YOUR FUND'S OBJECTIVE
The Franklin Gold Fund seeks capital appreciation and current income by
investing in securities of companies engaged in mining, processing or dealing
in gold or other precious metals.
March 15, 1995
Dear Shareholder:
This semi-annual report of the Franklin Gold Fund covers the six months ended
January 31, 1995. Although the period proved to be rather uneventful for gold
prices, it was especially challenging for gold-related equities.
Gold prices, and consequently the value of the fund's shares, are generally
affected by four major factors: supply and demand, inflation, political
climates, and currency volatility. During the period, most of the world's
economies appeared to be experiencing gradual recovery and growth. In the U.S.,
the Federal Reserve Board continued its pre-emptive attack on inflation by
raising short-term rates in August and November, following four increases
during the first half of 1994. Although political instability continued to be
felt in various regions, both the Middle East and South Africa showed greater
signs of peace and political stability. These factors resulted in a relatively
stable environment for gold prices during the period.
Gold closed at a price of $384.00 per ounce on August 1, 1994, and at $375.10
on January 31, 1995. In late September, it reached a high for the period of
$398.20 and then traded within a narrow band, averaging $384.32 per ounce.
Gold-related equities, however, did not fare as well. The fourth quarter of
1994 saw market corrections of 15% to 30% in the world's three primary
gold-producing regions -- South Africa, Australia, and North America. Most of
these declines were caused either by hedge funds liquidating their positions to
offset losses elsewhere or by institutional investors re-allocating their
portfolios in response to higher interest rates and expectations of relatively
subdued inflation. During the period, we sought to mitigate some of the
adverse effects of lower gold equity prices through conservative investment
strategy, geographic diversification and exposure to other pre-
<PAGE>
cious metals such as platinum. Although our focus on companies with abundant
reserves, stable production, low operating costs and quality management teams
helped reduce the fund's volatility relative to the overall sector, the fund's
share price fluctuated between $14.88 on July 31, 1994 and $12.77 on January
31, 1995, hitting a high of $17.07 on September 27, 1994. While the fund's
performance was disappointing for the one-year period ended January 31, 1995,
its total return for the same period earned the fund a #6 ranking out of 34
gold-oriented funds, as measured by Lipper Analytical Services, Inc., a
nationally recognized mutual fund research organization.*
As you can see from the chart to the right, the fund's top five geographic
regions on January 31, 1995, were South Africa, Canada, the U.S., Australia,
and Ghana. During the period, we used our cash reserves to add to our position
in Santa Fe Pacific Gold, a major North American gold producer. We also
increased our weightings toward established gold producers with mining
operations in Latin America, Southeast Asia, and West Africa in order to take
advantage of growth opportunities in these regions. For example, we added a new
position in Cambior, Inc., a Canadian gold and base-metal producer with mining
projects in Latin America.
GRAPHIC MATERIAL (1) OMITTED - SEE APPENDIX
Looking forward, we are optimistic about the overall gold market and the
Franklin Gold Fund. Supply and demand fundamentals for gold remain attractive,
and we expect about a 2% annual growth in demand for gold in the near future.
*The fund ranked #10 out of 26 funds for the 5-year period ended January 31,
1995, and #3 out of 13 for the 10-year period ended December 31, 1994. Lipper
rankings do not include sales charges, and past expense limitations increased
the fund's total returns. Rankings may have been different if these factors had
been considered. Past performance cannot guarantee future results.
2
<PAGE>
FRANKLIN GOLD FUND
Top 10 Holdings on 1/31/95
Based on Total Net Assets
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
COUNTRY NET ASSETS
<S> <C>
Barrick Gold Corp.,
Canada 13.3%
DeBeers Consolidated Mines, Ltd., ADR
South Africa 6.9%
Newmont Mining Corp.,
United States 5.9%
Western Mining Holdings Corp., Ltd.,
Australia 5.4%
Placer Dome, Inc.,
Canada 5.2%
Rustenburg Platinum Holdings, Ltd., ADR,
South Africa 5.1%
Impala Platinum Holdings, Ltd., ADR,
South Africa 4.4%
Teck Corp.,
Canada 4.1%
Homestake Mining Co.,
United States 4.0%
Santa Fe Pacific Gold Corp.,
United States 3.2%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 5 OF THIS REPORT.
Worldwide inflation appears to be at a cyclical low point, and numerous
political and economic uncertainties persist in North Korea, Mexico, China and
the former Soviet Union. All of this bodes well for the future of gold-related
equities. Given this environment, we expect to continue investing in
established companies with international exposure and mining potential in
regions such as Latin America, Southeast Asia, and West Africa.
We appreciate your participation in the Franklin Gold Fund and look forward to
serving your investment needs in the months and years to come.
Sincerely,
Charles B. Johnson
Chairman
SPECIAL MEETING OF SHAREHOLDERS
At a special meeting of shareholders of the Fund held on March 7, 1995,
shareholders of the Fund voted on an amendment to the Fund's Articles of
Incorporation to permit the issuance of additional classes of shares and to
make other conforming changes. The proposal was approved by shareholders and
the vote was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTE
<S> <C> <C> <C>
13,602,784 1,097,865 966,844 3,031
</TABLE>
3
<PAGE>
PERFORMANCE SUMMARY
The Franklin Gold Fund reported a total return of -13.73% for the six-month
period ended January 31, 1995. Total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains and does not
include the initial sales charge. We have always maintained a long-term
perspective when managing the fund, and we encourage shareholders to view their
investments in a similar manner. As you can see from the chart to the right,
the Franklin Gold Fund provided a cumulative total return of more than 107% for
the 10-year period ended January 31, 1995.
The fund's share price, as measured by net asset value, decreased from $14.88
on July 31, 1994 to $12.77 on January 31, 1995. During the past six months,
shareholders received 7.4 cents ($0.074) per share in income distributions. Of
course, dividends will vary depending on income earned by the fund.
FRANKLIN GOLD FUND
Periods ended 1/31/95
<TABLE>
<CAPTION>
ONE- FIVE- TEN-
YEAR YEAR YEAR
<S> <C> <C> <C>
Cumulative
Total Return(1): -17.50% -9.44% 107.43%
Average Annual
Total Return(2): -21.22% -2.8% 7.08%
</TABLE>
1. Cumulative total returns show the change in value of an investment
over the periods indicated and do not include the current, maximum 4.5% initial
sales charge.
2. Average annual total returns represent the average annual change in
value of an investment over the periods indicated and have been restated to
reflect the current, maximum 4.5% initial sales charge.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns 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. All total return figures assume
reinvestment of dividends and capital gains at net asset value, and take into
account the effect of the 12b-1 plan from the date of its implementation. Past
expense limitations increased the fund's 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 is not indicative of future
results.
4
<PAGE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, JANUARY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS 92.1%
GOLD & DIVERSIFIED RESOURCES 12.7%
358,011 Freeport-McMoRan Copper & Gold, Inc. . . . . . . . . . . . . . . . . . . . . . $ 7,339,226
460,401 RTZ Corp., Plc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,668,402
705,100 Teck Corp., Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,703,684
1,023,047 Western Mining Holdings Corp., Ltd. . . . . . . . . . . . . . . . . . . . . . . 5,267,289
611,225 Western Mining Holdings Corp., Ltd., ADR . . . . . . . . . . . . . . . . . . . 12,835,725
------------
42,814,326
------------
LONG LIFE GOLD MINES 21.7%
457,500 a,bAshanti Goldfields, ADS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,550,313
890,000 Deelkraal Gold Mining Co., Ltd., ADR . . . . . . . . . . . . . . . . . . . . . 920,260
500,000 Driefontein Consolidated Mines, Ltd., ADR . . . . . . . . . . . . . . . . . . 5,812,500
905,000 Hemlo Gold Mines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,466,250
730,000 Kloof Gold Mining Co., Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . 7,208,750
255,000 Newmont Gold Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,319,375
341,604 Newmont Mining Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,742,638
1,058,663 Santa Fe Pacific Gold Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 10,718,963
133,000 Southvaal Holdings, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . 3,058,122
975,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR . . . . . . . . . . . . . . . . 6,885,938
58,000 Western Deep Levels, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . 1,660,250
------------
73,343,359
------------
MEDIUM LIFE GOLD MINES 39.0%
1,850,000 aAcacia Resources, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,221,679
370,000 aAmax Gold, Inc., Series B . . . . . . . . . . . . . . . . . . . . . . . . . . 1,757,500
2,257,249 Barrick Gold Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,862,824
390,000 Battle Mountain Gold Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,461,250
200,000 Cambior, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,899,521
3,600,000 Central Norseman Gold Corp., N.L., ADR . . . . . . . . . . . . . . . . . . . . 2,125,800
497,500 East Rand Gold & Uranium Co., Ltd., ADR . . . . . . . . . . . . . . . . . . . 1,028,880
840,700 Echo Bay Mines, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,671,388
1,016,866 aEmperor Mines, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,539,840
558,401 Free State Consolidated Gold Mines, Ltd., ADR . . . . . . . . . . . . . . . . 6,421,612
904,900 Hartebeestfontein Gold Mining Co., Ltd., ADR . . . . . . . . . . . . . . . . . 3,247,596
881,117 Homestake Mining Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,547,174
865,050 Newcrest Mining, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,176,623
717,000 aNiugini Mining, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . . . 2,090,127
147,000 aPegasus Gold, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,525,125
938,820 Placer Dome, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,602,875
1,150,000 Placer Pacific, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,438,027
934,100 Plutonic Resources, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,536,275
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, JANUARY 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
COMMON STOCKS (CONT.)
MEDIUM LIFE GOLD MINES (CONT.)
1,309,450 Poseidon Gold, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,181,194
605,000 Randfontein Estates Gold Mining Co., Ltd., ADR . . . . . . . . . . . . . . . . 4,048,176
597,000 aTVX Gold, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,550,417
125,500 Unisel Gold Mines, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . . 297,724
51,000 Winkelhaak Mines, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . . . . . 546,001
------------
131,777,628
------------
MINING FINANCE COMPANIES 9.2%
325,000 Anglo American Gold Investment Co., Ltd., ADR . . . . . . . . . . . . . . . . 2,539,062
1,175,000 DeBeers Consolidated Mines, Ltd., ADR . . . . . . . . . . . . . . . . . . . . 23,353,125
222,100 Gold Fields of South Africa, Ltd., ADR . . . . . . . . . . . . . . . . . . . . 5,025,012
------------
30,917,199
------------
PLATINUM 9.5%
825,000 Impala Platinum Holdings, Ltd., ADR . . . . . . . . . . . . . . . . . . . . . 14,854,454
845,000 Rustenburg Platinum Holdings, Ltd., ADR . . . . . . . . . . . . . . . . . . . 17,270,616
------------
32,125,070
------------
TOTAL COMMON STOCKS (COST $270,736,411) . . . . . . . . . . . . . . . . . 310,977,582
------------
CONVERTIBLE PREFERRED STOCKS 3.3%
28,400 Amax Gold, Inc., $3.75 cvt. pfd., Series B . . . . . . . . . . . . . . . . . . 1,270,900
10,900 Battle Mountain Gold Co., $3.25 cvt. pfd. . . . . . . . . . . . . . . . . . . 604,950
103,100 Echo Bay Finance Corp., $1.75 cum. cvt. pfd., Series A . . . . . . . . . . . . 2,938,350
87,400 Freeport-McMoRan Copper & Gold, Inc., pfd., Series B . . . . . . . . . . . . . 2,753,100
113,000 Freeport-McMoRan Copper & Gold, Inc., pfd., Series C . . . . . . . . . . . . . 3,460,624
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $17,154,680) . . . . . . . . . . 11,027,924
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
<S> <C> <C>
CONVERTIBLE DEBENTURES 1.5%
$ 2,100,000 FMC Corp., cvt. deb., 6.75%, 01/16/05 . . . . . . . . . . . . . . . . . . . . 1,690,500
1,250,000 Freeport-McMoRan, Inc., cvt. disc. deb., 6.55%, 01/15/01 . . . . . . . . . . . 1,128,124
2,470,000 Teck Corp., cvt. sub. deb., 3.75%, 07/15/06 . . . . . . . . . . . . . . . . . 2,185,950
------------
TOTAL CONVERTIBLE DEBENTURES (COST $4,819,018) . . . . . . . . . . . . . 5,004,574
------------
TOTAL COMMON STOCKS, CONVERTIBLE PREFERRED STOCKS AND
CONVERTIBLE DEBENTURES (COST $292,710,109) . . . . . . . . . . . . . . 327,010,080
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, JANUARY 31, 1995
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
c,dRECEIVABLES FROM REPURCHASE AGREEMENTS 3.0%
$10,449,176 Joint Repurchase Agreement, 5.82%, 02/01/95 (Maturity Value $10,321,288)
(COST $10,319,620)
Collateral: U.S. Treasury Bills, 04/13/95 - 11/16/95
U.S. Treasury Notes, 4.25% - 8.875%, 12/31/95 - 11/30/99 . . . . $ 10,319,620
------------
TOTAL INVESTMENTS (COST $303,029,729) 99.9% . . . . . . . . . . 337,329,700
OTHER ASSETS AND LIABILITIES, NET .1% . . . . . . . . . . . . . 191,404
NET ASSETS 100.0% . . . . . . . . . . . . . . . . . . . . . . . $337,521,104
============
At January 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $303,055,348 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost . . . . . . . . . . . . . . . . . . . . . . $ 85,453,342
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value . . . . . . . . . . . . . . . . . . . . . . (51,178,990)
------------
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,274,352
============
</TABLE>
(a)Non-income producing.
(b)See Note 6 regarding Rule 144A securities.
(c)Face amount for repurchase agreements is for the underlying collateral.
(d)See Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
FRANKLIN GOLD FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value
(identified cost $292,710,109) $327,010,080
Receivables from repurchase
agreements, at value and cost 10,319,620
Receivables:
Dividends and interest 1,106,774
Capital shares sold 648,525
Prepaid expenses 9,790
TOTAL ASSETS 339,094,789
Liabilities:
Payables:
Capital shares repurchased 1,019,169
Management fees 147,550
Distribution fees 162,846
Shareholder servicing costs 28,622
Accrued expenses and other liabilities 215,498
Total liabilities 1,573,685
Net assets, at value $337,521,104
Net assets consist of:
Undistributed net investment income $ 1,271,140
Unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 34,299,971
Net realized loss from investments and
foreign currency transactions (8,392,088)
Capital shares 2,642,670
Additional paid-in capital 307,699,411
Net assets, at value $337,521,104
Net asset value per share
($337,521,104:26,426,695
shares outstanding) $12.77
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends, net of foreign
taxes withheld of $429,324 $3,913,355
Interest 704,563
----------
Total income $4,617,918
Expenses:
Management fees, net (Note 5) 1,055,661
Distribution fees (Note 5) 369,028
Shareholder servicing costs
(Note 5) 174,594
Reports to shareholders 220,532
Registration fees 102,692
Custodian fees 76,046
Professional fees 29,821
Directors' fees and expenses 14,174
Other 18,246
----------
Total expenses 2,060,794
-----------
Net investment income 2,557,124
-----------
Realized and unrealized
gain (loss) on investments:
Net realized gain (loss) from:
Investments 2,066,379
Foreign currency transactions (2,318)
Net unrealized depreciation on investments and
translation of assets and liabilities denominated in
foreign currencies (57,500,390)
-----------
Net realized and unrealized
loss on investments (55,436,329)
-----------
Net decrease in net assets
resulting from operations $(52,879,205)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
FRANKLIN GOLD FUND
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 1995 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 1994
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, 1995 JULY 31, 1994
---------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,557,124 $ 5,002,795
Net realized gain from investments and foreign currency transactions. . . . . . . . 2,064,061 310,132
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies. . . . . . . . . . . . . . . . . . . . . . . . (57,500,390) (15,570,891)
------------ ------------
Net decrease in net assets resulting from operations. . . . . . . . . . . . (52,879,205) (10,257,964)
Distributions to shareholders from undistributed net investment income. . . . . . . . . (1,938,752) (5,039,248)
Increase (decrease) in net assets from capital share transactions (Note 3) . . . . . . (26,359,151) 39,291,074
------------ ------------
Net increase (decrease) in net assets. . . . . . . . . . . . . . . . . . . (81,177,108) 23,993,862
Net assets:
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,698,212 394,704,350
------------ ------------
End of period (including undistributed net investment income of
$1,271,140 - 01/31/95 and $645,599 - 07/31/94). . . . . . . . . . . . . . . . . $337,521,104 $418,698,212
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 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 readily available, if any,
are valued in accordance with procedures established by the Board of Directors.
Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets are valued in a similar manner and these values are
translated into U.S. dollars at current market quotations of their respective
currency against U.S. dollars last quoted by a major bank or, if no such
quotation is available, at the rate of exchange determined 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.
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.
Net realized loss differs for financial statement and tax purposes primarily
due to losses deferred for wash sales.
10
<PAGE>
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 the 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
foreign exchange gains and losses 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 January
31, 1995, all outstanding joint repurchase agreements held by the Fund had been
entered into on that date.
2. CAPITAL LOSS CARRYOVERS
At July 31, 1994, for income tax purposes, the Fund had capital loss carryovers
as follows:
<TABLE>
<S> <C> <C>
Expiring in: 1999 . . . . . . . . . . . . $ 2,614,651
2000 . . . . . . . . . . . . 4,861,344
2001 . . . . . . . . . . . . 2,947,368
-----------
. . . . . . . . . . . . . . . $10,423,363
</TABLE> ===========
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at January 31,
1995 by $25,619.
11
<PAGE>
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
3. CAPITAL STOCK
At January 31, 1995, there were 100,000,000 shares of $.10 par value capital
stock authorized and paid-in capital aggregated $310,342,081. Transactions in
the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1995 JULY 31, 1994
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold . . . . . . . . . . . . . . . . . 1,869,794 $ 28,859,522 7,653,237 $ 109,797,299
Shares issued in reinvestment of distributions 105,420 1,494,859 251,295 3,644,547
Shares redeemed . . . . . . . . . . . . . . . (2,245,772) (34,457,699) (5,455,745) (79,401,326)
Changes from exercise of exchange privilege:
Shares sold . . . . . . . . . . . . . . . . 10,651,091 162,687,577 34,905,973 511,582,013
Shares redeemed . . . . . . . . . . . . . . (12,089,305) (184,943,410) (34,473,583) (506,331,459)
----------- ------------- ----------- -------------
Net increase (decrease) . . . . . . . . . . . (1,708,772) $ (26,359,151) 2,881,177 $ 39,291,074
=========== ============= =========== =============
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended January 31, 1995 aggregated $20,701,495
and $17,806,285, 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 $1,055,661 for the six months ended January 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 six months ended January 31, 1995, the
Fund's expenses did not exceed these limitations. 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 for the six
months ended January 31, 1995 totaling $1,037,914, of which $922,500 was
subsequently paid to other dealers. Commissions are deducted from the gross
proceeds received from the sales of the capital stock of the Fund, and as such
are not expenses of the Fund.
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 six months ended January 31, 1995 aggregated $174,594,
of which $158,531 was paid to Franklin/Templeton Investor Services, Inc.
Effective May 1, 1994, the Fund implemented a plan of distribution under Rule
12b-1 of the Investment Company Act of 1940, pursuant to which the Fund will
reimburse Franklin/Templeton Distributors, Inc. in an amount up to a maximum of
0.25% per annum of the Fund's average daily net assets for costs incurred in
the promotion, offering and marketing of the Fund's shares. Fees incurred by
the Fund under the agreement aggregated $369,028 for the six months ended
January 31, 1995.
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.
12
<PAGE>
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
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 January 31, 1995, the Fund held one 144A
security with a value aggregating $9,550,313 representing 2.83% of the Fund's
net assets. See the accompanying statement of investments in securities and net
assets for specific information on that security.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, -----------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning of period . $14.88 $15.63 $11.50 $12.71 $13.74 $12.17
Net investment income . . . . . . . . . . 0.10 .19 .21 .35 .35 .37
Net realized & unrealized gain (loss) on
securities . . . . . . . . . . . . . . . (2.136) (0.746) 4.147 (1.191) (.956) 1.681
------- ------- ------- ------- ------- -------
Total from investment operations . . . . (2.036) (0.556) 4.357 (.841) (.606) 2.051
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income . . (0.074) (0.194) (.227) (.369) (.334) (.481)
Distributions from capital gains . . . . -- -- -- -- (.090) --
------- ------- ------- ------- ------- -------
Total distributions . . . . . . . . . . . (0.074) (0.194) (.227) (.369) (.424) (.481)
------- ------- ------- ------- ------- -------
Net asset value at end of period . . . . $12.77 $14.88 $15.63 $11.50 $12.71 $13.74
======= ======= ======= ======= ======= =======
TOTAL RETURN** . . . . . . . . . . . . . (13.75)% (3.52)% 38.56% (6.87)% (4.01)% 16.87%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (in 000's) . . $337,521 $418,698 $394,704 $257,888 $277,397 $330,950
Ratio of expenses to average net assets . .99%* .81% .62%o .31%o .75% .75%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . 1.24%* 1.30% 1.89% 2.99% 2.78% 2.72%
Portfolio turnover rate . . . . . . . . . 4.56% 1.46% 1.62% .26% .53% 2.98%
</TABLE>
* Annualized
** Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum initial sales charge and assumes
reinvestment of dividends and capital gains, if any, at net asset value
and is not annualized.
o During the years indicated, Franklin Advisers, Inc., the investment
manager, agreed in advance to waive a portion of the management fees. 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.
13
<PAGE>
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 geographic distribution of the
fund's securities as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Geographic Breakdown on 1/31/95
<S> <C>
South Africa 30.8%
United Kingdom 1.7%
Ghana 2.8%
Australia 11.4%
United States 20.9%
Canada 29.2%
Cash and Short-Term Securities 3.2%
</TABLE>
??
