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.
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most fund reports, such as the fund's annual and semi-annual
reports, may be mailed to a household. Additional copies may be obtained,
without charge, by calling Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236).
September 16, 1996
Dear Shareholder:
We are pleased to bring you this 28th annual report of the Franklin Gold Fund,
which covers the fiscal year ended July 31, 1996.
During the last five months of 1995, factors that normally influence the price
of gold offset one another, and gold bullion experienced the lowest amount of
volatility since the U.S. central banks relinquished control of gold prices in
1968. Inflationary fears and political instability were relatively low, which
exerted downward pressure on gold prices, while the weak dollar and strong
physical demand for gold helped buoy prices. As a result, gold traded within a
narrow band of $380 to $400 per ounce, with volatility averaging only 7%. Since
1968, annual volatility for gold prices has averaged about 32%, and only twice
has fallen below 10%.*
In the first two months of 1996, however, gold prices surged to their highest
levels in more than five years, peaking at $416 in early February. This rally,
which was caused primarily by strong supply and demand fundamentals and a shift
in investor psychology, proved to be unsustainable, and gold prices retreated
back to $387 per ounce by the end of the fund's fiscal year. These declines were
due to weakened demand for gold, the expected summer fall-off in the fabrication
of gold-related products, concern about the Sumitomo copper-trading scandal, and
the International Monetary Fund's proposal to sell a portion of its gold
reserves to help finance debt relief in developing countries.
*Source: Gold Fields Mineral Services, Ltd.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Because our outlook was more favorable for gold than for other precious metals,
we increased the fund's holdings of gold-producing companies during the fiscal
year, while decreasing our exposure to platinum and diversified metals. We
focused on large mining companies with attractive production, growth and reserve
profiles, as well as smaller companies with international exploration and mining
potential. Specifically, we initiated positions in Compania de Minas
Buenaventura, Peru's leading gold producer, Bre-X Minerals, Ltd., a Canadian
company with growing mining interests in Southeast Asia, and Sons of Gwalia, an
Australian producer with low-cost reserves and a dynamic management team. We
also added to existing holdings that we believed exhibited favorable growth
prospects, and trimmed positions that appeared to have limited upside potential.
Looking forward, we remain optimistic about the long-term prospects for gold and
the Franklin Gold Fund. With demand for gold exceeding supply, we believe
fundamentals bode well for a gradual increase in gold prices. Therefore, we
intend to maintain our emphasis on mining companies that we feel are capable of
increasing their production, reserves, cash flow and earnings over the long
term.
Franklin Gold Fund
Top 10 Holdings on 7/31/96
Based on Total Net Assets
% of Total
Company, Country Net Assets
Barrick Gold Corp., Canada 9.5%
Newmont Mining Corp., U.S. 8.0%
Placer Dome, Inc., Canada 5.9%
Santa Fe Pacific Gold Corp., U.S. 5.2%
DeBeers Consolidated Mines, Ltd., ADR, 4.4%
South Africa
Rustenburg Platinum Holdings, Ltd., ADR, 3.5%
South Africa
Freeport-McMoRan Copper & Gold,
Inc., U.S. 3.3%
Ashanti Goldfields, ADS, Ghana 3.2%
TVX Gold, Inc., Canada 3.1%
Impala Platinum Holdings, Ltd., ADR, 3.0%
South Africa
For a complete list of portfolio holdings, please see
page 10 of this report.
This discussion reflects the strategies we employed for the fund during the
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and our
evaluations, conclusions and decisions regard-ing portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the fund.
We believe the fund has a useful place in a diversified investment portfolio as
potential protection against economic uncertainty and inflation. As discussed in
the prospectus, however, it 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 and developing markets.
We appreciate your participation in the Franklin Gold Fund and welcome any
comments or suggestions you may have.
Sincerely,
Charles B. Johnson
Chairman
Franklin Gold Fund
PERFORMANCE SUMMARY
Class I
The Franklin Gold Fund's Class I shares provided a total return of +1.65% for
the one-year period ended July 31, 1996. 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 table on
page 5, the fund's Class I shares provided a cumulative total return of more
than 208% for the 10-year period ended July 31, 1996.
As measured by net asset value, the price of the fund's Class I shares decreased
42 cents, from $15.07 on July 31, 1995 to $14.65 on July 31, 1996. During the
reporting period, shareholders received distributions of 12.59 cents ($0.1259)
per share in dividend income and 51.46 cents ($0.5146) per share in long-term
capital gains. Of course, past performance cannot guarantee future results, and
distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the fund's portfolio.
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(R). Please note that this index differs from the fund since it
does not emphasize gold stocks, and on July 31, 1995, contained only 0.58% gold
stocks. Of course, comparing a mutual fund with an unmanaged index is never an
apples-to-apples comparison. Performance figures reported by a general market
index do not include various fees, sales charges and operating expenses included
in the fund's performance figures. If the fund's costs had been applied to the
index, the index's performance would have been lower. Please remember that,
unlike indices, mutual funds are never fully invested because they must have
cash on hand to redeem shares. Also, an index is simply a measure of performance
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Gold Fund
Class I
Periods ended July 31, 1996
Since
Inception
One-Year Five-Year Ten-Year (5/19/69)
Cumulative Total Return1...... 1.65% 30.78% 208.38% 303.79%
Average Annual Total Return2.. -2.93% 4.54% 11.41% 5.08%
Value of $10,000 Investment3.. $9,707 $12,489 $29,463 $38,561
1. Cumulative total returns measure 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 specified periods and reflect the current,
maximum 4.5% initial sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the specified periods and include 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 affects subsequent performance. All of the above calculations 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 predictive of future
results.
PERFORMANCE SUMMARY
Class II
The Franklin Gold Fund's Class II shares provided a total return of +0.81% for
the one-year period ended July 31, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains,
and does not include sales charges.
As measured by net asset value, the price of the fund's Class II shares
decreased 45 cents, from $15.05 on July 31, 1995 to $14.60 on July 31, 1996.
During the reporting period, shareholders received distributions of 2.97 cents
($0.0297) per share in income dividends and 51.46 cents ($0.5146) per share in
long-term capital gains. Of course, past performance cannot guarantee future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the fund's portfolio.
The graph to the right compares the performance of Franklin Gold Fund's Class II
shares, since inception, with the performance of the Standard & Poor's 500 Stock
Index(R). Please note that this index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1996, contained only 0.58% gold stocks.
Of course, comparing a mutual fund with an unmanaged index is never an
apples-to-apples comparison. Performance figures reported by a general market
index do not include various fees, sales charges and operating expenses included
in the fund's performance figures. If the fund's costs had been applied to the
index, the index's performance would have been lower. Please remember that
unlike indices, mutual funds are never fully invested because they must have
cash on hand to redeem shares. Also, an index is simply a measure of performance
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMEN
FRANKLIN GOLD FUND
Class II
Periods ended July 31, 1996
Since
Inception
One-Year (5/01/95)
Cumulative Total Return1................ 0.81% 2.27%
Average Annual Total Return2............ -1.14% 0.24%
Value of $10,000 Investment3............ $9,886 $10,030
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the 1.0% initial sales charge and 1.0%
Contingent Deferred Sales Charge (CDSC), applicable to shares redeemed within
the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the indicated periods. It includes the 1.0% initial sales
charge and the 1.0% CDSC, applicable to shares redeemed within the first 18
months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the specified periods and include all sales charges.
All calculations assume reinvestment of dividends and capital gains at net asset
value. 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 predictive of future results. Schedule of Foreign Tax
Withholding (unaudited)
SCHEDULE OF FOREIGN TAX WITHHOLDING (UNAUDITED)
At July 31, 1996, more than 50% of the Franklin Gold Funds' total assets were
invested in securities of foreign issuers. In most instances, foreign taxes were
withheld from dividends paid to the fund on these investments. As in prior
years, the Fund intends to make an election under Section 853 of the Internal
Revenue Code. This election will allow shareholders to treat their proportionate
share of foreign taxes paid by the Fund as having been paid directly by them.
In January 1997, shareholders will receive Form 1099-DIV which will include
his/her share of taxes withheld and foreign source income distributed during
calendar year 1996.
a. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I shareholders in December 1995:
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
-------------------- --------- ---------
Australia................. $0.000655 $0.008004
Canada.................... 0.000941 0.004765
South Africa.............. 0.003163 0.030724
United Kingdom............ 0.000161 0.001569
--------- ---------
Total..................... $0.004920 $0.045062
========= =========
b. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class II shareholders in December 1995:
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
---------------------------- --------- ---------
Australia.................... $0.000036 $0.000457
Canada....................... 0.000054 0.000272
South Africa................. 0.000182 0.001752
United Kingdom............... 0.000011 0.000089
--------- ---------
Total........................ $0.000283 $0.002570
========= =========
c. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I shareholders in June 1996:
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
----------------- --------- ---------
Australia................... $0.003800 $0.026000
Canada...................... 0.003000 0.010600
Peru........................ 0.000000 0.000500
South Africa................ 0.003700 0.080000
United Kingdom.............. 0.000900 0.007700
--------- ---------
Total....................... $0.011400 $0.124800
========= =========
d. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class II shareholders in June 1996:
Foreign Taxes Foreign Source
Withheld Income
Country Per Share Per Share
--------------------- --------- ---------
Australia................. $0.003800 $0.022400
Canada.................... 0.003000 0.010100
Peru...................... 0.000000 0.000300
South Africa.............. 0.003700 0.072900
United Kingdom............ 0.000900 0.006100
--------- ---------
Total...................... $0.011400 $0.111800
========= =========
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.
FRANKLIN GOLD FUND
Statement of Investments in Securities and Net Assets, July 31, 1996
<TABLE>
<CAPTION>
Shares/ Value
Country* Warrants (Note 1)
Common Stocks and Warrants 94.1%.
Gold & Diversified Resources 6.8%
<S> <C> <C> <C>
US 308,011 Freeport-McMoRan Copper & Gold, Inc., Class A ..................... $ 8,547,305
US 131,000 Freeport-McMoRan Copper & Gold, Inc., Class B...................... 3,880,875
GB 468,401 RTZ Corp. Plc. .................................................... 6,768,464
CA 325,100 Teck Corp., Class B ............................................... 6,478,592
-------------
25,675,236
-------------
Long Life Gold Mines 55.4%
US 470,000 aAmax Gold, Inc. .................................................. 2,702,500
US 666,300 bAshanti Goldfields Co., ADS....................................... 11,910,113
US 1,282,249 Barrick Gold Corp. ................................................ 35,742,691
US 60,000 Battle Mountain Gold Co. .......................................... 547,500
CA 843,600 Battle Mountain Canada, Inc. ...................................... 7,515,982
ZA 475,000 Beatrix Mines, Ltd. ............................................... 3,657,895
CA 100,000 aBre-X Minerals, Ltd. ............................................. 1,807,338
PE 100,592 bCompania de Minas Buenaventura S. A. ............................. 897,778
PE 301,387 bCompania de Minas Buenaventura S. A., Class C .................... 2,592,050
US 224,500 a,bCompania de Minas Buenaventura S. A., Sponsored ADR............. 4,012,938
US 580,000 Driefontein Consolidated Mines, Ltd., ADR.......................... 7,612,500
US 483,401 Free State Consolidated Gold Mines, Ltd., ADR ..................... 5,015,285
AU 2,007,000 aGoldfields, Ltd. ................................................. 4,361,995
CA 600,000 aGreenstone Resources Ltd. ........................................ 7,047,529
US 431,117 Homestake Mining Co. .............................................. 7,059,541
US 730,000 Kloof Gold Mining Co., Ltd., ADR .................................. 7,391,250
US 255,000 Newmont Gold Co. .................................................. 12,973,125
US 341,604 Newmont Mining Corp. .............................................. 16,866,698
US 938,820 Placer Dome, Inc. ................................................. 21,944,918
US 1,463,663 Sante Fe Pacific Gold Corp. ....................................... 19,576,493
CA 1,497,000 aTVX Gold, Inc. ................................................... 11,432,052
US 1,175,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR .................... 9,289,903
US 122,492 Western Areas Gold Mining, ADR..................................... 1,710,144
ZA 213,008 Western Areas Gold Mining Co., Ltd. ............................... 2,973,851
US 58,000 Western Deep Levels, Ltd., ADR .................................... 2,124,250
-------------
208,766,319
-------------
Medium Life Gold Mines 16.5%
AU 3,483,000 aAcacia Resources, Ltd. ........................................... 7,004,200
US 1,444,000 aCampbell Resources, Inc........................................... 1,624,500
CA 722,000 aCampbell Resources, Inc., warrants................................ 294,062
US 678,000 aCanyon Resources Corp............................................. 1,737,375
US 3,306,664 Central Norseman Gold Corp., N.L., ADR ............................ 2,276,307
CA 455,000 aDayton Mining Corp. .............................................. 2,697,007
Medium Life Gold Mines (cont.)
US 497,500 East Rand Gold & Uranium Co., Ltd., ADR ........................... $ 1,069,426
US 340,700 Echo Bay Mines, Ltd. .............................................. 3,492,175
CA 114,000 Euro-Nevada Mining Corp............................................ 2,313,248
CA 200,000 Franco-Nevada Mining Corp., Ltd.................................... 6,109,313
US 904,900 Hartebeestfontein Gold Mining Co., Ltd., ADR ...................... 2,887,626
AU 865,050 Newcrest Mining, Ltd. ............................................. 3,131,257
AU 133,750 aNiugini Mining Ltd. .............................................. 284,484
AU 610,000 aNiugini Mining, Ltd., ADR ........................................ 1,297,470
AU 2,000,000 Placer Pacific, Ltd. .............................................. 2,629,727
AU 1,874,100 Plutonic Resources, Ltd. .......................................... 8,102,822
AU 2,359,450 Poseidon Gold, Ltd. ............................................... 5,456,494
AU 1,542,000 Sons of Gwalia, Ltd. .............................................. 9,779,799
-------------
62,187,292
-------------
Mining Finance Companies 7.5%
US 65,000 Anglo American Corp. of South Africa Ltd., Unsponsored ADR ........ 3,607,500
US 352,500 Anglo American Gold Investment Co., Ltd., ADR ..................... 3,150,469
US 535,000 DeBeers Consolidated Mines, Ltd, ADR .............................. 16,250,625
ZA 900,000 aRandgold & Exploration Co., Ltd. ................................. 5,335,180
-------------
28,343,774
-------------
Platinum 7.9%
US 785,000 Impala Platinum Holdings, Ltd., ADR ............................... 11,307,454
US 817,257 Rustenburg Platinum Holdings, Ltd., ADR ........................... 13,039,908
US 266,700 a,bStillwater Mining Co. .......................................... 5,400,675
-------------
29,748,037
-------------
Total Common Stocks and Warrants (Cost $298,041,866)......... 354,720,658
-------------
Face
Amount
Convertible Debentures 0.9%
US $ 1,645,000 Bema Gold Corp., cvt. sub notes, 7.50%, 02/28/00 (Cost $1,818,700). 3,273,550
-------------
Total Long Term Investments (Cost $299,860,566).............. 357,994,208
-------------
c,dReceivables from Repurchase Agreements 4.0%
US 15,025,959 Joint Repurchase Agreement, 5.60%, 08/01/96
(Maturity Value $14,952,567) (Cost $14,950,242)
B.A. Securities, Inc., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Notes, 5.75% - 6.875%, 10/31/96 - 05/31/98
Bear Stearns & Co., Inc., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Bills, 01/09/97
U.S. Treasury Notes, 5.75% - 8.75%, 10/15/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Notes, 6.375%, 05/15/99
Daiwa Securities America, Inc., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Notes, 5.50% - 9.25%, 09/30/97 - 04/30/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Bills, 01/16/97 - 07/24/97
U.S. Treasury Notes, 5.50% - 8.875%, 04/30/97 - 02/15/99
Fuji Securities, Inc., (Maturity Value $ 2,340,641)
Collateral: U.S. Treasury Notes, 5.625% - 8.50%, 01/31/97 - 11/15/00
SBC Warburg, Inc., (Maturity Value $ 908,721)
Collateral: U.S. Treasury Bills, 10/03/96 - 12/19/96............ $ 14,950,242
-------------
Total Investments (Cost $314,810,808) 99.0%............. 372,944,450
Other Assets and Liabilities, Net 1.0%.................. 4,064,654
-------------
Net Assets 100.0%....................................... $377,009,104
=============
At July 31, 1996, the net unrealized appreciation
based on the cost of investments for income tax
purposes of $314,859,558 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ..................................... $ 90,753,236
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................... (32,668,344)
-------------
Net unrealized appreciation ..................................... $ 58,084,892
=============
</TABLE>
COUNTRY LEGEND:
AU - Australia
CA - Canada
GB - United Kingdom
PE - Peru
US - United States
ZA - South Africa
*Securities traded in currency of country indicated and valued in U.S. dollars.
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
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.
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements
Statement of Assets and Liabilities
July 31, 1996
Assets:
<S> <C>
Investments in securities, at value (identified cost $299,860,566)............................. $357,994,208
Receivables from repurchase agreements, at value and cost...................................... 14,950,242
Cash .......................................................................................... 2,928,037
Receivables:
Dividends and interest ....................................................................... 1,388,250
Investment securities sold.................................................................... 189,132
Capital shares sold........................................................................... 163,070
-------------
Total assets ............................................................................. 377,612,939
-------------
Liabilities:
Payables:
Capital shares repurchased.................................................................... 95,475
Management fees .............................................................................. 167,127
Distribution fees ............................................................................ 247,911
Shareholder servicing costs................................................................... 43,000
Accrued expenses and other liabilities......................................................... 50,322
-------------
Total liabilities ........................................................................ 603,835
-------------
Net assets, at value............................................................................ $377,009,104
=============
Net assets consist of:
Undistributed net investment income............................................................ 649,709
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies............................................. 58,133,909
Undistributed net realized gain from investments and foreign currency transactions............. 20,985,414
Class I capital shares......................................................................... 283,480,347
Class II capital shares........................................................................ 13,759,725
-------------
Net assets, at value............................................................................ $377,009,104
=============
Class I Shares:
Net assets, at value........................................................................... $364,031,639
=============
Shares outstanding............................................................................. 24,847,733
=============
Net asset value per share*..................................................................... $14.65
=============
Maximum offering price per share (100/95.5 of $14.65).......................................... $15.34
=============
Class II Shares:
Net assets, at value........................................................................... $12,977,465
=============
Shares outstanding............................................................................. 888,553
=============
Net asset value per share*..................................................................... $14.61
=============
Maximum offering price per share (100/99 of $14.61)............................................ $14.76
=============
</TABLE>
* 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.
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statement of Operations
for the year ended July 31, 1996
Investment income:
<S> <C>
Dividends, net of foreign taxes withheld $684,143.................................. $6,131,860
Interest .......................................................................... 1,562,100
-------------
Total income.................................................................. $ 7,693,960
Expenses:
Management fees (Note 5)........................................................... 2,024,845
Distribution fees- Class I (Note 5)................................................ 822,734
Distribution fees- Class II (Note 5)............................................... 68,735
Shareholder servicing costs (Note 5)............................................... 540,668
Reports to shareholders............................................................ 182,112
Registration fees.................................................................. 61,056
Custodian fees..................................................................... 52,494
Professional fees.................................................................. 42,208
Directors' fees and expenses....................................................... 18,141
Other.............................................................................. 19,301
-------------
Total expenses................................................................ 3,832,294
-------------
Net investment income........................................................ 3,861,666
-------------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments ...................................................................... 41,844,538
Foreign currency transactions .................................................... (87,230)
Net unrealized depreciation on:
Investments....................................................................... (38,797,845)
Translation of assets and liabilities denominated in foreign currencies........... (1,910)
-------------
Net realized and unrealized gain on investments and foreign currency................ 2,957,553
-------------
Net increase in net assets resulting from operations................................ $ 6,819,219
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended July 31, 1996 and 1995
1996 1995
----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income........................................................ $ 3,861,666 $ 4,832,721
Net realized gain from investments and foreign currency transactions......... 41,757,308 4,060,690
Net unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies.................... (38,799,755) 5,133,304
----------- -----------
Net increase in net assets resulting from operations........................... 6,819,219 14,026,715
Distributions to shareholders from undistributed net investment income:
Class I....................................................................... (3,188,716) (5,476,921)
Class II...................................................................... (18,297) (1,399)
Distributions to shareholders in excess of net investment income:
Class I....................................................................... -- (1,507,200)
Class II...................................................................... -- (12,289)
Distributions to shareholders from net realized capital gain:
Class I....................................................................... (12,724,819) --
Class II...................................................................... (144,240) --
Decrease in net assets from capital share transactions (Note 3 )............... (8,804,235) (30,656,926)
----------- -----------
Net decrease in net assets............................................... (18,061,088) (23,628,020)
Net assets:
Beginning of year............................................................. 395,070,192 418,698,212
----------- -----------
End of year (including undistributed net investment income
of $649,709 at 7/31/96 and accumulated distributions in
excess of net invesment income of $1,511,778 at 7/31/95)...................... $377,009,104 $395,070,192
=========== ===========
</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 investment objective of the Fund is capital appreciation.
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. Security Valuation:
Portfolio securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
securities. The Fund may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions, under
procedures approved by the Board of Directors (the Board). Securities for which
market quotations are not available are valued in accordance with procedures
established by the Board.
The value of a foreign security is determined as of the earlier of the close of
trading on the foreign exchange on which it is traded or the close of trading on
the New York Stock Exchange (Exchange). 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 which materially
affect the value of these foreign securities occur during such period, these
securities will be valued in accordance with procedures established by the
Board.
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.
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.
d. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Net
investment income and realized gains and losses differ 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 the currencies against U.S. dollars on the
valuation date. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the day that the transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are recognized when reported by the custodian.
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.
Realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, gains or losses realized
between the trade and settlement dates on security transactions, the difference
between the amounts of dividends and 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 or 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 the end of the reporting period, resulting from changes in
exchange rates.
f. Repurchase Agreement:
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.
A repurchase agreement is accounted for as a loan by the Fund, to the seller,
collateralized by underlying U.S. government securities, which are delivered to
the Fund's custodian. The market value, including accrued interest, of the
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At July 31, 1996, all
outstanding repurchase agreements held by the Fund had been entered into on that
date.
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At July 31, 1996, for tax purposes, the Fund had accumulated net realized gains
of $21,067,360.
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at July 31, 1996 by
$48,750.
3. CAPITAL STOCK
At July 31, 1996, there were 100,000,000 shares of $.10 par value capital stock
authorized of which 45,000,000 shares each were designated as Class I and Class
II, respectively. On June 18, 1996, the Board approved the designation of the
remaining 10,000,000 shares as Class Z. Class Z shares are not yet available for
sale.
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------
1996 1995
--------------------- ---------------------
Class I Shares: Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold ........................................... 25,634,973 $399,883,240 24,815,801 $369,015,923
Shares issued in reinvestment of distributions ........ 923,993 13,015,891 376,809 5,462,548
Shares redeemed ....................................... (27,721,440) (432,416,613) (27,317,870) (408,181,875)
--------- ----------- --------- -----------
Net decrease .......................................... (1,162,474) $ (19,517,482) (2,125,260) $(33,703,404)
========= =========== ========= ===========
Year Ended July 31,
------------------------------------------
1996 1995*
--------------------- ---------------------
Class II Shares: Shares Amount Shares Amount
--------- ----------- --------- -----------
Shares sold ........................................... 907,471 $14,300,321 205,591 $3,036,529
Shares issued in reinvestment of distributions ........ 10,276 144,486 813 11,885
Shares redeemed ....................................... (235,465) (3,731,560) (133) (1,936)
--------- ----------- --------- -----------
Net increase .......................................... 682,282 $10,713,247 206,271 $3,046,478
========= =========== ========= ===========
*For the period May 1, 1995 (effective date) to July 31, 1995.
</TABLE>
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, 1996, aggregated $106,269,842 and
$127,904,604, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES,
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc., (Advisers)
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees computed monthly on the net assets of the Fund at
the last day of the month as follows:
Annualized Fee Rate Month-End Net Assets
-------------- --------------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% Over $250 million
The terms of the management agreement provide that annual aggregate 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, 1996, the
Fund's expenses did not exceed these limitations.
b. Shareholder Services Agreement:
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc., (Investor Services) the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended July 31, 1996, aggregated $540,668, of which $485,780 was paid to
Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors) in an amount up to a maximum of 0.25% per
annum for Class I and 1.00% per annum for Class II of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Fund's shares. The Plans do not permit nor require payments of excess
costs after termination.
In its capacity as underwriter for the shares of the Fund, Distributors receives
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. Distributors may also make payments, out
of its own resources, to the dealers for certain sales of the Fund's shares.
Commissions received by Distributors and the amounts paid to other dealers, and
any applicable contingent deferred sales charges for the year ended July 31,
1996, were as follows:
Class I Class II
--------- -------
Total commissions received...................... $1,634,168 $130,308
Paid to other dealers........................... $1,506,876 $252,298
Contingent deferred sales charges............... $792 $8,384
d. Other Affiliates and Related Party Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Distributors, Advisers, and Investor Services, all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. LOANS OF PORTFOLIO SECURITIES
During the year ended July 31, 1996, 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 $14,012 for the year ended July 31, 1996.
At July 31, 1996, there were no loaned securities in the Fund.
7. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------------------
Class I Shares: 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period................ $15.07 $14.88 $15.63 $11.50 $12.71
Net investment income................................. .21 .18 .19 .21 .35
Net realized and unrealized gain (loss) on securities. .011 .275 (.746) 4.147 (1.191)
------- ------- ------- ------- -------
Total from investment operations...................... .221 .455 (.556) 4.357 (.841)
------- ------- ------- ------- -------
Less distributions:
From net investment income........................... (.126) (.203) (.194) (.227) (.369)
From capital gains................................... (.515) -- -- -- --
In excess of net investment income................... -- (.062) -- -- --
------- ------- ------- ------- -------
Total distributions................................... (.641) (.265) (.194) (.227) (.369)
------- ------- ------- ------- -------
Net asset value at end of period...................... $14.65 $15.07 $14.88 $15.63 $11.50
======= ======= ======= ======= =======
Total Return*......................................... 1.65% 3.14% (3.52)% 38.56% (6.87)%
Ratios/Supplemental Data
Net assets at end of period (in 000's)................ $364,032 $391,966 $418,698 $394,704 $257,888
Ratio of expenses to average net assets............... .95% .95% .81% .62%++ .31%++
Ratio of net income to average net assets............. .99% 1.20% 1.30% 1.89% 2.99%
Portfolio turnover rate............................... 28.74% 6.36% 1.46% 1.62% 0.26%
Average commission rate**............................. .0308 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
7. FINANCIAL HIGHLIGHTS (cont.)
Class II Shares 1996 1995+***
--------- ---------
Per Share Operating Performance
<S> <C> <C>
Net asset value at beginning of period................................................. $15.05 $15.02
--------- ---------
Net investment income.................................................................. .12 .12
Net realized and unrealized gain (loss) on securities.................................. (.015) .092
--------- ---------
Total from investment operations....................................................... .105 .212
--------- ---------
Less distributions:
From net investment income............................................................ (.030) (.120)
From capital gains.................................................................... (.515) (.062)
--------- ---------
Total distributions.................................................................... (.545) (.182)
--------- ---------
Net asset value at end of period....................................................... $14.61+++ $15.05
========= =========
Total Return*.......................................................................... 0.81% 1.45%
Ratios/Supplemental Data
Net assets at end of period (in 000's)................................................. $12,977 $3,104
Ratio of expenses to average net assets................................................ 1.74% 1.73%++
Ratio of net investment income to average net assets................................... .16% .33%++
Portfolio turnover rate................................................................ 28.74% 6.36%
Average commission rate**.............................................................. .0308 --
</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or deferred contingent sales charge. Prior to May 1, 1994, dividends were
reinvested at maximum offering price, and capital gains at net asset value.
Effective May 1, 1994, with the implementation of the Rule 12b-1 distribution
plan for Class I shares the sales charge on reinvested dividends has been
eliminated.
**Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.
***Per share amounts have been calculated using the daily average shares
outstanding during the period.
+For the period May 1, 1995 (effective date) to July 31, 1995.
++Annualized
+++The Net Assets Value differs from the Net Asset Value used to process
shareholder activity as of the reporting date, which does not include market
adjustment for portfolio trades made on that date. These adjustments are
generally accounted for on the day following the trade date.
++During the years indicated, Franklin Advisers, Inc., the Investment Manager,
agreed in advance to waive a portion of its 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.
Under IRC 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
13.28% of ordinary income dividends (including short-term capital gain
distributions) paid by the Fund as income qualifying for the dividends received
for the year ended July 31, 1996.
The amount reported above is an estimated percentage and should be used for
information purposes only. Information on the final percentage that qualified
for this deduction for calendar year 1996 will be available shortly after the
end of this calendar year.
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 the
Franklin Gold Fund (the Fund), including the statement of investments in
securities and net assets, as of July 31, 1996, 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
each of the periods presented. 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 include confirmation of securities owned as of July
31, 1996, by correspondence with the custodian. 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 the
Fund as of July 31, 1996, 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 each of the periods presented, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
September 5 , 1996
Franklin Gold Fund Annual Report 7/31/96.
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 geographic breakdown as a
percentage of the fund's total net assets.
Quality Breakdown on 7/31/96
Canada 29.8%
South Africa 25.8%
United States 21.2%
Australia 11.9%
Other 7.0%
Cash & Short-Term Securities 4.3%
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the S&P 500 Stock Index, based on a $10,000 investment from
8/1/86 to 7/31/96.
Period Ending Fund Index
8/1/86 $9,554 $10,000
8/31/86 $11,568 $10,742
9/30/86 $13,162 $9,854
10/31/86 $12,003 $10,422
11/30/86 $13,294 $10,675
12/31/86 $13,192 $10,403
1/31/87 $14,820 $11,805
2/28/87 $15,789 $12,271
3/31/87 $20,843 $12,625
4/30/87 $22,951 $12,513
5/31/87 $21,214 $12,622
6/30/87 $20,917 $13,259
7/31/87 $25,341 $13,932
8/31/87 $25,371 $14,451
9/30/87 $25,844 $14,135
10/31/87 $18,473 $11,090
11/30/87 $20,955 $10,176
12/31/87 $19,980 $10,951
1/31/88 $16,952 $11,412
2/29/88 $17,205 $11,944
3/31/88 $18,961 $11,574
4/30/88 $18,611 $11,703
5/31/88 $18,993 $11,804
6/30/88 $18,659 $12,345
7/31/88 $18,739 $12,298
8/31/88 $17,785 $11,880
9/30/88 $17,161 $12,386
10/31/88 $17,857 $12,731
11/30/88 $18,504 $12,549
12/31/88 $17,869 $12,768
1/31/89 $18,588 $13,703
2/28/89 $19,355 $13,362
3/31/89 $19,453 $13,673
4/30/89 $19,322 $14,383
5/31/89 $18,318 $14,965
6/30/89 $19,684 $14,880
7/31/89 $20,029 $16,224
8/31/89 $20,556 $16,542
9/30/89 $21,308 $16,474
10/31/89 $21,542 $16,092
11/30/89 $24,491 $16,420
12/31/89 $25,354 $16,814
1/31/90 $26,773 $15,686
2/28/90 $24,392 $15,888
3/31/90 $23,653 $16,309
4/30/90 $21,685 $15,903
5/31/90 $23,280 $17,454
6/30/90 $21,906 $17,337
7/31/90 $23,442 $17,281
8/31/90 $22,759 $15,719
9/30/90 $22,077 $14,953
10/31/90 $19,944 $14,889
11/30/90 $19,364 $15,851
12/31/90 $20,411 $16,293
1/31/91 $18,557 $17,004
2/28/91 $20,535 $18,219
3/31/91 $20,146 $18,660
4/30/91 $20,270 $18,705
5/31/91 $21,029 $19,511
6/30/91 $22,014 $18,618
7/31/91 $22,528 $19,485
8/31/91 $20,348 $19,947
9/30/91 $20,915 $19,614
10/31/91 $22,315 $19,877
11/30/91 $22,847 $19,076
12/31/91 $21,615 $21,258
1/31/92 $21,705 $20,862
2/29/92 $20,929 $21,132
3/31/92 $20,351 $20,720
4/30/92 $19,936 $21,329
5/31/92 $21,164 $21,433
6/30/92 $21,226 $21,114
7/31/92 $21,007 $21,977
8/31/92 $20,020 $21,527
9/30/92 $19,363 $21,779
10/31/92 $17,792 $21,853
11/30/92 $16,641 $22,596
12/31/92 $17,219 $22,874
1/31/93 $17,293 $23,066
2/28/93 $18,678 $23,380
3/31/93 $20,821 $23,873
4/30/93 $23,297 $23,295
5/31/93 $26,197 $23,917
6/30/93 $26,502 $23,986
7/31/93 $29,130 $23,890
8/31/93 $26,167 $24,796
9/30/93 $23,856 $24,605
10/31/93 $26,670 $25,114
11/30/93 $26,185 $24,876
12/31/93 $29,912 $25,177
1/31/94 $29,386 $26,033
2/28/94 $28,034 $25,327
3/31/94 $28,334 $24,223
4/30/94 $27,075 $24,533
5/31/94 $27,658 $24,935
6/30/94 $27,405 $24,324
7/31/94 $28,104 $25,122
8/31/94 $29,540 $26,152
9/30/94 $31,938 $25,514
10/31/94 $30,408 $26,088
11/30/94 $27,330 $25,139
12/31/94 $28,498 $25,511
1/31/95 $24,245 $26,171
2/28/95 $25,612 $27,192
3/31/95 $28,137 $27,994
4/30/95 $28,365 $28,817
5/31/95 $28,004 $29,970
6/30/95 $28,197 $30,665
7/31/95 $28,985 $31,683
8/31/95 $29,024 $31,763
9/30/95 $29,158 $33,103
10/31/95 $25,908 $32,984
11/30/95 $27,812 $34,432
12/31/95 $28,132 $35,096
1/31/96 $32,618 $36,290
2/29/96 $32,698 $36,627
3/31/96 $32,798 $36,979
4/30/96 $33,198 $37,522
5/31/96 $34,460 $38,490
6/30/96 $30,126 $38,637
7/31/96 $29,463 $36,929
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the S&P 500 Stock Index, based on a $10,000 investment from
5/1/95 to 7/31/96.
Period Ending Fund Index
5/1/95 9,901 10,000
5/31/95 9,717 10,400
6/30/95 9,777 10,641
7/31/95 10,044 10,995
8/31/95 10,051 11,022
9/30/95 10,091 11,487
10/31/95 8,963 11,446
11/30/95 9,617 11,948
12/31/95 9,715 12,179
1/31/96 11,253 12,593
2/29/96 11,280 12,710
3/31/96 11,301 12,832
4/30/96 11,433 13,021
5/31/96 11,855 13,357
6/30/96 10,362 13,407
7/31/96 10,030 12,815
