CONTENTS
Shareholder Letter ........................................ 1
Performance Summaries
Class I .................................................. 4
Class II ................................................. 7
Advisor Class ............................................ 9
Financial Highlights ...................................... 11
Statement of Investments .................................. 14
Financial Statements ...................................... 17
Notes to
Financial Statements ...................................... 20
Report of
Independent Accountants.................................... 23
Tax Designation ........................................... 24
SHAREHOLDER LETTER
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.
Dear Shareholder:
This is the 29th annual report of the Franklin Gold Fund and covers the fiscal
year ended July 31, 1997.
During the reporting period, rising equity markets, low inflation, and sales of
gold by central banks adversely affected gold prices, despite strong supply and
demand fundamentals. Aggressive short-selling and options-selling also
contributed to this situation. In July, the price of gold fell to 12-year lows
as investors discovered that Australia, the third largest gold-producing
country, had sold nearly two-thirds of its reserves over the previous few
months. During the reporting period, the price of an ounce of gold bullion
declined from about $385 at the beginning of the period to less than $325 on
July 31, 1997. Within this environment, the fund's Class I shares produced a
one-year cumulative total return of -16.45%, as discussed in the Performance
Summary on page 4. Most other gold funds also reflected the recent weakness in
gold prices, and Lipper Analytical Services, Inc. ranked the Franklin Gold Fund
#6 out of 46 gold funds for the one-year period ended July 31, 1997.1 This
placed the fund in the top 13% of all gold funds for this period.
1. The fund was also ranked #14 out of 27 for the five-year and #5 out of 18 for
the ten-year periods ended July 31, 1997. Lipper Analytical Services, Inc. is a
nationally recognized mutual fund research organization. Lipper rankings do not
include sales charges, and past expense reductions by the fund's manager
increased the fund's total returns. Rankings may have been different if these
factors had been considered. Past performance cannot guarantee future results.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
During the 12 months under review, we initiated a position in Dayton Mining
Corp., a small, low-cost producer with excellent potential for expanding their
reserves and strong production growth. We also purchased shares in Euro-Nevada
Mining Corp. and Franco-Nevada Mining Corp. These two diversified holding
companies supply capital for mining companies with healthy reserve and
production levels. We sold shares of Echo Bay Mines Ltd. and Battle Mountain
Gold Co. for a profit. Both companies are maturing North American gold producers
which, in our opinion, had limited short-term growth potential. And we scaled
back our exposure to the more volatile companies which focus solely on searching
for gold rather than producing it.
Looking forward, we will seek companies with large gold reserves, strong
production profiles, low operating costs, quality management, and the potential
to perform well over time, despite depressed gold prices. In the near term,
strong equity markets, a limited inflationary environment, continued bearish
short-selling, and pressures from central bank sales may prevent a rally in gold
prices. Longer term, though, strong supply and demand fundamentals could have
greater influence on the price of gold, and we remain optimistic about the
prospects for gold and the Franklin Gold Fund.
We believe the fund continues to have 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.
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 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.
We appreciate your participation in the Franklin Gold Fund and welcome any
comments or suggestions you may have.
Sincerely,
R. Martin Wiskemann
Suzanne Willoughby Killea
Portfolio Managers
Franklin Gold Fund
Top-10 Holdings
Based on Total Net Assets
7/31/97
Company % of Total
COUNTRY Net Assets
Newmont Mining Corp. 14.2%
U.S.
Barrick Gold Corp. 9.3%
CANADA
De Beers
Centenary AG, ADR 6.4%
SOUTH AFRICA
Placer Dome, Inc. 5.1%
CANADA
Rustenberg Platinum
Holdings, Ltd., ADR 4.6%
SOUTH AFRICA
Franco-Nevada
Mining Corp. 3.5%
CANADA
Freeport-McMoRan
Copper & Gold, Inc. 2.7%
U.S.
Euro-Nevada
Mining Corp. 2.5%
CANADA
Teck Corp., Class B 2.4%
CANADA
Ashanti Goldfields
Co. Ltd., 144A, GDR 2.4%
GHANA
For a complete list of portfolio holdings, please see page 14 of this report.
PERFORMANCE SUMMARY
CLASS I
Franklin Gold Fund - Class I reported a cumulative total return of -16.45% for
the one-year period ended July 31, 1997. Cumulative 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 I shares decreased
$3.21, from $14.65 on July 31, 1996, to $11.44 on July 31, 1997. During the
reporting period, shareholders received income distributions totaling 8.9 cents
($0.089) per share. Of course, 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 on page 6 compares the performance of Franklin Gold Fund - Class I,
over the past 10 years, with the performance of the Standard & Poor's 500(R)
Stock Index. Please note that this index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1997, contained only 0.31% gold stocks.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of securities analysts
or portfolio managers, or pay commissions or market spreads to buy and sell
securities. Unlike indices, mutual funds are never fully invested because of the
need to have cash on hand to redeem shares or pay for upcoming investments. In
addition, the fund's performance includes the maximum initial sales charge, all
fund expenses, and account fees. If the fund's costs had been applied to the
index, its performance would have been lower. Please remember that an index is
simply a measure of performance and cannot be invested in directly.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Gold Fund
Class I
Periods ended 7/31/97 Since
One- Five- Ten- Inception
Year Year Year (5/19/69)
Cumulative Total Return1 -16.45% 17.18% -2.87% 237.35%
Average Annual Total Return2 -20.21% 2.28% -0.75% 4.24%
Value of $10,000 Investment3 $7,979 $11,192 $9,278 $32,216
7/31/93 7/31/94 7/31/95 7/31/96 7/31/97
One-Year Total Return4 38.56% -3.52% 3.14% 1.65% -16.45%
1. Cumulative total returns represent the change in value of an investment over
the periods indicated and do not include the sales charge.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated and include the maximum 4.5% initial
sales charge. See Note below.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the sales charge.
4. One-year total returns represent the change in value of an investment over
the one-year periods ended on the specified dates and do not include the sales
charge.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns would differ. 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. Past expense reductions by the fund's manager 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.
CLASS II
Franklin Gold Fund - Class II provided a cumulative total return of -17.12% for
the one-year period ended July 31, 1997. Cumulative 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 $3.23, from $14.60 on July 31, 1996, to $11.37 on July 31, 1997.
During the reporting period, shareholders received income distributions of 1.9
cents ($0.019) per share. Of course, distributions will vary depending on income
earned by the fund and any profits realized from the sale of securities in the
portfolio.
The graph on page 8 compares the performance of Franklin Gold Fund - Class II,
since inception, with the performance of the Standard & Poor's 500(R) Stock
Index. Please note that this index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1997, contained only 0.31% gold stocks.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of securities analysts
or portfolio managers, or pay commissions or market spreads to buy or sell
securities. Unlike indices, mutual funds are never fully invested because of the
need to have cash on hand to redeem shares or pay for upcoming investments. In
addition, the fund's performance includes the sales charges, all fund expenses,
and account fees. If the fund's costs had been applied to the index, its
performance would have been lower. Please remember that an index is simply a
measure of performance and cannot be invested in directly.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Gold Fund
Class II
Periods ended July 31, 1997
Since
One- Inception
Year (5/1/95)
Cumulative Total Return1 -17.12% -15.24%
Average Annual Total Return2 -18.74% -7.49%
Value of $10,000 Investment3 $8,126 $8,392
1. Cumulative total returns represent the change in value of an investment over
the periods indicated and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated and include the 1.00% initial sales
charge and 1.00% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of purchase.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include sales charges.
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.
ADVISOR CLASS
Franklin Gold Fund - Advisor Class reported an aggregate total return of
- -12.24%, from the shares' inception on January 2, 1997, through the period ended
July 31, 1997. Aggregate total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains, if any.
As measured by net asset value, the price of the fund's shares decreased $1.69,
from $13.12 on January 2, 1997, to $11.43 on July 31, 1997. During the reporting
period, shareholders received distributions of 9.09 cents ($0.0909) per share in
dividend income. Of course, distributions will vary depending on income earned
by the fund, as well as any profits realized from the sale of securities in the
portfolio.
The graph on page 10 compares the performance of Franklin Gold Fund - Advisor
Class, since inception, with the performance of the Standard & Poor's 500(R)
Stock Index. Please note that this index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1997, contained only 0.31% gold stocks.
Of course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of securities analysts
or portfolio managers, or pay commissions or market spreads to buy or sell
securities. Unlike indices, mutual funds are never fully invested because of the
need to have cash on hand to redeem shares or pay for upcoming investments. In
addition, the fund's performance includes all fund expenses, and account fees.
If the fund's costs had been applied to the index, its performance would have
been lower. Please remember that an index is simply a measure of performance and
cannot be invested in directly.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Gold Fund
Advisor Class
Period ended 7/31/97
Since
Inception
(1/2/97)
Aggregate Total Return1 -12.24%
Value of $10,000 Investment2 $8,776.00
1. Aggregate total return represents the change in value of an investment over
the period indicated. Since the shares have existed for less than one year,
average annual total returns are not provided.
2. This figure represents the value of a hypothetical $10,000 investment in the
fund over the period indicated. All total return figures assume reinvestment of
dividends and capital gains, if any. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or less when you sell
your shares.
Past performance is not predictive of future results.
FRANKLIN GOLD FUND
Financial Highlights
<TABLE>
<CAPTION>
Class I
Year Ended July 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $14.65 $15.07 $14.88 $15.63 $11.50
Income from investment operations:
Net investment income ................................ .07 .21 .18 .19 .21
Net realized and unrealized gains (losses) ........... (2.37) .01 .27 (.75) 4.15
Total from investment operations ...................... (2.30) .22 .45 (.56) 4.36
Less distributions:
Dividends from net investment income ................. (.09) (.13) (.20) (.19) (.23)
In excess of net investment income ................... -- -- (.06) -- --
Distributions from net realized gains ................ (.82) (.51) -- -- --
Total distributions ................................... (.91) (.64) (.26) (.19) (.23)
Net asset value, end of year .......................... $11.44 $14.65 $15.07 $14.88 $15.63
Total return* ......................................... (16.45)% 1.65% 3.14% (3.52)% 38.56%
Ratios/Supplemental Data:
Net assets, end of year (000's) ....................... $291,544 $364,032 $391,966 $418,698 $394,704
Ratios to average net assets:
Expenses ............................................. 1.05% .95% .95% .81% .62%
Expenses excluding waiver and payments by affiliate .. 1.05% .95% .95% .81% .75%
Net investment income ................................ .55% .99% 1.20% 1.30% 1.89%
Portfolio turnover rate ............................... 16.05% 28.74% 6.36% 1.46% 1.62%
Average commission rate paid** ........................ $.0156 $.0308 -- -- --
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from net
investment income were reinvested at the offering price.
**Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
Class II
Year Ended July 31,
1997 1996 1995+****
Per Share Operating Performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............. $14.61 $15.05 $15.02
Income from investment operations:
Net investment income (loss)................... (.02) .12 .12
Net realized and unrealized gains (losses) .... (2.38) (.02) .09
Total from investment operations ............... (2.40) .10 .21
Less distributions:
Dividends from net investment income .......... (.02) (.03) (.12)
In excess of net investment income ............ -- -- (.06)
Distributions from net realized gains ......... (.82) (.51) --
Total distributions ............................ (.84) (.54) (.18)
Net asset value, end of year ................... $11.37 $14.61 $15.05
Total return* .................................. (17.18)% .81% 1.45%
Ratios/Supplemental Data:
Net assets, end of year (000's) ................ $20,783 $12,977 $3,104
Ratios to average net assets:
Expenses ...................................... 1.83% 1.74% 1.73%**
Net investment income (loss) .................. (.16)% .16% .33%**
Portfolio turnover rate ........................ 16.05% 28.74% 6.36%
Average commission rate paid*** ................ $.0156 $.0308 --
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
***Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
****For the period May 1, 1995 (effective date) to July 31, 1995.
+Per share amounts have been calculated using the daily average shares
outstanding during the period.
Advisor Class
1997****
Per Share Operating Performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ... $13.12
Income from investment operations:
Net investment income ................. .07
Net realized and unrealized loss ...... (1.67)
Total from investment operations ....... (1.60)
Less distributions:
Dividends from net investment income .. (.09)
Net asset value, end of period ......... $11.43
Total return* .......................... (12.24)%
Ratios/Supplemental Data:
Net assets, end of period (000's) ...... $3,211
Ratios to average net assets:
Expenses .............................. .83%**
Net investment income.................. .80%**
Portfolio turnover rate ................ 16.05%
Average commission rate paid*** ........ $.0156
*Total return is not annualized.
**Annualized
***Relates to purchases and sales of equity securities.
****For the period January 2, 1997 (effective date) to July 31, 1997.
See notes to financial statements.
FRANKLIN GOLD FUND
Statement of Investments, July 31, 1997
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
<S> <C> <C> <C>
Common Stocks and Warrants 90.9%
Gold & Diversified Resources 9.9%
Freeport-McMoRan Copper & Gold, Inc., Class A ................ United States 308,011 $ 8,393,300
Freeport-McMoRan Copper & Gold, Inc., Class B ................ United States 131,000 3,831,750
Orogen Minerals, Ltd.......................................... Australia 720,000 2,124,859
Orogen Minerals, Ltd., ADR, 144A.............................. Australia 54,000 1,593,643
Rio Tinto, Plc. .............................................. United Kingdom 468,401 7,597,624
Teck Corp., Class B .......................................... Canada 382,100 7,672,968
-------------
31,214,144
-------------
Long Life Gold Mines 44.5%
Ashanti Goldfields Co., Ltd., Sponsored GDR, 144A ............ Africa 676,868 7,614,765
aAvgold, Ltd. ................................................. South Africa 802,872 713,819
Barrick Gold Corp. ........................................... Canada 1,282,249 29,251,305
Compania de Minas Buenaventura, SA, 144A ..................... Peru 100,592 903,832
Compania de Minas Buenaventura, SA, Class C, 144A ............ Peru 301,387 2,462,850
......Compania de Minas Buenaventura, SA, Sponsored ADR, 144A Peru 224,500 4,069,063
Driefontein Consolidated, Ltd., Sponsored ADR ................ South Africa 580,000 4,096,250
Free State Consolidated Gold Mines, Ltd., ADR ................ South Africa 433,401 2,167,005
aGetchell Gold Corp. .......................................... United States 85,500 2,853,563
aHarmony Gold Mining Co., Ltd. ................................ South Africa 273,000 1,302,396
Homestake Mining Co. ......................................... United States 431,117 5,954,804
Kloof Gold Mining Co., Ltd., Sponsored ADR ................... South Africa 268,600 1,359,788
aLihir Gold, Ltd. ............................................. Australia 1,049,600 1,494,031
Newmont Gold Co. ............................................. United States 255,000 10,773,750
Newmont Mining Corp. ......................................... United States 826,370 34,087,763
Placer Dome, Inc. ............................................ Canada 938,820 15,959,940
Southvaal Holdings, Ltd. ..................................... South Africa 144,400 3,240,898
aTVX Gold, Inc. ............................................... Canada 997,000 4,581,337
Vaal Reefs Exploration & Mining Co., Ltd., ADR ............... South Africa 1,175,000 6,021,875
Western Areas Gold Mining Co., Ltd. .......................... South Africa 230,008 1,516,262
aWestern Areas Gold Mining, Co., Ltd., ADR .................... South Africa 23,523 155,068
-------------
140,580,364
-------------
Medium Life Gold Mines 14.2%
aAcacia Resources, Ltd. ....................................... Australia 4,122,000 4,454,290
Battle Mountain Canada, Inc. ................................. Canada 583,600 3,294,073
Beatrix Mines, Ltd. .......................................... South Africa 475,000 2,678,087
aBema Gold Corp. .............................................. Canada 224,000 1,369,708
aCampbell Resources, Inc., warrants ........................... Canada 722,000 124,112
aCanyon Resources Corp. ....................................... United States 678,000 1,525,500
aDayton Mining Corp. .......................................... Canada 501,800 1,634,055
East Rand Gold and Uranium Co., Ltd., ADR .................... South Africa 197,500 263,821
aGeomaque Explorations, Ltd. .................................. Canada 754,800 1,747,854
Great Central Mines, Ltd. .................................... Australia 648,400 1,328,857
aGreenstone Resources, Ltd. ................................... Canada 568,900 5,351,834
aLeo Shield Exploration, NL ................................... Australia 2,619,730 331,901
Newcrest Mining, Ltd. ........................................ Australia 865,050 1,772,868
aNiugini Mining, Ltd. ......................................... Australia 133,750 234,242
Medium Life Gold Mines (cont.)
aNiugini Mining, Ltd., Sponsored ADR .......................... Australia 610,000 $ 1,068,293
Normandy Mining, Ltd. ........................................ Australia 3,704,336 4,279,022
aPangea Goldfields, Inc. ...................................... Canada 346,300 839,500
Plutonic Resources, Ltd. ..................................... Australia 1,874,100 5,558,765
aRandgold & Exploration Co., Ltd. ............................. South Africa 150,000 520,438
Sons of Gwalia, Ltd. ......................................... Australia 1,575,500 5,753,300
aWilliam Resources, Inc., Legend Shares ....................... Canada 229,400 268,925
aWilliams Resources, Inc. ..................................... Canada 485,333 568,955
-------------
44,968,400
-------------
Mining Finance Companies 14.1%
Anglo American Corp. of South Africa, Ltd., ADR .............. South Africa 65,000 3,688,750
De Beers Centenary, AG, ADR .................................. South Africa 559,200 20,131,200
Euro-Nevada Mining Corp. ..................................... Canada 257,100 8,037,282
Euro-Nevada Mining Corp., Legend Shares, 144A ................ Canada 45,000 1,406,759
Franco-Nevada Mining Corp., Ltd. ............................. Canada 234,100 10,994,348
Franco-Nevada Mining Corp., Ltd., Legend Shares, 144A ........ Canada 7,500 352,232
-------------
44,610,571
-------------
Platinum 7.2%
Impala Platinum Holdings, Ltd., ADR .......................... South Africa 267,800 2,932,651
aRustenburg Platinum Holdings, Ltd., ADR ...................... South Africa 840,138 14,574,630
aStillwater Mining Co., 144A .................................. United States 266,700 5,200,650
-------------
22,707,931
-------------
Gold Exploration 1.0%
aEquinox Resources, NL ........................................ Australia 3,470,000 853,387
aHelix Resources, NL .......................................... Australia 1,590,000 888,712
aRandgold Resources, Ltd., GDR, 144A .......................... Africa 90,000 1,282,500
-------------
3,024,599
-------------
Total Common Stocks and Warrants (Cost $280,764,509) 287,106,009
-------------
PRINCIPAL
AMOUNT*
Convertible Bonds 1.2%
Dayton Mining Corp., cvt. sub. deb., 144A, 7.00%, 4/01/02 .... Canada $ 2,700,000 2,403,000
Randgold & Exploration Co., Ltd.,
cvt. sub. notes, 144A, 7.00%, 9/30/01 ........................ South Africa 980,000 862,400
William Resources, Inc., cvt. sub. deb., 8.00%, 1/23/02 ...... Canada 700,000 CAD 415,369
-------------
Total Convertible Bonds (Cost $4,204,089) 3,680,769
-------------
bRepurchase Agreement 7.1%
Joint Repurchase Agreement, 5.753%,
08/01/97 (Maturity Value $22,323,747)
(Cost $22,320,181) ........................................... United States $22,320,181
Aubrey G. Lanston & Co., Inc.
Bear, Stearns & Co., Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Daiwa Securities America, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson North America, L.L.C.
Fuji Securities, Inc.
Greenwich Capital Markets, Inc.
SBC Warburg, Inc.
The Nikko Securities Co. International, Inc.
UBS Securities L.L.C.
Collateralized by U.S. Treasury Bills & Notes ................ $ 22,320,181
-------------
Total Investments (Cost $307,288,779) 99.2% .................. 313,106,959
Other Assets, less Liabilities .8%............................ 2,431,820
-------------
Net Assets 100.0% ............................................ $315,538,779
-------------
</TABLE>
CURRENCYABBREVIATIONS:
CAD - Canadian dollar
*Securities traded in U.S. dollars unless otherwise indicated.
aNon-income producing.
bInvestment is through participation in a joint account with other funds managed
by the investment advisor. At July 31, 1997, all repurchase agreements held by
the Fund had been entered into on that date.
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements
Statement of Assets and Liabilities
July 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at value (cost $307,288,779) ................................... $313,106,959
Cash ...................................................................................... 2,091,710
Receivables:
Capital shares sold ...................................................................... 817,786
Dividends and interest ................................................................... 533,098
From affiliates .......................................................................... 12,744
-------------
Total assets ......................................................................... 316,562,297
-------------
Liabilities:
Payables:
Investment securities purchased .......................................................... 111,637
Capital shares redeemed .................................................................. 193,536
To affiliates ............................................................................ 282,627
To shareholders .......................................................................... 370,534
Other liabilities ......................................................................... 65,184
-------------
Total liabilities .................................................................... 1,023,518
-------------
Net assets, at value ................................................................ $315,538,779
=============
Net assets consist of:
Undistributed net investment income ....................................................... $ 142,947
Net unrealized appreciation ............................................................... 5,818,166
Accumulated net realized loss ............................................................. (8,983,411)
Capital shares ............................................................................ 318,561,077
-------------
Net assets, at value ................................................................. $315,538,779
=============
Class I:
Net asset value per share ($291,544,305 / 25,485,921 shares outstanding)* ................. $11.44
=============
Maximum offering price per share ($11.44 / 95.5%) ......................................... $11.98
=============
Class II:
Net asset value per share ($20,782,989 / 1,827,083 shares outstanding)* ................... $11.37
=============
Maximum offering price per share ($11.37 / 99%) ........................................... $11.48
=============
Advisor class:
Net asset value and offering price per share ($3,211,485 / 280,883 shares outstanding) .... $11.43
=============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
<TABLE>
<CAPTION>
Statement of Operations
for the year ended July 31, 1997
<S> <C> <C>
Investment income:
(net of foreign taxes and fees of $312,796)
Dividends .................................................................. $ 4,319,719
Interest ................................................................... 1,345,290
-------------
Total investment income ............................................... $ 5,665,009
Expenses:
Management fees (Note 5) ................................................... 1,822,259
Distribution fees (Note 5)
Class I ................................................................... 741,295
Class II .................................................................. 173,568
Transfer agent fees (Note 5) ............................................... 624,805
Custodian fees ............................................................. 130,056
Reports to shareholders .................................................... 211,385
Registration and filing fees ............................................... 60,455
Professional fees .......................................................... 34,560
Directors' fees and expenses ............................................... 17,045
Other ...................................................................... 21,695
-------------
Total expenses ........................................................ 3,837,123
-------------
Net investment income ................................................ 1,827,886
-------------
Realized and unrealized losses:
Net realized loss from:
Investments ............................................................... (8,934,661)
Foreign currency transactions ............................................. (41,037)
-------------
Net realized loss .......................................................... (8,975,698)
Net unrealized depreciation on:
Investments ............................................................... (52,315,461)
Translation of assets and liabilities denominated in foreign currencies ... (282)
-------------
Net unrealized depreciation ................................................ (52,315,743)
-------------
Net realized and unrealized loss ............................................ (61,291,441)
-------------
Net decrease in net assets resulting from operations ........................ $(59,463,555)
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended July 31, 1997 and 1996
1997 1996
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ..................................................... $ 1,827,886 $ 3,861,666
Net realized gain (loss) from investments and foreign currency transactions (8,975,698) 41,757,308
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies .............................. (52,315,743) (38,799,755)
---------------------------
Net increase (decrease) in net assets resulting from operations ....... (59,463,555) 6,819,219
Distributions to shareholders from:
Net investment income:
Class I .................................................................. (2,234,184) (3,188,716)
Class II ................................................................. (21,024) (18,297)
Advisor Class ............................................................ (14,937) --
Net realized gains:
Class I .................................................................. (20,163,382) (12,724,819)
Class II ................................................................. (911,251) (144,240)
Capital share transactions (Note 2)
Class I ................................................................... 5,704,541 (19,517,482)
Class II .................................................................. 12,219,430 10,713,247
Advisor Class ............................................................. 3,414,037 --
---------------------------
Net decrease in net assets ............................................ (61,470,325) (18,061,088)
Net assets:
Beginning of year .......................................................... 377,009,104 395,070,192
---------------------------
End of year ................................................................ $315,538,779 $377,009,104
===========================
Undistributed net investment income
(accumulated distributions in excess of net investment
income) included in net assets:
Beginning of year ......................................................... $ 584,768 $ (1,149,902)
===========================
End of year ............................................................... $ 142,947 $ 584,768
===========================
</TABLE>
See notes to financial statements.
FRANKLIN GOLD FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Gold Fund (the Fund) is registered under the Investment Company Act of
1940 as a diversified, open-end investment company. The Fund seeks capital
appreciation.
The following summarizes the Fund's significant accounting policies.
a. Security Valuation:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. Income Taxes:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute substantially all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Realized and unrealized gains and 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.
d. Foreign Currency Translation:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. 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. CAPITAL STOCK
The Fund offers three classes of shares: Class I, Class II and Advisor Class.
The shares have the same rights except for their initial sales load,
distribution fees, voting rights on matters affecting a single class and the
exchange privilege of each class.
At July 31, 1997, there were 100 million shares authorized ($0.10 par value), of
which 45 million shares each were designated as Class I and Class II, and 10
million shares were designated as Advisor Class. Transactions in the Fund's
shares were as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------------
1997 1996
--------------------------------------------------------
Class I Shares: Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 37,310,473 $487,562,871 25,634,973 $399,883,240
Shares issued in reinvestment of distributions ... 1,410,265 18,492,485 923,993 13,015,891
Shares redeemed ..................................(38,082,550) (500,350,815) (27,721,440) (432,416,613)
--------------------------------------------------------
Net increase (decrease) .......................... 638,188 $ 5,704,541 (1,162,474)$ (19,517,482)
========================================================
Class II Shares: Shares Amount Shares Amount
Shares sold ...................................... 1,412,506 $ 18,343,389 907,471 $ 14,300,321
Shares issued in reinvestment of distributions ... 56,807 744,729 10,276 144,486
Shares redeemed .................................. (530,783) (6,868,688) (235,465) (3,731,560)
--------------------------------------------------------
Net increase ..................................... 938,530 $ 12,219,430 682,282 $ 10,713,247
========================================================
Period Ended July 31, 1997*
----------------------------
Advisor Class Shares: Shares Amount
- ------------------------------------------------------------------------------
Shares sold ...................................... 429,697 $ 5,074,980
Shares issued in reinvestment of distributions ... 1,042 12,789
Shares redeemed .................................. (149,856) (1,673,732)
---------------------------
Net increase ..................................... 280,883 $ 3,414,037
===========================
*Effective date of Advisor Class shares was January 2, 1997.
</TABLE>
3. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 1997 aggregated $52,974,751 and $57,287,946, respectively.
4. INCOME TAXES
At July 31, 1997, the Fund had tax basis capital losses of $6,513,315 which may
be carried over to offset future capital gains. Such losses expire in 2005.
At July 31, 1997, the Fund has deferred capital losses occurring subsequent to
October 31, 1996 of $2,470,096. For tax purposes, such losses will be reflected
in the year ending July 31, 1998.
At July 31, 1997, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes of $307,288,779 was as follows:
Unrealized appreciation ........ $74,469,363
Unrealized depreciation ........ (68,651,183)
------------
Net unrealized appreciation .... $ 5,818,180
============
Net investment income and net realized capital gains (losses) differ for
financial statement and tax purposes primarily due to differing treatments of
foreign currency transactions.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers Inc. (Advisers), Franklin/ Templeton Distributors, Inc.
(Distributors), Franklin Templeton Services, Inc. (FT Services) and
Franklin/Templeton Investor Services, Inc. (Investor Services), the Fund's
investment manager, principal underwriter, administrative manager and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers based on the average net
assets of the Fund 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
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
The Fund reimburses Distributors up to 0.25% and 1.00% per year of the average
daily net assets of Class I and Class II, respectively, for costs incurred in
marketing the Fund's shares.
Distributors paid net commissions on sales of Fund shares, and received
contingent deferred sales charges for the year of $203,967 and $24,272,
respectively.
FRANKLIN GOLD FUND
Report of Independent Accountants
To the Shareholders and Board of Directors
of the 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, as of
July 31, 1997, 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 included confirmation of securities owned as of July
31, 1997, 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, 1997, 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 its financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
September 2, 1997
FRANKLIN GOLD FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the fund hereby designates
38.95% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended July 31, 1997.
At July 31, 1997, more than 50% of the Franklin Gold Fund's 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 1998, shareholders will receive Form 1099-DIV which will include
his/her share of taxes withheld and foreign source income distributed during
calendar year 1997.
a. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I shareholders in December 1996:
Foreign TaxesForeign Source
Withheld Income
Country Per Share Per Share
Australia .......... $0.001900 $0.006400
Canada ............. 0.001600 0.004000
Peru ............... 0.000000 0.000400
South Africa ....... 0.000300 0.008100
United Kingdom ..... 0.001500 0.001200
Total .............. $0.005300 $0.020100
b. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class II shareholders in December 1996:
Foreign TaxesForeign Source
Withheld Income
Country Per Share Per Share
Australia .......... $0.001900 $0.004900
Canada ............. 0.001600 0.003100
Peru ............... 0.000000 0.000200
South Africa ....... 0.000300 0.006100
United Kingdom ..... 0.001500 0.000900
Total .............. $0.005300 $0.015200
c. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I shareholders in June 1997:
Foreign TaxesForeign Source
Withheld Income
Country Per Share Per Share
Australia .......... $0.001700 $0.005600
Canada ............. 0.002500 0.009100
Peru ............... 0.000000 0.000600
South Africa ....... 0.000200 0.022000
United Kingdom ..... 0.000500 0.002600
Total .............. $0.004900 $0.039900
d. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class II shareholders in June 1997:
Foreign TaxesForeign Source
Withheld Income
Country Per Share Per Share
Australia .......... $0.001700 $0.000700
Canada ............. 0.002500 0.001200
Peru ............... 0.000000 0.000100
South Africa ....... 0.000200 0.003000
United Kingdom ..... 0.000500 0.000300
Total .............. $0.004900 $0.005300
e. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Advisor Class shareholders in June 1997:
Foreign TaxesForeign Source
Withheld Income
Country Per Share Per Share
Australia .......... $0.001700 $0.007300
Canada ............. 0.002500 0.011800
Peru ............... 0.000000 0.000800
South Africa ....... 0.000200 0.028300
United Kingdom ..... 0.000500 0.003400
Total .............. $0.004900 $0.051600
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 Annual Report July 31, 1997.
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 format the geographic distribution of the fund's
securities on July 31, 1997, based on total net assets.
Geographic Distribution on July 31, 1997
Canada 30.5%
South Africa 23.4%
United States 23.0%
Australia 10.1%
Other 5.2%
Cash & Short-Term Securities 7.8%
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the
Franklin Gold Fund Class I shares to that of the S&P 500 Stock Index, based
on a $10,000 investment from 8/1/87 to 7/31/97.
Period Ending Fund S&P 500
Date Franklin Gold S&P 500
Fund Class-I
8/1/1987 $9,552 $10,000
8/31/1987 $9,564 $10,373
9/30/1987 $9,742 $10,146
10/31/1987 $6,963 $7,960
11/30/1987 $7,899 $7,304
12/31/1987 $7,531 $7,860
1/31/1988 $6,390 $8,191
2/29/1988 $6,485 $8,573
3/31/1988 $7,147 $8,308
4/30/1988 $7,015 $8,400
5/31/1988 $7,159 $8,473
6/30/1988 $7,033 $8,861
7/31/1988 $7,063 $8,828
8/31/1988 $6,704 $8,528
9/30/1988 $6,469 $8,891
10/31/1988 $6,731 $9,138
11/30/1988 $6,975 $9,007
12/31/1988 $6,736 $9,165
1/31/1989 $7,007 $9,836
2/28/1989 $7,296 $9,591
3/31/1989 $7,333 $9,814
4/30/1989 $7,283 $10,324
5/31/1989 $6,905 $10,742
6/30/1989 $7,420 $10,681
7/31/1989 $7,550 $11,645
8/31/1989 $7,748 $11,873
9/30/1989 $8,032 $11,825
10/31/1989 $8,120 $11,550
11/30/1989 $9,232 $11,786
12/31/1989 $9,557 $12,069
1/31/1990 $10,092 $11,259
2/28/1990 $9,194 $11,404
3/31/1990 $8,916 $11,707
4/30/1990 $8,174 $11,415
5/31/1990 $8,775 $12,528
6/30/1990 $8,258 $12,444
7/31/1990 $8,836 $12,404
8/31/1990 $8,579 $11,283
9/30/1990 $8,322 $10,733
10/31/1990 $7,518 $10,687
11/30/1990 $7,299 $11,378
12/31/1990 $7,694 $11,695
1/31/1991 $6,995 $12,205
2/28/1991 $7,740 $13,078
3/31/1991 $7,594 $13,394
4/30/1991 $7,641 $13,426
5/31/1991 $7,927 $14,005
6/30/1991 $8,298 $13,364
7/31/1991 $8,492 $13,986
8/31/1991 $7,670 $14,318
9/30/1991 $7,884 $14,079
10/31/1991 $8,412 $14,267
11/30/1991 $8,612 $13,692
12/31/1991 $8,148 $15,259
1/31/1992 $8,182 $14,975
2/29/1992 $7,889 $15,168
3/31/1992 $7,671 $14,872
4/30/1992 $7,515 $15,310
5/31/1992 $7,977 $15,385
6/30/1992 $8,001 $15,155
7/31/1992 $7,918 $15,775
8/31/1992 $7,547 $15,452
9/30/1992 $7,299 $15,633
10/31/1992 $6,707 $15,686
11/30/1992 $6,273 $16,219
12/31/1992 $6,490 $16,419
1/31/1993 $6,518 $16,556
2/28/1993 $7,041 $16,782
3/31/1993 $7,848 $17,136
4/30/1993 $8,782 $16,721
5/31/1993 $9,875 $17,168
6/30/1993 $9,990 $17,217
7/31/1993 $10,980 $17,148
8/31/1993 $9,863 $17,798
9/30/1993 $8,992 $17,661
10/31/1993 $10,053 $18,027
11/30/1993 $9,870 $17,856
12/31/1993 $11,275 $18,072
1/31/1994 $11,077 $18,686
2/28/1994 $10,567 $18,180
3/31/1994 $10,680 $17,387
4/30/1994 $10,206 $17,610
5/31/1994 $10,425 $17,898
6/30/1994 $10,330 $17,460
7/31/1994 $10,594 $18,033
8/31/1994 $11,135 $18,772
9/30/1994 $12,039 $18,314
10/31/1994 $11,462 $18,726
11/30/1994 $10,302 $18,044
12/31/1994 $10,742 $18,311
1/31/1995 $9,139 $18,786
2/28/1995 $9,654 $19,518
3/31/1995 $10,606 $20,094
4/30/1995 $10,692 $20,685
5/31/1995 $10,556 $21,512
6/30/1995 $10,629 $22,011
7/31/1995 $10,926 $22,742
8/31/1995 $10,940 $22,799
9/30/1995 $10,991 $23,761
10/31/1995 $9,766 $23,676
11/30/1995 $10,484 $24,715
12/31/1995 $10,604 $25,192
1/31/1996 $12,295 $26,048
2/29/1996 $12,325 $26,291
3/31/1996 $12,363 $26,543
4/30/1996 $12,514 $26,933
5/31/1996 $12,989 $27,628
6/30/1996 $11,356 $27,733
7/31/1996 $11,106 $26,507
8/31/1996 $11,545 $27,067
9/30/1996 $10,856 $28,590
10/31/1996 $10,886 $29,380
11/30/1996 $10,803 $31,601
12/31/1996 $10,715 $30,975
1/31/1997 $10,239 $32,911
2/28/1997 $11,473 $33,168
3/31/1997 $10,215 $31,804
4/30/1997 $9,569 $33,703
5/31/1997 $10,061 $35,756
6/30/1997 $9,441 $37,358
7/31/1997 $9,278 $40,331
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the
Franklin Gold Fund Class II shares to that of the S&P 500 Stock Index, based
on a $10,000 investment from 5/1/95 to 7/31/97.
Period Ending Fund S&P 500
Date Gold Class II S&P 500
5/1/1995 $9,901 $10,000
5/31/1995 $9,717 $10,400
6/30/1995 $9,777 $10,641
7/31/1995 $10,044 $10,995
8/31/1995 $10,051 $11,022
9/30/1995 $10,091 $11,487
10/31/1995 $8,963 $11,446
11/30/1995 $9,617 $11,948
12/31/1995 $9,715 $12,179
1/31/1996 $11,253 $12,593
2/29/1996 $11,280 $12,710
3/31/1996 $11,301 $12,832
4/30/1996 $11,433 $13,021
5/31/1996 $11,855 $13,357
6/30/1996 $10,362 $13,407
7/31/1996 $10,126 $12,815
8/31/1996 $10,521 $13,085
9/30/1996 $9,890 $13,822
10/31/1996 $9,911 $14,203
11/30/1996 $9,828 $15,277
12/31/1996 $9,743 $14,975
1/31/1997 $9,307 $15,911
2/28/1997 $10,415 $16,035
3/31/1997 $9,263 $15,376
4/30/1997 $8,673 $16,294
5/31/1997 $9,116 $17,286
6/30/1997 $8,540 $18,060
7/31/1997 $8,392 $19,498
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the
Franklin Gold Fund Advisor Class shares to that of the S&P 500 Stock Index,
based on a $10,000 investment from 1/2/97 to 7/31/97.
Period Ending Fund S&P 500
Date Gold(Adv.Class) S&P 500
1/ 2/97 $10,000 $10,000
1/31/97 $9,680 $10,625
2/28/97 $10,846 $10,708
3/31/97 $9,657 $10,268
4/30/97 $9,047 $10,881
5/30/97 $9,520 $11,543
6/30/97 $8,922 $12,061
7/31/97 $8,776 $13,021
