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).
March 15, 1996
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Franklin Gold Fund for
the period ended January 31, 1996.
During the last five months of 1995, factors that normally influence the price
of gold offset one another, and gold bullion experienced its lowest volatility
since 1968 when the U.S. central banks relinquished control of gold prices.
Inflationary fears and political instability were relatively low, which exerted
downward pressure on gold prices, while the weak U.S. dollar and strong demand
for gold helped buoy prices. As a result, gold traded within a narrow band of
$370 to $400 per ounce, with volatility averaging only 7%. Since 1968, annual
volatility has averaged about 32%, and has fallen below 10% only one other
time.*
*Source: Gold Fields Mineral Services, Ltd., 1995.
In January, however, gold prices surged to their highest levels in more than
five years due largely to strong supply and demand fundamentals and a shift in
investor psychology. Demand for gold remained high in Asian countries, while
production continued to decline in countries such as Canada, Russia, and South
Africa. South African mines experienced the world's most significant production
declines due to lower grades of mined ore, labor disruptions and an increased
number of national holidays. By the end of the reporting period, gold was
trading at $405.55 per ounce. The value of the fund's shares increased greatly
due to this rebound, and its Class I shares provided a six-month total return of
+12.53%, as discussed in the Performance Summary on page 5.
Because of our favorable outlook for gold relative to other precious metals, we
increased our holdings of gold-producing companies, while decreasing our
exposure to platinum and diversified metals. We focused on companies with
production growth and ample reserves, and trimmed positions of those with
limited upside potential. Specifically, we initiated positions in Compania de
Minas Buenaventura, Peru's leading gold producer; Dayton Mining, Bema Gold, and
Greenstone Resources, three Canadian companies with growing Latin American
mining interests; and Goldfields Ltd., and Sons of Gwalia, two Australian
producers that have low-cost reserves and dynamic management teams. We also
added to existing holdings, such as Acacia Resources, Ashanti Goldfields,
Freeport McMoran Copper & Gold, TVX Gold, and Santa Fe Pacific Gold, due to
their prospects for future growth.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we remain optimistic about the long-term prospects for gold and
the Franklin Gold Fund. We believe that strong gold prices may be sustained if:
(1) physical demand from Asia continues, and the price of gold in Japanese-yen
terms remains low; (2) central banks around the world continue their careful
gold-lending practices; and (3) gold producers do not hedge aggressively by
borrowing gold from central banks and "selling forward" (a process that
depresses the price of gold by adding to the supply available on the market).
These factors would help ensure that demand continues to outpace supply, which
would be beneficial to gold prices.
Franklin Gold Fund
Top 10 Holdings on 1/31/96
Based on Total Net Assets
Company % of Total
Country Net Assets
Barrick Gold Corp., 9.0%
Canada
Newmont Mining Corp., 7.9%
United States
Placer Dome, Inc., 6.3%
Canada
Santa Fe Pacific Gold Corp., 5.7%
United States
DeBeers Consolidated Mines, Ltd., ADR, 4.4%
South Africa
Impala Platinum Holdings, Ltd., ADR, 4.1%
South Africa
Rustenburg Platinum Holdings, Ltd., ADR, 4.1%
South Africa
Ashanti Goldfields, ADS, 3.5%
Ghana
RTZ Corp., 3.1%
United Kingdom
Vaal Reefs Exploration &
Mining Co., Ltd., ADR, 2.9%
South Africa
For a complete list of portfolio holdings, please see page 7 of this report.
Given this outlook, we intend to maintain our emphasis on those investments we
feel are capable of performing well over the long term -- companies with
top-quality management teams, low operating costs, and long-life reserve bases.
Within our conservative investment strategy, we also expect to continue to
invest in companies with international exploration and mining potential,
especially in Latin America, Southeast Asia, and West Africa.
This discussion reflects the strategies we employed for the fund during the
six-month period, 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 regarding 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.
Please 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, as well as the heightened risks involved with investing in
developing markets, are described in the prospectus.
We appreciate your participation in the Franklin Gold Fund and welcome any
comments or suggestions you may have.
Sincerely,
Charles B. Johnson
Chairman
Performance Summary - Class I Shares
The Franklin Gold Fund's Class I shares provided a total return of +12.53% for
the six-month period ended January 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 chart below,
the fund's Class I shares provided a cumulative total return of more than 165%
for the 10-year period ended January 31, 1996.
As measured by net asset value, the price of the fund's Class I shares increased
from $15.07 on July 31, 1995 to $16.29 on January 31, 1996. During the reporting
period, shareholders received distributions of 5.09 cents ($0.0509) 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.
Franklin Gold Fund - Class I Shares
Periods ended January 31, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year Ten-Year (5/19/69)
<S> <C> <C> <C> <C>
Cumulative Total Return1......... 34.53% 75.77% 165.07% 347.03%
Average Annual Total Return2..... 28.50% 10.91% 9.73% 5.58%
</TABLE>
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. See note below.
2. Average annual total returns measure the average annual change in value of an
investment over the periods indicated and reflect the current, maximum 4.5%
initial sales charge. See note below.
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 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.
Performance Summary - Class II Shares
The Franklin Gold Fund's Class II shares provided a total return of +12.03% for
the six-month period ended January 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.
As measured by net asset value, the price of the fund's Class II shares
increased from $15.05 on July 31, 1995 to $16.25 on January 31, 1996. During the
reporting period, shareholders received distributions of 0.29 cents ($0.0029)
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.
Franklin Gold Fund - Class II Shares
Periods ended January 31, 1996
Since
Inception
Six-Month (5/1/95)
Cumulative Total Return1.......................... 12.03% 13.65%
Aggregate Total Return2........................... 9.93% 11.54%
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. See note below.
2. Aggregate total returns measure the change in value of an investment over the
periods indicated and include the deduction of the 1.0% initial sales charge and
1.0% CDSC, applicable to shares redeemed within the first 18 months of
investment. Since Class II shares have existed for less than one year, average
annual total returns are not provided. See note below.
Note: All total return figures 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 indicative of future results.
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Statement of Investments in Securities and Net Assets, January 31, 1996 (unaudited)
Value
Shares (Note 1)
Common Stocks 89.0%
Gold & Diversified Resources 11.7%
<S> <C> <C>
308,011 Freeport-McMoRan Copper & Gold, Inc., Class A................................. $ 8,932,319
131,000 Freeport-McMoRan Copper & Gold, Inc., Class B................................. 3,880,875
935,401 eRTZ Corp. Plc. .............................................................. 12,950,880
575,100 Teck Corp., Class B........................................................... 11,248,363
1,273,047 Western Mining Holdings Corp., Ltd. .......................................... 7,831,335
156,225 Western Mining Holdings Corp., Ltd., ADR...................................... 3,983,738
-------------
48,827,510
-------------
Long Life Gold Mines 45.9%
457,000 bAshanti Goldfields Co., ADS.................................................. 11,425,000
130,000 bAshanti Goldfields Co., GDR.................................................. 3,250,000
1,282,249 Barrick Gold Corp. ........................................................... 37,666,064
277,000 Compania de Minas Buenaventura Class C ....................................... 2,179,325
580,000 Driefontein Consolidated Mines, Ltd., ADR .................................... 8,555,000
558,401 Free State Consolidated Gold Mines, Ltd., ADR................................. 5,863,211
366,117 Homestake Mining Co. ......................................................... 6,910,458
730,000 Kloof Gold Mining Co., Ltd., ADR.............................................. 9,125,000
255,000 Newmont Gold Co. ............................................................. 14,088,750
341,604 Newmont Mining Corp. ......................................................... 19,129,824
938,820 Placer Dome, Inc. ............................................................ 26,404,313
1,463,663 Santa Fe Pacific Gold Corp. .................................................. 23,967,482
597,000 aTVX Gold, Inc. .............................................................. 5,648,266
1,175,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR................................ 12,043,750
182,000 Western Areas Gold Mining Co., Ltd. .......................................... 2,991,986
58,000 Western Deep Levels, Ltd., ADR................................................ 2,776,750
-------------
192,025,179
-------------
Medium Life Gold Mines 16.0%
2,883,000 aAcacia Resources, Ltd. ...................................................... 6,355,470
470,000 aAmax Gold, Inc. ............................................................. 4,171,250
510,000 Battle Mountain Gold Co. ..................................................... 5,418,750
3,600,000 Central Norseman Gold Corp., N.L., ADR........................................ 3,673,080
455,000 aDayton Mining Corp. ......................................................... 2,317,965
497,500 East Rand Gold & Uranium Co., Ltd., ADR....................................... 1,329,022
540,700 Echo Bay Mines, Ltd. ......................................................... 6,961,513
600,000 aGreenstone Resources, Ltd. .................................................. 2,292,493
904,900 Hartebeestfontein Gold Mining Co., Ltd., ADR.................................. 3,223,163
570,000 Hemlo Gold Mines, Ltd. ....................................................... 6,982,500
865,050 Newcrest Mining, Ltd. ........................................................ 3,904,138
133,750 aNiugini Mining, Ltd. ........................................................ 283,890
610,000 aNiugini Mining, Ltd., ADR.................................................... 1,294,725
2,000,000 Placer Pacific, Ltd. ......................................................... $ 4,394,033
1,234,100 Plutonic Resources, Ltd. ..................................................... 6,893,232
1,309,450 Poseidon Gold, Ltd. .......................................................... 3,364,491
667,000 Sons of Gwalia, Ltd. ......................................................... 4,172,693
-------------
67,032,408
-------------
Mining Finance Companies 6.1%
257,500 Anglo American Gold Investment Co., Ltd., ADR................................. 2,735,938
535,000 DeBeers Consolidated Mines, Ltd., ADR......................................... 18,256,875
1,607,000 Gold Fields of South Africa, Ltd., ADR........................................ 4,428,217
-------------
25,421,030
-------------
Platinum 9.3%
825,000 Impala Platinum Holdings, Ltd., ADR........................................... 17,066,197
862,218 Rustenburg Platinum Holdings, Ltd., ADR....................................... 17,009,318
266,700 a,bStillwater Mining Co. ..................................................... 4,950,618
-------------
39,026,133
-------------
Total Common Stocks (Cost $262,190,422)....................................... 372,332,260
-------------
Face
Amount
Convertible Bond .5%
$ 1,645,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $1,818,700)........... 2,368,800
-------------
Total Long Term Investments (Cost $264,009,122)............................... 374,701,060
-------------
c,dReceivable from Repurchase Agreement13.5%
55,151,668 Joint Repurchase Agreement, 5.89%, 01/31/96 (Maturity Value $56,375,853)
(Cost $56,366,631)
Bear Stearns & Co., Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 5.25% - 8.625%, 11/15/96 - 10/15/99
Chase Securities, Inc., (Maturity Value $3,763,461)
Collateral: U.S. Treasury Notes, 4.75% - 7.25%, 03/31/97 - 09/30/98
Daiwa Securities America, Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 4.375% - 7.50%, 08/15/96 - 08/31/00
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Bills, 11/14/96
U.S. Treasury Notes, 4.75% - 8.00%, 12/31/96 - 11/30/99
Fuji Securities, Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 5.625% - 7.50%, 01/31/97 - 11/30/00
Lehman Brothers, Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 6.125% - 8.75%, 02/29/00 - 09/30/00
Nikko Securities Co. International, Inc., (Maturity Value $1,223,544)
Collateral: U.S. Treasury Bills, 01/09/97
U.S. Treasury Notes, 7.25%, 02/15/98
SBC Capital Markets, Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 5.375% - 6.875%, 05/31/98 - 07/31/99
UBS Securities, Inc., (Maturity Value $7,341,264)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 01/31/97 - 01/31/98.......... $ 56,366,631
-------------
Total Investments (Cost $320,375,753)103.0% .................................. 431,067,691
Liabilities in Excess of Other Assets(3.0)% .................................. (12,668,043)
-------------
Net Assets 100.0% ............................................................ $418,399,648
=============
At January 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$320,424,503 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
excess of value over tax cost................................................ $129,382,958
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value............................................. (18,739,770)
-------------
Net unrealized appreciation................................................... $110,643,188
=============
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.
eSee Note 1(g) regarding securities purchased on a when-issued or delayed delivery basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
Financial Statements
Statement of Assets and Liabilities
January 31, 1996 (unaudited)
Assets:
<S> <C>
Investments in securities, at value (identified cost $264,009,122)............................. $374,701,060
Receivable from repurchase agreement, at value and cost........................................ 56,366,631
Foreign currencies (Cost $5,696,844)........................................................... 5,711,340
Receivables:
Dividends and interest.......................................................................... 673,225
Capital shares sold............................................................................. 3,056,350
-------------
Total assets.................................................................................... 440,508,606
-------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................................................................... 5,062,871
Delayed delivery (Note 1)...................................................................... 8,433,200
Capital shares repurchased...................................................................... 8,099,424
Management fees................................................................................. 171,371
Distribution fees............................................................................... 237,274
Shareholder servicing costs..................................................................... 36,850
Accrued expenses and other liabilities......................................................... 67,968
-------------
Total liabilities............................................................................... 22,108,958
-------------
Net assets, at value............................................................................ $418,399,648
=============
Net assets consist of:
Undistributed net investment income............................................................ $ 928,418
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies.............................................................. 110,693,283
Net realized gain from investments and foreign currency transactions........................... 10,449,567
Class I capital shares......................................................................... 2,526,784
Class II capital shares........................................................................ 41,706
Class I additional paid-in capital............................................................. 287,526,934
Class II additional paid-in capital............................................................ 6,232,956
-------------
Net assets, at value............................................................................ $418,399,648
=============
Net asset value per share for Class I* ($411,620,224 / 25,267,843 shares outstanding).......... $16.29
=============
Net asset value per share for Class II* ($6,779,424 / 417,062 shares outstanding).............. $16.26
=============
*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 six months ended January 31, 1996 (unaudited)
<S> <C> <C>
Investment income:
Dividends, net of foreign taxes withheld of $429,196............................... $3,143,143
Interest........................................................................... 934,260
-------------
Total income........................................................................ $ 4,077,403
Expenses:
Management fees (Note 5)........................................................... 957,681
Distribution fees - Class I (Note 5)............................................... 395,995
Distribution fees - Class II (Note 5).............................................. 20,065
Shareholder servicing costs (Note 5)............................................... 226,013
Reports to shareholders............................................................ 161,222
Custodian fees..................................................................... 49,041
Registration fees.................................................................. 33,558
Professional fees.................................................................. 19,438
Directors' fees and expenses....................................................... 9,767
Other.............................................................................. 8,031
-------------
Total expenses...................................................................... 1,880,811
-------------
Net investment income............................................................... 2,196,592
-------------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments......................................................................... 31,236,610
Foreign currency transactions....................................................... (16,246)
Net unrealized appreciation (depreciation) on:
Investments......................................................................... 13,760,451
Translation of assets and liabilities denominated in foreign currencies............. (832)
-------------
Net realized and unrealized gain from investments and foreign currencies............ 44,979,983
-------------
Net increase in net assets resulting from operations................................ $47,176,575
=============
The accompanying notes are an integral part of these financial statements.
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statements of Changes in Net Assets
for the six months ended January 31, 1996 (unaudited)
and the year ended July 31, 1995
Six Months Ended Year Ended
January 31, 1996 July 31, 1995
------------ ----------
Increase in net assets:
Operations:
<S> <C> <C>
Net investment income.......................................................... $ 2,196,592 $ 4,832,721
Net realized gain from investments and foreign currency transactions........... 31,220,364 4,060,690
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies................................. 13,759,619 5,133,304
------------ ----------
Net increase in net assets resulting from operations.......................... 47,176,575 14,026,715
Distributions to shareholders:
From undistributed net investment income:
Class I........................................................................ (1,258,951) (5,476,921)
Class II....................................................................... (813) (1,399)
From net realized capital gains:
Class I........................................................................ (12,727,188) --
Class II....................................................................... (144,240) --
In excess of net investment income:
Class I (Note 1)............................................................... -- (1,507,200)
Class II (Note 1).............................................................. -- (12,289)
Decrease in net assets from capital share transactions (Note 3)................ (9,715,927) (30,656,926)
------------ ----------
Net increase (decrease) in net assets.......................................... 23,329,456 (23,628,020)
Net assets:
Beginning of period........................................................... 395,070,192 418,698,212
------------ ----------
End of period (including undistributed net investment income of $928,418
at 1/31/96 and accumulated distributions in excess of net investment
income of $(1,511,778) at 7/31/95)............................................ $418,399,648 $395,070,192
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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 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. 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. 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 investment manager. 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 asked prices 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.
The fair value of securities restricted as to resale are determined following
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.
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. 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.
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 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.
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 January 31, 1996, all
outstanding repurchase agreements held by the Fund had been entered into on that
date.
g. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Fund may trade securities on a when-issued or delayed delivery basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of holding them, it may
sell the securities before the settlement date. These securities are identified
on the accompanying Statement of Investments in Securities and Net Assets. The
Fund has set aside sufficient investment securities as collateral for these
purchase commitments.
2. CAPITAL LOSS CARRYOVERS
At July 31, 1995, for income tax purposes, the Fund had capital loss carryovers
as follows:
Expiring in: 2000....................... $3,810,508
2001....................... 2,947,368
-----------
$6,757,876
===========
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial statement purposes at January 31, 1996
by $48,750.
3. CAPITAL STOCK
At January 31, 1996, there were 100,000,000 shares of $.10 par value capital
stock authorized of which 45,000,000 have been allocated to Class I and Class II
shares, respectively, and 10,000,000 were reserved for future allocation.
Transactions in the Fund's Class I and Class II shares for the periods ended
January 31, 1996 and July 31, 1995 were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 1996 July 31, 1995
--------------------- ---------------------
Class I Shares Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 11,828,838 $176,676,261 24,815,801 $369,015,923
Shares issued in reinvestment of distributions......... 837,982 11,547,416 376,809 5,462,548
Shares redeemed........................................ (13,409,184) (201,167,788) (27,317,870) (408,181,875)
--------- ----------- --------- -----------
Net decrease........................................... (742,364) $ (12,944,111) (2,125,260) $ (33,703,404)
========= =========== ========= ===========
Six Months Ended Year Ended
January 31, 1996 July 31, 1995*
--------------------- ---------------------
Class II Shares Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................ 245,244 $3,736,605 205,591 $3,036,529
Shares issued in reinvestment of distributions......... 9,389 129,384 813 11,885
Shares redeemed........................................ (43,842) (637,805) (133) (1,936)
--------- ----------- --------- -----------
Net increase........................................... 210,791 $3,228,184 206,271 $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 period ended January 31, 1996 aggregated $46,673,422 and
$93,551,701, 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 based on the net assets of the
Fund on the last day of the month as follows:
Annualized Fee RateMonth-End Net Assets
- ------------- ----------------------------------
.625% First $100 million
.500% over $100 million, up to and including $250 million
.450% over $250 million
The terms of the management 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 period ended January 31,
1996, the Fund's expenses did not exceed these limitations.
b. 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 will reimburse Franklin/Templeton
Distributors, Inc., (Distributors), in an amount up to a maximum of .25% per
annum for Class I and 1.00% per annum for Class II, of the average daily net
assets of each 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. Fees incurred by the Fund under the Plans aggregated
$416,060 for the period ended January 31, 1996.
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 Class I and Class II
shares. Commissions received by Distributors and the amounts paid to other
dealers for the period ended January 31, 1996, were as follows:
Class I Class II
------- ------
Total commissions received.......................... $733,861 $34,769
======= ======
Paid to other dealers............................... $689,126 $62,207
======= ======
Distributors also received contingent deferred sales charges relating to
transactions in the Fund in the amount of $772 and $2,279 for Class I and Class
II, respectively.
c. Shareholder Services Agreement
Under the terms of a shareholder services 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 period ended January 31, 1996, aggregated $226,013, all of which was paid to
Investor Services.
d. Other Affiliated Parties and 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. 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, 1996, the Fund held 144A
securities with a value aggregating $19,625,618, representing 4.7% of the Fund's
net assets. See the accompanying Statement of Investments in Securities and Net
Assets for specific information of such securities.
7. LOANS OF PORTFOLIO SECURITIES
During the period ended January 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 period ended January 31, 1996, and as of that date, there
were no loaned securities in the Fund.
8. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout the period
are as follows:
<TABLE>
<CAPTION>
Six Months
Ended
January 31,
1996
Period Ended July 31,
------------------------------------------
Class I Shares: 1995 1994 1993 1992 1991
- -------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value at beginning of period..... $15.07 $14.88 $15.63 $11.50 $12.71 $13.74
Net investment income...................... 0.09 0.18 0.19 0.21 0.35 0.35
Net realized and unrealized gain (loss)
on securities............................. 1.696 0.275 (0.746) 4.147 (1.191) (0.956)
------- ------- ------- ------- ------- -------
Total from investment operations........... 1.786 0.455 (0.556) 4.357 (0.841) (0.606)
------- ------- ------- ------- ------- -------
Less distributions:
From net investment income................ (0.051) (0.203) (0.194) (0.227) (0.369) (0.334)
From capital gains........................ (0.515) -- -- -- -- (0.090)
In excess of net investment income........ -- (.062) -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions........................ (0.566) (0.265) (0.194) (0.227) (0.369) (0.424)
------- ------- ------- ------- ------- -------
Net asset value at end of period........... $16.29 $15.07 $14.88 $15.63 $11.50 $12.71
======= ======= ======= ======= ======= =======
Total Return*.............................. 12.53% 3.14% (3.52)% 38.56% (6.87)% (4.01)%
Ratios/Supplemental Data
Net assets at end of period (in 000's)..... $411,620 $391,966 $418,698 $394,704 $257,888 $277,397
Ratio of expenses to average net assets.... 0.98%++ 0.95% 0.81% 0.62% 0.31% 0.75%
Ratio of expenses to average net assets
(excluding waiver and payments
by Manager)............................... -- -- -- 0.75% 0.77% --
Ratio of net investment income to
average net assets........................ 1.16%++ 1.20% 1.30% 1.89% 2.99% 2.78%
Portfolio turnover rate.................... 13.51% 6.36% 1.46% 1.62% 0.26% 0.53%
Average Commission Rate***................. .0307 -- -- -- -- --
8. FINANCIAL HIGHLIGHTS (cont.)
Six Months Period
Ended Ended
January 31, July 31,
Class II Shares 1996 1995+**
- ---------------------------------------------------------------------------- --------- ---------
Per Share Operating Performance
Net asset value at beginning of period................................................. $15.05 $15.02
--------- ---------
Net investment income.................................................................. 0.08 0.12
Net realized and unrealized gain on securities......................................... 1.648 0.092
--------- ---------
Total from investment operations....................................................... 1.728 0.212
--------- ---------
Less distributions:
From net investment income............................................................ (0.003) (0.120)
From capital gains.................................................................... (0.515) (0.062)
--------- ---------
Total distributions.................................................................... (0.518) (0.182)
--------- ---------
Net asset value at end of period....................................................... $16.26+++ $15.05
========= =========
Total Return*.......................................................................... 12.03% 1.45%
Ratios/Supplemental Data
Net assets at end of period (in 000's)................................................. $6,779 $3,104
Ratio of expenses to average net assets................................................ 2.14%++ 1.73%++
Ratio of net investment income to average net assets................................... 1.06%++ 0.33%++
Portfolio turnover rate................................................................ 13.51% 6.36%
Average Commission Rate***............................................................. .0307 --
</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 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.
***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.
+For the period May 1, 1995 (effective date) to July 31, 1995.
++Annualized
+++The Net Asset 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.
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 geographic distribution on
January 31, 1996 as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Franklin Gold Fund
Geographic Distribution on 1/31/96
Based on Total Net Assets
<S> <C>
Canada 24.4%
South Africa 25.2%
United States 21.9%
Australia 11.0%
Other 7.1%
Cash & Short-Term Securities 10.4%
</TABLE>
