Your Fund's Objective
The Franklin Gold Fund seeks capital appreciation with current income by
investing primarily in securities of companies engaged in mining, processing or
dealing in gold or other precious metals.
September 15, 1995
Dear Shareholder:
We are pleased to bring you the 27th annual report of the Franklin Gold Fund for
the fiscal year ended July 31, 1995.
The past twelve months were unique because they marked a period in which gold
prices were less volatile than at any time since the U.S. central banks
relinquished control of gold prices in 1968. This phenomenon was primarily the
result of factors that normally influence the price of gold counteracting one
another. Inflationary fears and political instability were low, which exerted
downward pressure on gold prices. On the other hand, the weak U.S. dollar and
strong physical demand helped support prices. The net result was that gold
traded within a narrow band of $370 to $400 per ounce, with volatility averag-
ing only 7%. Since 1968, annual volatility has averaged about 32%, and has
fallen below 10% only one other time.
Within this environment, the price of gold peaked at $397 per ounce in September
1994, bottomed at $372 in January 1995, and averaged $384 for the fiscal year.
The fund's Class I share price (based on net asset value), which is
significantly influenced by the price of gold, fluctuated between a high of
$17.07 on September 27, 1994 and a low of $12.77 on January 31, 1995, closing at
$15.07 on July 31, 1995.
This reporting period was also noteworthy because gold production declined
worldwide for the first time in decades. Moderate declines were reported in
Canada and Russia, with South African mines experiencing the most significant
production declines due to a combination of lower grades of mined ore, labor
disruptions and an increased number of national holidays. Currently, South
African mines are the world's only gold mines that do not operate seven days per
week.
GRAPHIC MATERIAL 1 OMITTED SEE END OF DOCUMENT
If these mines eventually shift to a seven-day work week, we expect to see an
increase in productivity. In the meantime, supply and demand fundamentals bode
well for the prospect of higher gold prices.
The fund's portfolio did not change dramatically over the course of the fiscal
year. We did, however, initiate a position in Western Areas, a South African
gold mining company with potential for both reserve and production growth from
its recent merger with South Deep Exploration Co., Ltd. Focusing on companies we
believe display the most favorable growth potential, we added to holdings such
as Acacia Resources, Ltd., Ashanti Goldfields, and Santa Fe Pacific Gold Corp.,
while reducing other positions with seemingly limited growth potential. We
increased our platinum exposure based on the favorable outlook for automobile,
electronics and jewelry consumption worldwide, particularly in Japan. And,
seeking to benefit from the rally in the copper, nickel and aluminum markets, we
also increased our exposure to base metals.
Looking forward, we are optimistic about the long-term prospects for gold and
the Franklin Gold Fund. We expect about a 2% annual growth in demand for gold in
the near future. Additionally, the supply of mined gold could decline further,
which would also benefit gold prices. Given this environment, we will continue
to emphasize those investments that we feel are capable of performing well over
the long term -- companies with long-life reserve bases, low operating costs,
and top-quality management. Within our conservative investment strategy, we
expect to continue investing in companies with international exploration and
mining potential, especially in Latin America, Southeast Asia and West Africa.
It is important to keep in mind that gold is a "safe-haven" investment, meaning
the demand for gold tends to increase when investors perceive economic
instability, such as high inflation, or political turmoil, such as regional
conflicts. As such, gold funds tend to perform well when other investments may
falter. Please also be aware that the fund is subject to special risks,
including those related to fluctuations in the price of gold and other precious
metals, and the currency fluctuation and political uncertainty associated with
foreign investing. These and other risks are described in the prospectus.
We appreciate your participation in the Franklin Gold Fund and look forward to
serving your investment needs in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Performance Summary
Franklin Gold Fund Class I shares provided a total return of +3.14% for the
one-year period ended July 31, 1995. Total return measures the change in value
of an investment, does not include the maximum initial sales charge, and assumes
reinvestment of dividends.
As measured by net asset value, the fund's Class I share price increased from
$14.88 on July 31, 1994 to $15.07 on July 31, 1995, while the Class II share
price increased from $15.02 on May 1, 1995 (the inception date for these shares)
to $15.05 on July 31, 1995.
During the reporting period, Class I shareholders received income dividends
totaling 26.5 cents ($0.265) per share, and Class II shareholders received
income dividends of 18.2 cents ($0.182) per share. Of course, past performance
cannot guarantee future results, and dividends will vary depending on income
earned by the fund.
The graph to the right compares the performance of Franklin Gold Fund's Class I
shares, over the past 10 years, with the performance of the Standard & Poor's
500 Stock Index (S&P 500)(R).
GRAPHIC MATERIAL 2 OMITTED SEE END OF DOCUMENT
Please note that the S&P 500 index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1995, contained only 0.57% gold stocks.
Of course, such unmanaged market indices have inherent performance differentials
in comparison with any fund. They don't pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions or market spreads to
buy and sell stocks. And, unlike an unmanaged index, mutual funds are never 100%
invested because of the need to have cash on hand to redeem shares. In addition,
the performance shown for the fund includes the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as the Franklin
Gold Fund's had been applied to the index, its performance would have been
lower. Please remember that an index is simply a measure of performance, and one
cannot invest in an index directly. Class II shares are not represented as they
have not been available for a sufficient period of time. Past performance is not
predictive of future results.
<TABLE>
<CAPTION>
Franklin Gold Fund
Periods ended July 31, 1995
Since Since
Inception Inception
One-Year Five-Year Ten-Year (05/19/69) (05/01/95)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares................................. 3.14% 23.65% 152.63% 297.25% ---
Class II Shares................................ --- --- --- --- 1.45%
Average Annual Total Return2
Class I Shares................................. -1.50% 3.38% 9.21% 5.22% ---
------------------------------------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.5% initial sales
charge for Class I Shares, or the maximum 1.00% initial sales charge and
1.00% Contingent Deferred Sales Charge (CDSC) for Class II Shares, applicable
to shares redeemed within the first 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value
of an investment over the specified periods. The figures have been restated
to reflect the maximum 4.5% initial sales charge for Class I Shares. See note
below.
Note: Prior to July 1, 1994, Class I shares were offered at a lower
initial sales charge, with dividends reinvested at the offering price. Thus,
actual total return for purchasers of shares during that period would have
been different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which will affect future performance. Class II
shares, which the fund began offering on May 1, 1995, are subject to
different fees and expenses, which will affect their performance. Please see
the prospectus for more details regarding Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Past expense limitations increased the fund's Class
I total returns. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance cannot guarantee future results.
</TABLE>
Franklin Gold Fund
Top 10 Holdings on 7/31/95
Based on Total Net Assets
Company % of Total
Country Net Assets
Barrick Gold Corp., 11.7%
Canada
DeBeers Consolidated Mines, Ltd., ADR, 7.3%
South Africa
Newmont Mining Corp., 6.3%
United States
Placer Dome, Inc., 6.0%
Canada
Impala Platinum Holdings, Ltd., ADR, 5.8%
South Africa
Western Mining Holdings Corp., Ltd., 5.0%
Australia
Rustenburg Platinum Holdings, Ltd., ADR, 4.6%
South Africa
Teck Corp., 4.3%
Canada
Homestake Mining Co., 3.7%
United States
Santa Fe Pacific Gold Corp., 3.3%
United States
For a complete list of portfolio holdings, please see
page 7 of this report.
*Includes all sales charges and represents the change in value of an investment
over the period shown. Total return assumes reinvestment of dividends and
capital gains, if any. Past performance is not predictive of future results.
**Index is unmanaged and includes reinvested dividends.
Schedule of Foreign Tax Withholding (unaudited)
At July 31, 1995, the Franklin Gold Fund had invested more than 50% of its total
assets in securities of foreign corporations. In many cases, foreign taxes were
withheld from dividends paid to the fund on these investments. Section 853 of
the Internal Revenue Code (the Code) permits the Fund to pass through to its
shareholders a tax benefit on the withholding of these foreign taxes.
The amounts of foreign tax withheld and foreign source income designated below
are estimates, and should be used for planning purposes only. The actual amount
of taxes withheld and foreign source income distributed during calendar year
1995 will be provided to shareholders with their Form 1099-DIV in January 1996.
a. Shareholders receiving the December 1994 income dividend of $.074 per
share:1,2
<TABLE>
<CAPTION>
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
----------------------------------------- --------- ---------
<S> <C> <C>
Australia................................ $0.000466 $0.006673
Canada................................... 0.002501 0.009878
South Africa............................. 0.011995 0.047042
United Kingdom........................... 0.000220 0.001144
--------- ---------
Total.................................... $0.015182 $0.064737
========= =========
</TABLE>
b. Class I shareholders receiving the June 1995 income dividend of $.191 per
share:
<TABLE>
<CAPTION>
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
----------------------------------------- --------- ---------
<S> <C> <C>
Australia................................ $0.000405 $0.025288
Canada................................... 0.003151 0.027688
South Africa............................. 0.014860 0.143415
United Kingdom........................... 0.000348 0.006376
--------- ---------
Total.................................... $0.018764 $0.202767
========= =========
</TABLE>
c. Class II shareholders receiving the June 1995 income dividend of $.182 per
share:
<TABLE>
<CAPTION>
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
----------------------------------------- --------- ---------
<S> <C> <C>
Australia................................ $0.000386 $0.024096
Canada................................... 0.003005 0.026388
South Africa............................. 0.014161 0.136662
United Kingdom........................... 0.000332 0.006077
--------- ---------
Total.................................... $0.017884 $0.193223
========= =========
</TABLE>
The Fund hereby designates the total foreign taxes paid and foreign source
income received, on a per share basis as detailed above, as payments qualifying
under Sec. 853 of the Code. Shareholders are advised to check with their tax
advisors for information on the treatment of these amounts on their individual
income tax returns.
1These amounts were previously reported to shareholders on their 1994 Form
1099-DIV statements.
2The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares.
FRANKLIN GOLD FUND
Statement of Investments in Securities and Net Assets, July 31, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 91.2%
Gold & Diversified Resources 12.4%
308,011 Freeport-McMoRan Copper & Gold, Inc. ......................................... $ 8,200,793
460,401 RTZ Corp., Plc. .............................................................. 6,639,090
705,100 Teck Corp., Class B .......................................................... 14,225,589
1,023,047 Western Mining Holdings Corp., Ltd. .......................................... 6,633,938
511,225 Western Mining Holdings Corp., Ltd., ADR ..................................... 13,164,044
-----------
48,863,454
-----------
Long Life Gold Mines 45.4%
537,500 a,b Ashanti Goldfields, ADS ...................................................... 11,868,000
1,857,249 Barrick Gold Corp. ........................................................... 46,199,069
500,000 Driefontein Consolidated Mines, Ltd., ADR .................................... 7,156,250
558,401 Free State Consolidated Gold Mines, Ltd., ADR ................................ 6,700,812
904,900 Hartebeestfontein Gold Mining Co., Ltd., ADR ................................. 3,280,263
881,117 Homestake Mining Co. ......................................................... 14,428,291
730,000 Kloof Gold Mining Co., Ltd., ADR ............................................. 8,942,500
255,000 Newmont Gold Co. ............................................................. 10,455,000
341,604 Newmont Mining Corp. ......................................................... 14,603,571
938,820 Placer Dome, Inc. ............................................................ 23,587,853
1,058,663 Santa Fe Pacific Gold Corp. .................................................. 13,233,288
133,000 Southvaal Holdings, Ltd., ADR ................................................ 4,139,625
597,000 a TVX Gold, Inc. ............................................................... 4,087,548
975,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR ............................... 6,642,188
182,000 Western Areas Gold Mining Co., Ltd. .......................................... 2,454,808
58,000 Western Deep Levels, Ltd., ADR ............................................... 1,790,750
-----------
179,569,816
-----------
Medium Life Gold Mines 13.6%
1,850,000 a Acacia Resources, Ltd. ....................................................... 3,661,743
370,000 a Amax Gold, Inc., Series B .................................................... 2,312,500
390,000 Battle Mountain Gold Co. ..................................................... 3,705,000
200,000 Cambior, Inc. ................................................................ 2,574,402
3,600,000 Central Norseman Gold Corp., N.L., ADR ....................................... 3,057,480
497,500 East Rand Gold & Uranium Co., Ltd., ADR ...................................... 1,455,187
840,700 Echo Bay Mines, Ltd. ......................................................... 7,723,931
905,000 Hemlo Gold Mines, Inc. ....................................................... 9,276,250
865,050 a Newcrest Mining, Ltd. ........................................................ 4,031,363
717,000 a Niugini Mining, Ltd., ADR .................................................... 1,768,696
1,150,000 Placer Pacific, Ltd. ......................................................... 2,607,458
934,100 Plutonic Resources, Ltd. ..................................................... 4,553,220
Medium Life Gold Mines (cont.)
1,309,450 Poseidon Gold, Ltd. .......................................................... $ 2,601,491
605,000 Randfontein Estates Gold Mining Co., Ltd., ADR ............................... 4,250,125
-----------
53,578,846
-----------
Mining Finance Companies 9.4%
275,000 Anglo American Gold Investment Co., Ltd., ADR ................................ 2,475,000
1,175,000 DeBeers Consolidated Mines, Ltd., ADR ........................................ 28,934,375
222,100 Gold Fields of South Africa, Ltd., ADR ....................................... 5,885,650
-----------
37,295,025
-----------
Platinum 10.4%
825,000 Impala Platinum Holdings, Ltd., ADR .......................................... 22,892,925
845,000 Rustenburg Platinum Holdings, Ltd., ADR ...................................... 18,167,500
-----------
41,060,425
-----------
Total Common Stocks (Cost $263,465,543) ................................ 360,367,566
-----------
Convertible Preferred Stocks 3.0%
28,400 Amax Gold, Inc., $3.75 cvt. pfd., Series B ................................... 1,434,200
10,900 Battle Mountain Gold Co., $3.25 cvt. pfd. .................................... 588,600
103,100 Echo Bay Finance Corp., $1.75 cum. cvt. pfd., Series A ....................... 2,951,237
87,400 Freeport-McMoRan Copper & Gold, Inc., pfd., Series B ......................... 3,069,925
113,000 Freeport-McMoRan Copper & Gold, Inc., pfd., Series C ......................... 3,757,250
-----------
Total Convertible Preferred Stocks (Cost $12,359,980) .................. 11,801,212
-----------
Face
Amount
Convertible Debentures 1.1%
$ 2,100,000 FMC Corp., cvt. deb., 6.75%, 01/16/05 ........................................ 1,832,250
2,470,000 Teck Corp., cvt. sub. deb., 3.75%, 07/15/06 .................................. 2,581,150
-----------
Total Convertible Debentures (Cost $3,825,268) ......................... 4,413,400
-----------
Total Common Stocks, Convertible Preferred Stocks and Convertible
Debentures (Cost $279,650,791) ........................................ 376,582,178
-----------
Short Term Investments
Certificate of Deposit 1.3%
5,000,000 Societe Generale, New York Branch, 6.0%, 08/04/95 (Cost $5,000,000) .......... 5,000,100
-----------
Total Investments before Repurchase Agreements (Cost $284,650,791)...... 381,582,278
-----------
cReceivables from Repurchase Agreements 5.3%
$ 7,945,000 Lehman Government Securities, Inc., 5.920%, 08/01/95 (Maturity Value $8,401,381)
Collateral: U.S. Treasury Notes, 8.875%, 11/15/97 ........................... $ 8,400,000
13,360,591 dJoint Repurchase Agreement, 5.904%, 08/01/95 (Maturity Value $12,610,240)
Collateral: U.S. Treasury Bills, 12/14/95 - 07/25/96
U.S. Treasury Notes, 4.25% - 7.625%, 11/15/95 - 08/31/99 ........ 12,608,172
-----------
Total Receivables from Repurchase Agreements (Cost $21,008,172) ........ 21,008,172
-----------
Total Investments (Cost $305,658,963) 101.9% ...................... 402,590,450
Other Assets and Liabilities, Net (1.9)% .......................... (7,520,258)
-----------
Net Assets 100.0% ................................................. $395,070,192
===========
At July 31, 1995, the net unrealized appreciation based on thecost of investments
for income tax purposes of $305,658,963 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................. $125,492,374
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................. (28,560,887)
-----------
Net unrealized appreciation ................................................ $ 96,931,487
===========
</TABLE>
aNon-income producing.
bSee Note 6 regarding Rule 144A securities.
cFace amount for repurchase agreements is for the underlying collateral.
dSee Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
July 31, 1995
<S> <C>
Assets:
Investments in securities, at value (identified cost $284,650,791)............................. $381,582,278
Receivables from repurchase agreements, at value and cost...................................... 21,008,172
Receivables:
Dividends and interest........................................................................ 1,135,363
Investment securities sold.................................................................... 533,266
Capital shares sold........................................................................... 321,239
-----------
Total assets.............................................................................. 404,580,318
-----------
Liabilities:
Payables:
Capital shares repurchased.................................................................... 621,127
Payable upon return of securities loaned (Note 7)............................................. 8,426,096
Management fees............................................................................... 169,182
Distribution fees............................................................................. 212,072
Shareholder servicing costs................................................................... 25,371
Accrued expenses and other liabilities......................................................... 56,278
-----------
Total liabilities......................................................................... 9,510,126
-----------
Net assets, at value............................................................................ $395,070,192
===========
Net assets consist of:
Accumulated distributions in excess of net investment income................................... (1,511,778)
Unrealized appreciation on investments and translation of assets and liabilities denominated in
foreign currencies............................................................................. 96,933,664
Net realized loss from investments and foreign currency transactions........................... (6,396,001)
Class I capital shares......................................................................... 2,601,021
Class II capital shares........................................................................ 20,627
Additional paid-in capital..................................................................... 303,422,659
-----------
Net assets, at value............................................................................ $395,070,192
===========
Computation of net assets value and offering price per share:
Class I shares:
Net asset value* ($391,965,748 O 26,010,207 shares outstanding)............................... $15.07
===========
Maximum offering price (100/95.5 of $15.07)................................................... $15.78
===========
Class II shares:
Net asset value* ($3,104,444 O 206,271 shares outstanding).................................... $15.05
===========
Maximum offering price (100/99 of $15.05)..................................................... $15.20
===========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statement of Operations
for the year ended July 31, 1995
Investment income:
Dividends, net of foreign taxes withheld of $902,322............................... $7,210,190
Interest........................................................................... 1,456,502
----------
Total income.................................................................. $ 8,666,692
Expenses:
Management fees (Note 5)........................................................... 2,063,979
Distribution fees - Class I (Note 5)............................................... 818,573
Distribution fees - Class II (Note 5).............................................. 4,072
Shareholder servicing costs (Note 5)............................................... 338,028
Reports to shareholders............................................................ 295,988
Custodian fees..................................................................... 90,843
Registration fees.................................................................. 75,683
Professional fees.................................................................. 39,977
Directors' fees and expenses....................................................... 18,345
Other.............................................................................. 88,483
----------
Total expenses................................................................ 3,833,971
-----------
Net investment income........................................................ 4,832,721
-----------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments....................................................................... 4,063,547
Foreign currency transactions..................................................... (2,857)
Net unrealized appreciation on:
Investments....................................................................... 5,131,127
Translation of assets and liabilities denominated in foreign currencies........... 2,177
-----------
Net realized and unrealized gain on investments and foreign currency................ 9,193,994
-----------
Net increase in net assets resulting from operations................................ $14,026,715
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended July 31, 1995 and 1994
<S> <C> <C>
1995 1994
----------- ----------
Increase (decrease) in net assets:
Operations:
Net investment income......................................................... $ 4,832,721 $ 5,002,795
Net realized gain from investments and foreign currency transactions.......... 4,060,690 310,132
Net unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies...................... 5,133,304 (15,570,891)
----------- ----------
Net increase (decrease) in net assets resulting from operations.......... 14,026,715 (10,257,964)
Distributions to shareholders from undistributed net investment income:
Class I....................................................................... (5,476,921) (5,039,248)
Class II...................................................................... (1,399) --
Distributions to shareholders in excess of net investment income:
Class I (Note 1).............................................................. (1,507,200) --
Class II (Note 1)............................................................. (12,289) --
Increase (decrease) in net assets from capital share transactions (Note 3)..... (30,656,926) 39,291,074
----------- ----------
Net increase (decrease) in net assets.................................... (23,628,020) 23,993,862
Net assets:
Beginning of year............................................................. 418,698,212 394,704,350
----------- ----------
End of year (including accumulated distributions in excess of net investment
income of $(1,511,778) at 7/31/95, and undistributed net investment income of
$645,599 at 7/31/94).......................................................... $395,070,192 $418,698,212
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Gold Fund (the Fund), is an open-end diversified management investment
company (mutual fund), registered under the Investment Company Act of 1940 as
amended.
The Fund offers two classes of shares, Class I and Class II. Class I shares are
sold with a higher front-end sales charge than Class II shares. Each class of
shares may be subject to a contingent deferred sales charge and has the same
rights, except with respect to the effect of the respective sales charges, the
distribution fees borne by each class, voting rights on matters affecting a
single class and the exchange privilege of each class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Securities Valuation:
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. Other securities
for which market quotations are readily available are valued at current market
values, obtained from pricing services, which are based on a variety of factors,
including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific securities. Portfolio securities which are traded both in the
over-the-counter market and on a securities exchange are valued according to the
broadest and most representative market as determined by the Manager. Other
securities for which market quotations are not available, if any, are valued in
accordance with procedures established by the Board of Directors.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and that value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and ask price is
used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events materially
affect the value of these foreign securities occur during such period, then
these securities will be valued in accordance with procedures established by the
Board of Directors.
The fair values of securities restricted as to resale, if any, are determined
following procedures approved by the Board of Directors -- See Note 6.
b. Income Taxes:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
d. Investment Income, Expense and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount is amortized as required by the Internal Revenue Code.
The distributions in excess of net investment income are not expected to result
in a tax-basis return of capital at fiscal year-end because of the timing
differences between book and tax recognition of dividend distributions.
Net investment income differs for financial statement and tax purposes primarily
due to tax basis mark to market of unrealized gains with respect to passive
foreign investment company (PFIC) shares.
e. Foreign Currency Translation:
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of such currencies against U.S. dollars on the
date of the valuation. Purchases and sales of securities, income and expenses
are translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are recognized when reported by the custodian
bank.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade date and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
appreciation/depreciation on translation of assets and liabilities denominated
in foreign currencies arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end, resulting from changes
in exchange rates.
f. Repurchase Agreements:
The Fund may enter into a Joint Repurchase Agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements with government securities dealers recognized by the
Federal Reserve Board and/or member banks of the Federal Reserve System. The
value and face amount of the Joint Repurchase Agreement are allocated to the
Fund based on its pro-rata interest.
In a repurchase agreement, the Fund purchases a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Fund to the
seller, collateralized by the underlying security. The transaction requires the
initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Fund's custodian and held until resold to the
dealer or bank. At July 31, 1995, all outstanding joint repurchase agreements
held by the Fund had been entered into on that date.
<TABLE>
<CAPTION>
2. CAPITAL LOSS CARRYOVERS
At July 31, 1995, for income tax purposes, the Fund had capital loss carryovers
as follows:
<S> <C>
Expiring in: 2000....................... 3,448,633
2001....................... 2,947,368
----------
$6,396,001
==========
</TABLE>
For tax purposes, the aggregate cost of securities and unrealized appreciation
are the same as for financial statement purposes at July 31, 1995.
3. CAPITAL STOCK
At July 31, 1995, there were 100,000,000 Class I shares and 100,000,000 Class II
shares of $.10 par value capital stock authorized, and paid-in capital
aggregated $302,997,829 and $3,046,478, respectively. Transactions in the Fund's
Class I and Class II shares for the year ended July 31, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
Year Ended July 31,
----------------------------------------------------
1995 1994
----------------------- -----------------------
Class I Shares Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 3,350,428 $ 50,417,743 7,653,237 $109,797,299
Shares issued in reinvestment of distributions......... 376,809 5,462,548 251,295 3,644,547
Shares redeemed........................................ (4,562,040) (68,425,080) (5,455,745) (79,401,326)
Changes from exercise of exchange privilege:
Shares sold........................................... 21,465,373 318,598,180 34,905,973 511,582,013
Shares redeemed....................................... (22,755,830) (339,756,795) (34,473,583) (506,331,459)
--------- ----------- --------- -----------
Net increase (decrease)................................ (2,125,260) $ (33,703,404) 2,881,177 $ 39,291,074
========= =========== ========= ===========
Period Ended
July 31, 1995*
----------------
Class II Shares Shares Amount
------- ---------
<S> <C> <C>
Shares sold.................................................. 205,262 $3,031,529
Shares issued in reinvestment of distributions............... 813 11,885
Shares redeemed.............................................. (133) (1,936)
Changes from exercise of exchange privilege:
Shares sold................................................. 329 5,000
------- ---------
Net increase................................................. 206,271 $3,046,478
======= =========
</TABLE>
*For the period May 1, 1995 (effective date) to July 31, 1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended July 31, 1995 aggregated $24,151,657 and
$36,445,449, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under terms of an agreement, provides investment
advice, administrative services, office space and facilities to the Fund, and
receives fees computed monthly on the net assets of the Fund on the last day of
the month at an annualized rate of 5/8 of 1% of the first $100 million of net
assets, 1/2 of 1% of net assets in excess of $100 million up to $250 million,
and 45/100 of 1% of net assets in excess of $250 million. Fees incurred by the
Fund aggregated $2,063,979 for the year ended July 31, 1995. The terms of the
agreement provide that aggregate annual expenses of the Fund be limited to the
extent necessary to comply with the limitations set forth in the laws,
regulations and administrative interpretations of the states in which the Fund's
shares are registered. For the year ended July 31, 1995, the Fund's expenses did
not exceed these limitations.
Under the terms of a Distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, which was effective May 1, 1994 for Class I shares, and
which became effective May 1, 1995 for Class II shares, Class I and II shares
will reimburse Franklin/Templeton Distributors, Inc. in an amount up to a
maximum of 0.25% and 1.00% per annum, respectively, of the average daily net
assets of each class for costs incurred in the promotion, offering and marketing
of the Class I and II shares. Fees incurred by the classes under the agreement
aggregated $822,645 for the year ended July 31, 1995.
In its capacity as underwriter for the capital stock of the Fund,
Franklin/Templeton Distributors, Inc. received commissions on sales of the
Fund's capital stock. Commissions are deducted from the gross proceeds received
from the sale of the capital stock of the Fund and as such are not expenses of
the Fund. Franklin/Templeton Distributors, Inc. may also make payments, out of
its own resources, to dealers for certain sales of Class I and Class II shares.
Commissions received by Franklin/Templeton Distributors, Inc. and the amounts
paid to other dealers for the year ended July 31, 1995 were as follows:
<TABLE>
<CAPTION>
Class I Class II
-------- ------
<S> <C> <C>
Total commissions received................................................................. $1,804,362 $62,109
======== ======
Paid to other dealers...................................................................... $1,603,702 $61,785
======== ======
</TABLE>
Pursuant to a shareholder service agreement with Franklin/Templeton Investor
Services, Inc., the Fund pays costs on a per shareholder account basis. Such
costs incurred for the year ended July 31, 1995 aggregated $338,028, of which
$313,397 was paid to Franklin/Templeton Investor Services, Inc.
Certain officers and directors of the Fund are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc., and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Fund values these
securities as disclosed in Note 1. At July 31, 1995, the Fund held one 144A
security with a value aggregating $11,868,000 representing 3.0% of the Fund's
net assets. See the accompanying Statement of Investments in Securities and Net
Assets for specific information on that security.
7. LOANS OF PORTFOLIO SECURITIES
During the year ended July 31, 1995, the Fund loaned securities to certain
brokers for which it received cash collateral against the loaned securities in
an amount equal to at least 102% of the market value of the loaned securities.
The cash collateral received is invested by the Fund in short-term instruments
and any interest income in excess of a predetermined rebate to the brokers is
kept by the Fund as interest income. Interest income from this source amounted
to $23,303 for the year ended July 31, 1995.
At July 31, 1995, the value of the loaned securities amounted to $7,987,500. The
Fund has received sufficient cash collateral to meet these commitments.
8. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout the year
are as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
Class I Shares: 1995 1994 1993 1992 1991
- -------------------------------------------- ------- ------- ------- ------- -------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year........................ $14.88 $15.63 $11.50 $12.71 $13.74
Net investment income....................................... 0.18 0.19 0.21 0.35 0.35
Net realized and unrealized gain (loss) on securities....... 0.275 (0.746) 4.147 (1.191) (0.956)
------- ------- ------- ------- -------
Total from investment operations............................ 0.455 (0.556) 4.357 (0.841) (0.606)
------- ------- ------- ------- -------
Less distributions:
From net investment income................................. (0.203) (0.194) (0.227) (0.369) (0.334)
From capital gains......................................... -- -- -- -- (0.090)
Distributions in excess of net investment income........... (.062) -- -- -- --
------- ------- ------- ------- -------
Total distributions......................................... (0.265) (0.194) (0.227) (0.369) (0.424)
------- ------- ------- ------- -------
Net asset value at end of year.............................. $15.07 $14.88 $15.63 $11.50 $12.71
======= ======= ======= ======= =======
Total Return*............................................... 3.14% (3.52)% 38.56% (6.87)% (4.01)%
Ratios/Supplemental Data
Net assets at end of year (in 000s)......................... $391,966 $418,698 $394,704 $257,888 $277,397
Ratio of expenses to average net assets..................... 0.95% 0.81% 0.62% 0.31%+ 0.75%
Ratio of net investment income to average net assets........ 1.20% 1.30% 1.89% 2.99% 2.78%
Portfolio turnover rate..................................... 6.36% 1.46% 1.62% 0.26% 0.53%
</TABLE>
8. FINANCIAL HIGHLIGHTS (cont.)
Period Ended
Class II Shares July 31, 1995a
- ------------------------------------------------ ---------
Per Share Operating Performance**
Net asset value at beginning of period........................... $15.02
---------
Net investment income............................................ 0.12
Net realized and unrealized gain on securities................... 0.092
---------
Total from investment operations................................. 0.212
---------
Less distributions:
From net investment income...................................... (0.120)
In excess of net investment income.............................. (0.062)
---------
Total distributions.............................................. (0.182)
---------
Net asset value at end of period................................. $15.05
=========
Total Return*.................................................... 1.45%
Ratios/Supplemental Data
Net assets at end of year (in 000s).............................. $3,104
Ratio of expenses to average net assets.......................... 1.73%++
Ratio of net investment income to average net assets............. 0.33%++
Portfolio turnover rate.......................................... 6.36%
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge or the deferred contingent sales charge. Prior to May 1, 1994, the total
return for Class I shares also assumes reinvestment of dividends at offering
price and capital gains, if any, at net asset value. Effective May 1, 1994, with
the implementation of the Rule 12b-1 distribution plan for Class I shares, as
discussed in Note 5, the existing sales charge on reinvested dividends has been
eliminated.
**Per share amounts have been calculated using the daily average
shares outstanding during the period.
+During the years indicated, Franklin Advisers, Inc., the Investment Manager,
agreed in advance to waive a portion of fits management fees incurred by the
Fund. Had such action not been taken, the ratios of operating expenses to
average net assets for the years ended July 31, 1993 and 1992 would have been
.75% and .77%, respectively.
++Annualized
aFor the period May 1, 1995 (effective date) to July 31, 1995.
Under IRC 854(b)(2) of the Internal Revenue Code, the fund hereby designates
21.2% of its ordinary income dividends paid by the Fund during the fiscal year
ended July 31, 1995, as income qualifying for the dividends received
deduction.
FRANKLIN GOLD FUND
Report of Independent Accountants
To the Shareholders and Board of Directors
of Franklin Gold Fund:
We have audited the accompanying statement of assets and liabilities of Franklin
Gold Fund, including the statement of investments in securities and net assets,
as of July 31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Gold Fund as of July 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated
thereon, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 31, 1995
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
Franklin Gold Fund
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities breakdown by location
as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Geographic Breakdown on 07/31/95
<S> <C>
United Kingdom 1.7%
Ghana 3.0%
Australia 10.6%
South Africa 31.6%
United States 19.6%
Canada 28.6%
Cash and Short-Term Securities 4.9%
</TABLE>
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the Franklin
Gold Fund to that of the S&P 500 Stock Index, based on a $10,000 investment from
8/1/85 to 7/31/95.
<TABLE>
<CAPTION>
Period Ending Franklin Gold Fund S&P 500
<S> <C> <C>
8/1/85 $9,550 $10,000
8/31/85 $9,320 $9,915
9/30/85 $8,949 $9,605
10/31/85 $8,173 $10,048
11/30/85 $9,114 $10,738
12/31/85 $8,420 $11,257
1/31/86 $10,243 $11,320
2/28/86 $10,325 $12,166
3/31/86 $9,497 $12,845
4/30/86 $8,923 $12,700
5/31/86 $7,988 $13,375
6/30/86 $8,168 $13,601
7/31/86 $7,952 $12,841
8/31/86 $9,629 $13,794
9/30/86 $10,956 $12,653
10/31/86 $9,991 $13,383
11/30/86 $11,066 $13,709
12/31/86 $10,980 $13,359
1/31/87 $12,336 $15,158
2/28/87 $13,142 $15,757
3/31/87 $17,349 $16,213
4/30/87 $19,104 $16,068
5/31/87 $17,658 $16,208
6/30/87 $17,411 $17,027
7/31/87 $21,094 $17,890
8/31/87 $21,118 $18,557
9/30/87 $21,512 $18,151
10/31/87 $15,377 $14,241
11/30/87 $17,443 $13,068
12/31/87 $16,631 $14,062
1/31/88 $14,111 $14,654
2/29/88 $14,321 $15,337
3/31/88 $15,783 $14,863
4/30/88 $15,492 $15,028
5/31/88 $15,809 $15,157
6/30/88 $15,531 $15,853
7/31/88 $15,598 $15,793
8/31/88 $14,804 $15,256
9/30/88 $14,285 $15,906
10/31/88 $14,863 $16,348
11/30/88 $15,402 $16,114
12/31/88 $14,874 $16,394
1/31/89 $15,472 $17,594
2/28/89 $16,111 $17,156
3/31/89 $16,192 $17,556
4/30/89 $16,083 $18,467
5/31/89 $15,247 $19,215
6/30/89 $16,384 $19,106
7/31/89 $16,672 $20,831
8/31/89 $17,110 $21,239
9/30/89 $17,736 $21,152
10/31/89 $17,931 $20,661
11/30/89 $20,385 $21,083
12/31/89 $21,104 $21,589
1/31/90 $22,285 $20,140
2/28/90 $20,303 $20,400
3/31/90 $19,688 $20,941
4/30/90 $18,050 $20,419
5/31/90 $19,378 $22,410
6/30/90 $18,234 $22,260
7/31/90 $19,512 $22,189
8/31/90 $18,944 $20,183
9/30/90 $18,376 $19,200
10/31/90 $16,601 $19,117
11/30/90 $16,118 $20,352
12/31/90 $16,990 $20,920
1/31/91 $15,446 $21,832
2/28/91 $17,093 $23,393
3/31/91 $16,769 $23,960
4/30/91 $16,872 $24,017
5/31/91 $17,504 $25,052
6/30/91 $18,324 $23,905
7/31/91 $18,752 $25,019
8/31/91 $16,937 $25,612
9/30/91 $17,409 $25,184
10/31/91 $18,575 $25,521
11/30/91 $19,017 $24,493
12/31/91 $17,992 $27,295
1/31/92 $18,067 $26,787
2/29/92 $17,421 $27,133
3/31/92 $16,940 $26,604
4/30/92 $16,594 $27,383
5/31/92 $17,616 $27,517
6/30/92 $17,668 $27,107
7/31/92 $17,485 $28,216
8/31/92 $16,664 $27,638
9/30/92 $16,117 $27,961
10/31/92 $14,809 $28,056
11/30/92 $13,852 $29,010
12/31/92 $14,332 $29,367
1/31/93 $14,394 $29,613
2/28/93 $15,547 $30,016
3/31/93 $17,331 $30,650
4/30/93 $19,392 $29,908
5/31/93 $21,806 $30,706
6/30/93 $22,060 $30,795
7/31/93 $24,247 $30,672
8/31/93 $21,780 $31,835
9/30/93 $19,857 $31,590
10/31/93 $22,199 $32,243
11/30/93 $21,796 $31,937
12/31/93 $24,898 $32,324
1/31/94 $24,460 $33,423
2/28/94 $23,334 $32,517
3/31/94 $23,585 $31,099
4/30/94 $22,537 $31,497
5/31/94 $23,022 $32,014
6/30/94 $22,811 $31,229
7/31/94 $23,393 $32,254
8/31/94 $24,588 $33,576
9/30/94 $26,585 $32,757
10/31/94 $25,311 $33,494
11/30/94 $22,749 $32,275
12/31/94 $23,721 $32,752
1/31/95 $20,181 $33,601
2/28/95 $21,319 $34,911
3/31/95 $23,420 $35,941
4/30/95 $23,610 $36,998
5/31/95 $23,310 $38,478
6/30/95 $23,470 $39,370
7/31/95 $24,127 $40,677
</TABLE>
