Shares only in Creation Units of 50,000 or multiples thereof. Creation Units are issued and redeemed in exchange for cash. Individual Shares will not be redeemed by the Fund but are listed and traded on the Exchange under the ticker symbol “EZBC.” The Fund issues Shares in Creation Units on a continuous basis at the applicable NAV per Share on the creation order date.
The Fund’s only ordinary recurring expense is expected to be the Sponsor’s fee. 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: the fees charged by the Administrator, the Custodians and the Trustee, Cboe BZX Exchange listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, tax reporting fees, audit fees, license fees and expenses, up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor will also pay the costs of the Fund’s organization and the initial offering costs, and may not seek reimbursement of such costs.
13
Table of Contents
The Sponsor’s fee is accrued daily at an annualized rate equal to 0.19% of the net asset value of the Fund and is payable at least quarterly in arrears in U.S. dollars or in-kind or any combination thereof. The Sponsor may, at its sole discretion and from time to time, waive all or a portion of the Sponsor’s fee for stated periods of time. The Sponsor is under no obligation to waive any portion of its fees and any such waiver shall create no obligation to waive any such fees during any period not covered by the waiver. The Fund will sell bitcoin as needed to pay the Sponsor’s fee. The Fund bears transaction costs, including any bitcoin network fees or other similar transaction fees, in connection with any sales of bitcoin necessary to pay the Sponsor’s fee, as well as other Fund expenses (if any) that are not assumed by the Sponsor (expenses assumed by the Sponsor are specified above). Any bitcoin network fees and similar transaction fees incurred in connection with the creation or redemption of Creation Units are borne by the Authorized Participant. For a period from January 12, 2024 to August 2, 2024, the Sponsor will waive a portion of the Sponsor’s Fee so that the Sponsor’s Fee after the fee waiver will be equal to 0.00% of the net asset value of the Fund for the first $10.0 billion of the Fund’s assets. In the future, if the Sponsor decides to waive all or a portion of the Sponsor’s Fee, Shareholders will be notified in a prospectus supplement or on the Sponsor’s website for the Fund.
The Fund 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 Fund may elect to comply with certain reduced public company reporting requirements.
The NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets. The NAV is calculated on each business day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Index price. In determining the NAV of the Trust on any business day, the Administrator will calculate the price of the bitcoin held by the Trust as of 4:00 p.m. ET on such day. The Administrator will also calculate the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the number of outstanding Shares. For purposes of making these calculations, a business day means any day other than a day when the Exchange is closed for regular trading.
The Administrator will rely on the Index as the index price to be used when determining NAV. However, determining the value of the Trust’s bitcoin using the Index is not in accordance with GAAP, and therefore is not used in the Trust’s financial statements. The Trust’s bitcoins are carried, for financial statement purposes, at fair value, as required by GAAP. The Trust determines the fair value of bitcoin based on the price provided by the bitcoin market that the Trust considers its “principal market” as of 4:00 p.m., ET on the valuation date. The net asset value of the Trust determined on a GAAP basis is referred to as the “Principal Market NAV” and the net asset value of the Trust per Share determined on a GAAP basis is referred to as the “Principal Market NAV per Share.”
NAV and NAV per Share are not measures calculated in accordance with GAAP and are not intended as substitute for Principal Market and Principal Market NAV per Share, respectively.
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 financial position and results of operations. These estimates and assumptions affect the Fund’s application of accounting policies.
Discussion of Operations (Financing Activities)
For the period December 15, 2023 to December 31, 2023*
On December 15, 2023, the Seed Capital Investor purchased 4,000 Shares at a per-Share price equal to $25.00 (the “Initial Seed Shares”). Delivery of the Initial Seed Shares was made on December 15, 2023. Total proceeds to the Fund from the sale of the Initial Seed Shares were $100,000. The Fund had no operations prior to the commencement of operations of the Fund on January 11, 2024. As of December 31, 2023, the Fund had not yet incurred or paid any fee to the Sponsor because the Fund had not yet commenced operations.
.
| * | No comparative period presented as fund inception was December 15, 2023. |
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Table of Contents
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 expected to be the Sponsor’s fee. 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: the fees charged by the Administrator, the Custodians and the Trustee, Cboe BZX Exchange listing fees, typical maintenance and transaction fees of the DTC, SEC registration fees, printing and mailing costs, tax reporting fees, audit fees, license fees and expenses, up to $500,000 per annum in ordinary legal fees and expenses. The Sponsor will also pay the costs of the Fund’s organization and the initial offering costs, and may not seek reimbursement of such costs.
The Sponsor’s fee is accrued daily at an annualized rate equal to 0.19% of the net asset value of the Fund and is payable at least quarterly in arrears in U.S. dollars or in-kind or any combination thereof. The Sponsor may, at its sole discretion and from time to time, waive all or a portion of the Sponsor’s fee for stated periods of time. The Sponsor is under no obligation to waive any portion of its fees and any such waiver shall create no obligation to waive any such fees during any period not covered by the waiver. The Fund will sell bitcoin as needed to pay the Sponsor’s fee. For a period from January 12, 2024 to August 2, 2024, the Sponsor will waive a portion of the Sponsor’s Fee so that the Sponsor’s Fee after the fee waiver will be equal to 0.00% of the net asset value of the Fund for the first $10.0 billion of the Fund’s assets. In the future, if the Sponsor decides to waive all or a portion of the Sponsor’s Fee, Shareholders will be notified in a prospectus supplement or on the Sponsor’s website for the Fund.
The Fund bears transaction costs, including any bitcoin network fees or other similar transaction fees, in connection with any sales of bitcoin necessary to pay the Sponsor’s fee, as well as other Fund expenses (if any) that are not assumed by the Sponsor (expenses assumed by the Sponsor are specified above). Any bitcoin network fees and similar transaction fees incurred in connection with the creation or redemption of Creation Units are borne by the Authorized Participant.
At December 31, 2023, the Trust did not have any off-balance sheet arrangements.
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 to seek to reflect generally the performance of the price of bitcoin before payment of the Fund’s expenses. The Fund had not yet commenced operations and did not yet hold bitcoin as of the date of this report; however, at launch and thereafter, fluctuations in the price of bitcoin 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 that the disclosure controls and procedures of the Trust were effective as of the end of the period covered by this report. Such 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.
Internal Control over Financial Reporting
There has been no change in the internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
15
Table of Contents
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 14, 2024, the Trust and the Fund is not subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against the Trust or Fund.
Item 1A. Risk Factors
You should carefully consider the factors discussed in “Risk Factors” in our Prospectus filed on January 12, 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 therein.
The risks described in our Prospectus 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) | On December 15, 2023, Franklin Resources Inc. (the “Seed Capital Investor”), an affiliate of the Sponsor, subject to conditions, purchased 4,000 Shares at a per-Share price equal to $25.00 (the “Initial Seed Shares”). Delivery of the Initial Seed Shares was made on December 15, 2023. Total proceeds to the Fund from the sale of the Initial Seed Shares were $100,000. On January 8, 2024, the Initial Seed Shares were redeemed for $100,000 and the Seed Capital Investor purchased two creation units in a cash transaction comprised of a total of 100,000 Shares at a per-Share price based on 29.00000000 bitcoins per Creation Unit (or 0.00058 bitcoins per Share), for a total of 58.00000000 bitcoins (the “Seed Creation Units”). The cash proceeds to the Fund from the sale of the Seed Creation Units were used by the Fund to purchase 58.00000000 bitcoins at the price of $44,973.58 per bitcoin on January 8, 2024. The transaction and other costs incurred in connection with the Seed Creation Units were paid by the Seed Capital Investor and not borne by the Fund. Thus, the ultimate total proceeds to the Fund from the sale of the Seed Creation Units were $2,608,467.81 (an amount representing 58.00000000 bitcoins). The Seed Capital Investor will act as a statutory underwriter with respect to the Seed Creation Units. See “Seed Capital Investor” and “Plan of Distribution” in the Fund’s prospectus for further information. No further sales of unregistered securities are contemplated. |
| b) | Not applicable. |
| c) | The Fund does not purchase Shares directly from its Shareholders. In connection with its redemption of Creation Units held by Authorized Participants, the Fund redeemed 0 Creation Units (comprising 0 Shares) during the period from December 15 (the date of the inception of the Fund in connection with the initial seed creation transaction) to December 31, 2023. The following table summarizes the redemptions by Authorized Participants during the period: |
| Period |
Total Shares Redeemed |
Average Price Per Share |
||||||
| October 1, 2023 – October 31, 2023 |
N/A | N/A | ||||||
| November 1, 2023 – November 30, 2023 |
N/A | N/A | ||||||
| December 15, 2023 – December 31, 2023 |
0 | $ | — | |||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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 period ended December 31, 2023.
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Table of Contents
Item 6. Exhibits
Listed below are the exhibits, which are filed as part of this quarterly report on Form 10-Q (according to the number assigned to them in Item 601 of Regulation S-K):
| Exhibit No | Description of Document | |
| 31.1(1) | Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2(1) | Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1(1) | Certification by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2(1) | Certification by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document. | |
| 101.SCH | XBRL Taxonomy Extension Schema. | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase. | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| (1) | Filed herewith. |
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Table of Contents
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 thereunto duly authorized.
Franklin Holdings, LLC
Sponsor of Franklin Templeton Digital Holdings Trust (Registrant)
| By: | /s/ David Mann* | |
| David Mann | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Matthew Hinkle* | |
| Matthew Hinkle | ||
| Chief Financial Officer | ||
| Date: February 23, 2024 | ||
| * | 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. |
18
Exhibit 31.1
Certification by Principal Executive Officer
Pursuant to Rule 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as amendedI, David Mann, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Templeton Digital Holdings Trust (the “Trust” or “registrant”) with respect to its series, Franklin Bitcoin ETF (the “Fund”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the condensed financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 23, 2024 | By | /s/ David Mann | ||||
| Name: | David Mann* | |||||
| Title: | President and Chief Executive Officer | |||||
| (serving in the capacity of principal executive officer) | ||||||
| * | 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. |
Exhibit 31.2
Certification by Principal Financial Officer
Pursuant to Rule 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as amendedI, Matthew Hinkle, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Templeton Digital Holdings Trust (the “Trust” or “registrant”) with respect to its series, Franklin Bitcoin ETF (the “Fund”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the condensed financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 23, 2024 | By | /s/ Matthew Hinkle | ||||
| Name: | Matthew Hinkle* | |||||
| Title: | Chief Financial Officer | |||||
| (serving in the capacity of principal financial officer) | ||||||
| * | 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. |
Exhibit 32.1
Certification by Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 (the “Report”) of Franklin Templeton Digital Holdings Trust (the “Trust” or “registrant”) with respect to its series, Franklin Bitcoin ETF (the “Fund”), as filed with the Securities and Exchange Commission on the date hereof, I, David Mann, the President and Chief Executive Officer of Franklin Holdings, LLC, Sponsor of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: February 23, 2024 | By | /s/ David Mann | ||||
| Name: | David Mann* | |||||
| Title: | President and Chief Executive Officer | |||||
| (serving in the capacity of principal executive officer) | ||||||
| * | 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. |
Exhibit 32.2
Certification by Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 (the “Report”) of Franklin Templeton Digital Holdings Trust (the “Trust” or “registrant”) with respect to its series, Franklin Bitcoin ETF (the “Fund”), as filed with the Securities and Exchange Commission on the date hereof, I, Matthew Hinkle, the Chief Financial Officer of Franklin Holdings, LLC, Sponsor of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| Date: February 23, 2024 | By | /s/ Matthew Hinkle | ||||
| Name: | Matthew Hinkle | |||||
| Title: | Chief Financial Officer | |||||
| (serving in the capacity of principal financial officer) | ||||||
| * | 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. |