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.
March 17, 1997
Dear Shareholder:
This report of the Franklin Gold Fund covers the six-month period ended January
31, 1997. After reaching a four-year peak in February 1996, the price of gold
began a sustained downturn that continued throughout the reporting period.
Between July 31, 1996 and January 31, 1997, it fell from $387.05 per ounce to
$344.35, its lowest level in nearly three years. Within this environment, the
fund's Class I shares produced a total return of -7.81%, as discussed in the
Performance Summary on page 5.
As you know, gold is frequently purchased by investors as a hedge against
inflation. However, lack of inflationary growth of the U.S. economy during the
reporting period discouraged this practice, and gold prices fell. The gold
market was also adversely impacted by sales of gold from several sources. For
example, European central banks sold stockpiled gold, as their governments tried
to meet requirements for joining the European Monetary Union. Mining companies
sold gold that won't actually be mined or delivered until a specified future
date (forward sales), and foreigners took advantage of the strong U.S. dollar to
sell gold at high prices when measured in their local currencies. Short-selling
by speculators applied still further downward pressure to the market.
Realizing that these conditions may prove to be temporary, we maintained our
large positions in major North American producers such as Barrick Gold Corp.,
Newmont Mining Corp., and Placer Dome Inc. We believe these securities offer
opportunities for long-term capital appreciation because of the companies' large
gold ore reserves, steady rates of production, low operating costs, and
top-quality management. We initiated positions in Getchell Gold, a low-cost
producer in Nevada; Orogen Minerals, a diversified mining and energy company
with significant assets in Papua New Guinea; and Equinox and Helix, two small
Australian exploration companies. In our opinion, these companies have strong
exploration and mining potential.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we remain optimistic about the long-term historical role for
gold. While there is a risk that the factors depressing gold prices in 1996
could continue in 1997, we feel that much of this risk may already be reflected
in the price of gold at the end of the reporting period. And if demand for gold
continues to exceed newly mined supply, as it has for the past several years,
any decrease in sales by central banks, producer forward-sales, or speculative
short-selling should allow market fundamentals to support a gradual price
increase. A return to an inflationary environment could also renew investor
interest. Given this outlook, we will maintain our emphasis on those mining
companies we feel are capable of increasing reserves, production, cash flow, and
earnings over the long term.
Franklin Gold Fund
Top 10 Holdings on 1/31/97
As a Percentage of Total Net Assets
% of Total
Company, Country Net Assets
Barrick Gold Corp. 10.2%
Canada
Newmont Mining Corp. 7.0%
U.S.
Placer Dome Inc. 5.7%
Canada
DeBeers Consolidated Mines Ltd., ADR 5.2%
South Africa
Santa Fe Pacific Gold Corp. 5.1%
U.S.
Freeport-McMoRan Copper & Gold Inc. 3.6%
U.S.
TVX Gold Inc. 3.4%
Canada
Rustenburg Platinum Holdings Ltd., ADR 3.3%
South Africa
Franco-Nevada Mining Corp. Ltd. 3.1%
Canada
Teck Corp., Class B 2.5%
Canada
For a complete list of portfolio holdings, please see page 9 of this report.
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,
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 believe the fund has a useful place in a diversified investment portfolio as
potential protec-tion against economic uncertainty and inflation.
As discussed in the prospectus, however, it is subject to special risks,
including those related to fluctuations in the price of gold and other precious
metals, and the currency fluctuation and political uncertainty associated with
foreign investing and developing markets.
We appreciate your participation in the Franklin Gold Fund and welcome any
comments or suggestions you may have.
Sincerely,
Charles B. Johnson
Chairman
Franklin Gold Fund
- --------------------------------------------------------------------------------
-- Celebrating 50 Years --
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
We thank you for your past support and look forward to serving your investment
needs in the years ahead.
- --------------------------------------------------------------------------------
Performance Summary
Class I
The Franklin Gold Fund - Class I reported a total return of -7.81% for the
six-month period, and -16.72% for the one-year period ended January 31, 1997.
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 on page 6, the fund's shares provided a
cumulative total return of +83.28% and an average annual total return of +5.75%
over the 10-year period ended January 31, 1997.
As measured by net asset value, the price of the fund's shares decreased by
$1.96, from $14.65 on July 31, 1996, to $12.69 on January 31, 1997. During the
reporting period, shareholders received distributions of 2.5 cents ($0.025) per
share in income dividends and 82.3 cents ($0.823) in long-term capital gains. Of
course, past performance cannot guarantee future results, and distributions will
vary depending on income earned by the fund, as well as any profits realized
from the sale of securities in the portfolio.
<TABLE>
<CAPTION>
Franklin Gold Fund
Class I
Periods ended 1/31/97
Since
Inception
One-Year Five-Year Ten-Year (5/19/69)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1.............. -16.72% 25.14% 83.28% 272.28%
Average Annual Total Return2.......... -20.48% 3.62% 5.75% 4.68%
Value of $10,000 Investment3.......... $7,952 $11,948 $17,496 $35,551
- ---------------------------------------------------------------------------------------
1/31/93 1/31/94 1/31/95 1/31/96 1/31/97
One-Year Total Return4........... -20.33% 69.94% -17.50% 34.53% -16.72%
- ---------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes 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. See Note below.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does 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 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 predictive of future
results.
Performance Summary
Class II
The Franklin Gold Fund - Class II reported a total return of -8.08% for the
six-month period, and -17.29% for the one-year period ended January 31, 1997.
Total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains, and does not include sales charges.
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 measured by net asset value, the price of the fund's shares decreased by
$1.99, from $14.60 on July 31, 1996, to $12.61 on January 31, 1997. During the
reporting period, shareholders received distributions of 1.9 cents ($0.019) per
share in income dividends and 82.3 cents ($0.823) in long-term capital gains. Of
course, past performance cannot guarantee future results, and distributions will
vary depending on income earned by the fund, as well as any profits realized
from the sale of securities in the portfolio.
Franklin Gold Fund
Class II
Periods ended 1/31/97
Since
Inception
One-Year (5/1/95)
- -------------------------------------------------
Cumulative
Total Return1........... -17.29% -6.00%
Average Annual
Total Return2........... -18.86% -4.01%
Value of $10,000
Investment3............. $8,114 $9,307
- --------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.00% initial sales
charge and 1.00% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment. 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 charges. See Note below.
Note: Investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Performance Summary
Advisor Class
The Franklin Gold Fund - Advisor Class reported a total return of -3.20% for the
one-month period beginning with inception on January 2, 1997 and ending January
31, 1997. Total return measures the change in value of an investment.
As measured by net asset value, the price of the fund's shares decreased by
$0.42, from $13.12 on January 2, 1997, to $12.70 on January 31, 1997. Of course,
past performance cannot guarantee future results.
Franklin Gold Fund
Advisor Class
Period ended 1/31/97
Since
Inception
(1/2/97)
- ---------------------------------------------------
Aggregate Total Return1................ -3.20%
Value of $10,000 Investment2........... $9,680
- ---------------------------------------------------
1. Aggregate total return represents the average annual change in value of an
investment over the period indicated. See Note below.
2. These figures represent the value of a hypothetical $10,000 investment in the
fund over the period indicated. See Note below.
Note: Investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Statement of Investments in Securities and Net Assets, January 31, 1997 (unaudited)
Shares/ Value
Country* Warrants (Note 1)
- ----------------------------------------------------------------------------------------------------------------
Common Stocks and Warrants 94.0%
Gold & Diversified Resources9.0%
<S> <C> <C> <C>
US 308,011 Freeport-McMoran Copper & Gold, Inc., Class A ..................... $ 8,431,801
US 131,000 Freeport-McMoran Copper & Gold, Inc., Class B...................... 3,766,250
AU 720,000 aOrogen Minerals, Ltd. ............................................. 1,603,392
US 54,000 a,bOrogen Minerals, Ltd., ADR ........................................ 1,202,542
GB 468,401 RTZ Corp., Plc. ................................................... 6,829,753
CA 382,100 Teck Corp., Class B ............................................... 8,593,527
------------
30,427,265
------------
Long Life Gold Mines 50.8%
US 666,300 bAshanti Goldfields Co., ADS ....................................... 8,245,463
US 1,282,249 Barrick Gold Corp. ................................................ 34,460,442
CA 583,600 Battle Mountain Canada, Inc. ...................................... 3,833,631
ZA 475,000 Beatrix Mines, Ltd................................................. 2,786,458
PE 100,592 Compania de Minas Buenaventura, SA ................................ 787,539
PE 301,387 Compania de Minas Buenaventura, SA, Class C........................ 2,065,481
US 224,500 a,bCompania de Minas Buenaventura, SA, Sponsored ADR ................. 3,563,938
US 580,000 Driefontein Consolidated Mines, Ltd., ADR ......................... 5,274,404
US 433,401 Free State Consolidated Gold Mines, Ltd., ADR ..................... 3,169,245
CA 568,900 aGreenstone Resources, Ltd. ........................................ 6,861,848
US 431,117 Homestake Mining Co. .............................................. 6,089,528
US 268,600 Kloof Gold Mining Co., Ltd., ADR .................................. 1,947,350
AU 1,049,600 aLihir Gold, Ltd. .................................................. 1,753,042
US 255,000 Newmont Gold Co. .................................................. 10,168,125
US 341,604 Newmont Mining Corp. .............................................. 13,621,459
US 938,820 Placer Dome, Inc. ................................................. 19,128,458
ZA 900,000 Randgold & Exploration ............................................ 7,342,105
US 1,127,363 Sante Fe Pacific Gold Corp. ....................................... 17,333,206
CA 1,497,000 aTVX Gold, Inc. .................................................... 11,611,542
US 1,175,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR .................... 7,857,813
US 123,409 Western Areas Gold Mining, ADR ................................... 1,326,107
ZA 213,008 Western Areas Gold Mining Co. , Ltd. .............................. 2,288,902
------------
171,516,086
------------
Medium Life Gold Mines 19.6%
AU 3,483,000 aAcacia Resources, Ltd. ............................................ 5,950,123
CA 722,000 aCampbell Resources, Inc., warrants ................................ 248,224
US 678,000 aCanyon Resources Corp. ............................................ 1,567,875
CA 501,800 aDayton Mining Corp. ............................................... 2,793,468
US 197,500 East Rand Gold & Uranium Co., Ltd., ADR ........................... 359,490
CA 257,100 Euro-Nevada Mining Corp. .......................................... 6,822,286
Medium Life Gold Mines (cont.)
CA 45,000 bEuro-Nevada Mining Corp., Legend Shares ........................... $ 1,194,099
CA 234,100 Franco-Nevada Mining Corp., Ltd. .................................. 10,078,159
CA 7,500 bFranco-Nevada Mining Corp., Ltd., Legend Shares ................... 322,880
CA 754,800 aGeomaque Explorations, Ltd......................................... 1,568,707
US 55,500 aGetchell Gold ..................................................... 2,011,875
AU 648,400 aGreat Central Mines, Ltd. ......................................... 1,552,734
US 904,900 Hartebeestfontein Gold Mining Co., Ltd., ADR ...................... 1,851,878
AU 2,619,730 aLeo Shield Exploration ............................................ 1,378,574
AU 865,050 Newcrest Mining, Ltd. ............................................. 3,311,840
AU 133,750 aNiugini Mining, Ltd. .............................................. 300,913
US 610,000 aNiugini Mining, Ltd., ADR ......................................... 1,372,378
AU 3,704,336 aNormandy Mining ................................................... 4,491,919
CA 346,300 aPangea Goldfields, Inc. ........................................... 1,388,027
AU 1,874,100 Plutonic Resources, Ltd. .......................................... 7,503,718
AU 1,575,500 Sons of Gwalia, Ltd. .............................................. 8,050,403
CA 409,200 aWilliam Resources, Inc., warrants ................................. 391,811
CA 1,622,800 aWilliam Resources, Inc. ........................................... 1,553,841
------------
66,065,222
------------
Mining Finance Companies 6.2%
US 65,000 Anglo American Corp. of South Africa, Ltd., Unsponsored ADR........ 3,607,500
US 559,200 DeBeers Consolidated Mines, Ltd., ADR ............................. 17,405,100
------------
21,012,600
------------
Platinum 5.4%
US 267,800 Impala Platinum Holdings, Ltd., ADR ............................... 2,657,433
US 833,970 Rustenburg Platinum Holdings, Ltd., ADR ........................... 11,201,885
US 266,700 a,bStillwater Mining Co. ............................................. 4,433,888
------------
18,293,206
------------
Gold Exploration 3.0%
CA 216,500 aBre-X Minerals, Ltd................................................ 3,519,280
CA 21,650 aBro-X Minerals, Ltd. .............................................. 31,336
AU 2,470,000 aEquinox Resources, NL ............................................. 1,582,343
AU 1,590,000 Helix Resources, NL ............................................... 4,911,075
------------
10,044,034
------------
Total Common Stocks and Warrants (Cost $298,041,866) ........ 317,358,413
------------
US $ 980,000 Randgold & Exploration cvt, sub. notes, 9.66%, 01/23/02 ........... $ 1,031,450
CA 700,000 William Resources, Inc., cvt. sub. notes, 7.00%, 10/03/01 ......... 550,752
------------
Total Convertible Corporate Bonds (Cost $1,504,089) ......... 1,582,202
------------
Total Long Term Investments (Cost $283,580,821) ............. 318,940,615
------------
c,dReceivables from Repurchase Agreements 5.3%
US 17,796,721 Joint Repurchase Agreements, 5.496%, 02/03/97
(Maturity Value $17,914,367) (Cost $17,906,166)
Aubrey G. Lanston & Co., Inc., (Maturity Value $1,935,279)
Collateral: U.S. Treasury Bills, 06/05/97
U.S. Treasury Notes, 5.125% - 9.125%, 04/30/97 - 05/15/99
B.T. Securities Corp., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 6.00% - 7.125%, 12/31/97 - 10/15/98
Chase Securities, Inc., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 5.25%, 12/31/97
Daiwa Securities America, Inc., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 5.50% - 8.875%, 11/15/98 - 08/31/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 5.50% - 6.125%, 07/31/97 - 12/31/00
Greenwich Capital Markets, Inc., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 6.00% - 7.75%, 08/31/97 - 12/31/99
SBC Warburg, Inc., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 6.625%, 06/30/01
The Nikko Securities Co. International, Inc., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 6.25% - 8.75%, 07/15/99 - 06/30/01
UBS Securities L.L.C., (Maturity Value $1,997,386)
Collateral: U.S. Treasury Notes, 5.875% - 13.375%,
06/30/98 - 08/15/01 ............................................. 17,906,166
------------
Total Investments ( Cost $301,486,987) 99.8% ............. 336,846,781
Other Assets and Liabilities, Net 0.2% ................... 840,461
------------
Net Assets 100.0% ........................................ $337,687,242
============
At January 31, 1997, the net unrealized appreciation based on the cost
of investments for income tax purposes of $301,486,987 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ....................... $ 76,845,627
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ....................... (41,485,833)
------------
Net unrealized appreciation ..................................... $ 35,359,794
============
COUNTRY LEGEND:
AU - Australia
CA - Canada
GB - United Kingdom
PE - Peru
US - United States
ZA - South Africa
*Securities traded in currency of country indicated and valued in U.S. dollars.
a Non-income producing.
bPurchased in a private placement transaction; resale may only be to qualified institutional buyers.
cFace amount for repurchase agreements is for the underlying collateral
dSee Note 1(f) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.>>
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements
Statement of Assets and Liabilities
January 31, 1997 (unaudited)
Assets:
<S> <C>
Investments in securities, at value (identified cost $283,580,821)............................. $318,940,615
Receivables from repurchase agreements, at value and cost ..................................... 17,906,166
Cash .......................................................................................... 54,323
Receivables:
Dividends and interest ....................................................................... 299,105
Investment securities sold ................................................................... 191,519
Capital shares sold .......................................................................... 800,676
Other assets .................................................................................. 72,480
------------
Total assets ............................................................................. 338,264,884
------------
Liabilities:
Payables:
Capital shares repurchased ................................................................... 221,170
Management fees .............................................................................. 147,461
Distribution fees ............................................................................ 209,011
------------
Total liabilities ........................................................................ 577,642
------------
Net assets, at value ........................................................................... $337,687,242
============
Net assets consist of:
Undistributed net investment income ........................................................... $ 306,593
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies ............................................ 35,359,423
Accumulated net realized loss from investments ............................................... (6,275,236)
Class I capital shares......................................................................... 287,308,488
Class II capital shares........................................................................ 20,840,780
Advisor Class capital shares .................................................................. 147,194
------------
Net assets, at value ........................................................................... $337,687,242
============
Class I Shares:
Net assets, at value .......................................................................... $319,816,203
============
Shares outstanding ............................................................................ 25,202,828
============
Net asset value per share*..................................................................... $12.69
============
Class II Shares:
Net assets, at value .......................................................................... $ 17,725,894
============
Shares outstanding ............................................................................ 1,406,117
============
Net asset value per share*..................................................................... $12.61
============
Advisor Class Shares:
Net assets, at value .......................................................................... $145,145
============
Shares outstanding ............................................................................ 11,428
============
Net asset value per share*..................................................................... $12.70
============
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statement of Operations
for the six months ended January 31, 1997 (unaudited)
Investment income:
<S> <C>
Dividends, net of foreign taxes withheld $140,001 ................................. $1,510,787
Interest .......................................................................... 644,719
------------
Total income ................................................................. $ 2,155,506
------------
Expenses:
Management fees (Note 5) .......................................................... 942,653
Distribution fees- Class I (Note 5) ............................................... 368,682
Distribution fees- Class II (Note 5) .............................................. 75,958
Shareholder servicing costs (Note 5) .............................................. 267,137
Reports to shareholders ........................................................... 108,746
Registration fees ................................................................. 34,024
Custodian fees..................................................................... 9,895
Professional fees.................................................................. 19,187
Directors' fees and expenses ...................................................... 9,173
Other.............................................................................. 5,359
------------
Total expenses ............................................................... 1,840,814
------------
Net investment income ....................................................... 314,692
------------
Realized and unrealized loss from investments and foreign currency:
Net realized loss from:
Investments....................................................................... (6,176,566)
Foreign currency transactions .................................................... (33,021)
Net unrealized depreciation on:
Investments ...................................................................... (22,773,848)
Translation of assets and liabilities denominated in foreign currencies........... (638)
------------
Net realized and unrealized loss on investments and foreign currency................ (28,984,073)
------------
Net decrease in net assets resulting from operations................................ $(28,669,381)
============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN GOLD FUND
Financial Statements (cont.)
Statements of Changes in Net Assets
for the six months ended January 31, 1997 (unaudited)
and the year ended July 31, 1996
Six Months Ended Year Ended
January 31, 1997 July 31, 1996
-------------- --------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income......................................................... $ 314,692 $ 3,861,666
Net realized gain (loss) from investments and foreign currency transactions... (6,209,587) 41,757,308
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies ............................... (22,774,486) (38,799,755)
----------- -----------
Net increase (decrease) in net assets resulting from operations .......... (28,669,381) 6,819,219
Distributions to shareholders from undistributed net investment income:
Class I ....................................................................... (612,513) (3,188,716)
Class II ...................................................................... (21,024) (18,297)
Distributions to shareholders from undistributed net capital gain:
Class I ....................................................................... (20,164,082) (12,724,819)
Class II ...................................................................... (911,252) (144,240)
Increase (decrease) in net assets from capital share transactions (Note 3 ) .... 11,056,390 (8,804,235)
----------- -----------
Net decrease in net assets ............................................... (39,321,862) (18,061,088)
Net assets:
Beginning of period ........................................................... 377,009,104 395,070,192
----------- -----------
End of period (including undistributed net investment income
of $306,593 at 1/31/97 and $649,709 at 7/31/96)............................... $337,687,242 $377,009,104
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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 investment objective of the Fund is capital appreciation.
The Fund offers three classes of shares, Class I, Class II, and Advisor Class.
Class I shares are sold with a higher front-end sales charge than Class II
shares. Each class of shares may be subject to a contingent deferred sales
charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. Effective January 1, 1997, the Fund
offers Advisor Class shares to certain qualified investors. Realized and
unrealized gains or losses and net investment income, other than class specific
expenses, are allocated daily to each class of shares based upon the relative
proportion of net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Portfolio securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
securities. The Fund may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions, under
procedures approved by the Board of Directors (the Board). Securities for which
market quotations are not available and are valued in accordance with procedures
established by the Board.
The value of a foreign security is determined as of the earlier of the close of
trading on the foreign exchange on which it is traded or the close of trading on
the New York Stock Exchange (Exchange). That value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York
time, on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and ask price is used.
Occasionally, events which affect the values of foreign securities and foreign
exchange rates may occur between the times at which they are determined and the
close of the exchange and will, therefore, not be reflected in the computation
of the Fund's net asset value, unless material. If events which materially
affect the value of these foreign securities occur during such period, these
securities will be valued in accordance with procedures established by the
Board.
b. Income Taxes:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Net
investment income and realized gains and losses differ for financial statements
and tax purposes primarily due to tax basis mark to market of unrealized gains
with respect to passive foreign investment company (PFIC) shares.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. Foreign Currency Translation:
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of 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 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 bank. 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, 1997, all
outstanding repurchase agreements held by the Fund had been entered into on that
date.
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At July 31, 1996, for tax purposes, the Fund had accumulated net realized gains
of $21,067,360.
For income tax purposes, the aggregate cost of securities and unrealized
appreciation are the same as for financial reporting purposes at January 31,
1997.
<TABLE>
<CAPTION>
3. CAPITAL STOCK
At January 31, 1997, there were 100,000,000 shares of $.10 par value capital
stock authorized of which 45,000,000 shares each were designated as Class I and
Class II, respectively, and 10,000,000 shares as Advisor Class.
Six Months Ended Year Ended
January 31, 1997 July 31, 1996
------------------------- -----------------------
Class I Shares: Shares Amount Shares Amount
--------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Shares sold ........................................ 15,703,910 $ 218,386,841 25,634,973 $ 399,883,240
Shares issued in reinvestment of distributions ..... 1,303,534 17,180,572 923,993 13,015,891
Shares redeemed .................................... (16,652,349) (231,739,272) (27,721,440) (432,416,613)
--------- ------------ ---------- ------------
Net increase (decrease) ............................ 355,095 $ 3,828,141 (1,162,474) $ (19,517,482)
========= ============ ========== ============
Six Months Ended Year Ended
January 31, 1997 July 31, 1996
------------------------- -----------------------
Class II Shares: Shares Amount Shares Amount
--------- ------------ --------- ----------
Shares sold ........................................ 680,081 $ 9,359,972 907,471 $14,300,321
Shares issued in reinvestment of distributions ..... 56,785 744,453 10,276 144,486
Shares redeemed .................................... (219,302) (3,023,370) (235,465) (3,731,560)
--------- ------------ --------- -----------
Net increase ....................................... 517,564 $ 7,081,055 682,282 $10,713,247
========= ============ ========= ===========
Six Months Ended
January 31, 1997*
----------------------
Allocator Class Shares: Shares Amount
--------- ----------
Shares sold ....................................... 11,428 $147,194
--------- ----------
Net increase ....................................... 11,428 $147,194
========= ==========
</TABLE>
*Effective date of Advisor Class shares was January 1, 1997.
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, 1997, aggregated $36,601,394 and
$46,704,573, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc., (Advisers)
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees computed monthly on the net assets of the Fund at
the last day of the month as follows:
Annualized Fee Rate Month-End Net Assets
------------------- ---------------------------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% Over $250 million
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
a. Management Agreement: (cont.)
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Fund. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Fund.
b. Shareholder Services Agreement:
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc., (Investor Services) the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the period ended January 31, 1997, aggregated $267,137.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors) in an amount up to a maximum of 0.25% per
annum for Class I and 1.00% per annum for Class II of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Fund's shares. The Plans do not permit nor require payments of excess
costs after termination.
In its capacity as underwriter for the shares of the Fund, Distributors receives
commissions on sales of the Fund's capital stock. Commissions are deducted from
the gross proceeds received from the sale of the capital stock of the Fund, and
as such are not expenses of the Fund. Distributors may also make payments, out
of its own resources, to the dealers for certain sales of the Fund's shares.
Commissions received by Distributors and the amounts paid to other dealers, and
any applicable contingent deferred sales charges for the period ended January
31, 1997, were as follows:
Class I Class II
--------- --------
Total commissions received.................. $548,323 $79,855
Paid to other dealers....................... 607,725 152,835
Contingent deferred sales charges........... -- $10,252
d. Other Affiliates and Related Party Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Distributors, Advisers, FT Services, and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc.
<TABLE>
<CAPTION>
6. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
are as follows:
Six Months
Ended
January 31, Period Ended July 31,
----------- -----------------------------------------------------------------
Class I Shares: 1997 1996 1995 1994 1993 1992
----------- -------- -------- -------- -------- --------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period..... $14.65 $15.07 $14.88 $15.63 $11.50 $12.71
-------- -------- -------- -------- -------- --------
Net investment income...................... .01 .21 .18 .19 .21 .35
Net realized and unrealized
gain on securities........................ (1.122) .011 .275 (.746) 4.147 (1.191)
-------- -------- -------- -------- -------- --------
Total from investment operations........... (1.112) .221 .455 (.556) 4.357 (.841)
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income................ (.025) (.126) (.203) (.194) (.227) (.369)
From capital gains........................ (.823) (.515) -- -- -- --
In excess of net investment income........ -- -- (.062) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions........................ (.848) (.641) (.265) (.194) (.227) (.369)
-------- -------- -------- -------- -------- --------
Net asset value at end of period........... $12.69 $14.65 $15.07 $14.88 $15.63 $11.50
======== ======== ======== ======== ======== ========
Total Return*.............................. (7.81)% 1.65% 3.14% (3.52)% 38.56% (6.87)%
Ratios/Supplemental Data
Net assets at end of period (in 000's)..... $319,816 $364,032 $391,966 $418,698 $394,704 $257,888
Ratio of expenses to average net assets ... .97% .95% .95% .81% .62%++ .31%++
Ratio of net income to average net assets.. .20% .99% 1.20% 1.30% 1.89% 2.99%
Portfolio turnover rate.................... 11.22% 28.74% 6.36% 1.46% 1.62% 0.26%
Average commission rate**.................. 0.0145 .0308 -- -- -- --
6. FINANCIAL HIGHLIGHTS (cont.)
Six Months
Ended
Class II Shares: January 31, 1997 1996 1995+***
------------ -------- --------
Per Share Operating Performance
Net asset value at beginning of period............ $14.61 $15.05 $15.02
------------ -------- --------
Net investment income............................. (.04) .12 .12
Net realized and unrealized gain on securities.... (1.118) (.015) .092
------------ -------- --------
Total from investment operations.................. (1.158) .105 .212
------------ -------- --------
Less distributions:
From net investment income....................... (.019) (.030) (.120)
From capital gains............................... (.823) (.515) (.062)
----------- -------- --------
Total distributions............................... (.842) (.545) (.182)
----------- -------- --------
Net asset value at end of period.................. $12.61 $14.61+++ $15.05
=========== ======== ========
Total Return*..................................... (8.08)% .81% 1.45%
Ratios/Supplemental Data
Net assets at end of period (in 000's)............ $17,726 $12,977 $3,104
Ratio of expenses to average net assets........... 1.77% 1.74% 1.73%++
Ratio of net income to average net assets......... (0.59%) .16% .33%++
Portfolio turnover rate........................... 11.22% 28.74% 6.36%
Average commission rate**......................... 0.0145 .0308 --
</TABLE>
6. FINANCIAL HIGHLIGHTS (cont.)
Advisor Class Shares: 1997++++
-----------
Per Share Operating Performance
Net asset value at beginning of period............ $13.12
-----------
Net investment income............................. --
Net realized and unrealized gain on securities.... (.420)
-----------
Total from investment operations.................. (.420)
-----------
Less distributions:
From net investment income....................... --
From capital gains............................... --
-----------
Total distributions............................... --
-----------
Net asset value at end of period.................. $12.70
===========
Total Return*..................................... (3.20%)
Ratios/Supplemental Data
Net assets at end of period (in 000's)............ $145
Ratio of expenses to average net assets........... 0.75%++
Ratio of net income to average net assets......... (0.02%)++
Portfolio turnover rate........................... 11.22%
Average commission rate**......................... 0.0145
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or deferred contingent sales charge. Prior to May 1, 1994, dividends were
reinvested at maximum offering price, and capital gains at net asset value.
Effective May 1, 1994, the sales charge on reinvested dividends was eliminated.
**Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.
***Per share amounts have been calculated using the daily average shares
outstanding during the period.
+For the period May 1, 1995 (effective date) to July 31, 1995.
++Annualized
+++The Net 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.
++During the years indicated, Advisers, agreed in advance to waive a portion of
management fees incurred by the Fund. Had such action not been taken, the ratios
of operating expenses to average net assets for the years ended July 31, 1993
and 1992 would have been .75% and .77%, respectively.
++++For the period January 1, 1997 (effective date) to January 31, 1997.
Franklin Gold Fund Semi-Annual Report January 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 portfolio,
based on total net assets on January 31, 1997.
<TABLE>
<CAPTION>
Geographic Distribution on 1/31/97
<S> <C>
Canada 32.9%
United States 21.1%
South Africa 20.8%
Australia 13.3%
Other 6.4%
Short-Term Obligations
& Other Net Assets 5.5%
</TABLE>
