SEMI
ANNUAL
REPORT
FRANKLIN GOLD FUND
SHAREHOLDER LETTER
CONTENTS
Shareholder Letter .................................. 1
Performance Summary
Class I ............................................ 4
Class II ........................................... 6
Advisor Class ...................................... 8
Financial Highlights &
Statement of Investments ............................ 10
Financial Statements ................................ 16
Notes to
Financial Statements ................................ 19
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 report of the Franklin Gold Fund covers the six-month period ended January
31, 1998.
During the reporting period, commodity prices in general fell appreciably, with
the Goldman Sachs Commodity Index (GSCI) dropping from 3,369.67 on July 31,
1997, to 3,009.86 on January 30, 1998.1 The GSCI is comprised of the world's
major commodities, including oil, and precious and base metals. Due to
short-selling, relatively low inflation, increased lending of gold reserves
(notably by Germany), and sales of gold by central banks such as those of
Australia and Argentina, gold bullion prices were particularly hard hit, and the
Financial Times Gold Mines Index fell 20.95%.2 Although demand for gold
increased during the six months under review (especially in the electronics and
price-sensitive jewelry sectors), this was partially offset in the fourth
quarter of 1997 by sharp declines in Southeast Asian demand due to the Asian
currency crises. It is interesting to note that during these crises, gold
performed as expected, maintaining both liquidity and value relative to local
Asian currencies. On the supply side, the situation was complicated as overall
global production increased slightly despite production cutbacks and closures at
higher-cost mines. Within this environment, Franklin Gold Fund - Class I
produced a -21.62% cumulative total return for the six-month period ended
January 31, 1998, as discussed in the Performance Summary on page 4.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The fund's disappointing performance resulted primarily from the fall in gold
bullion prices. With our focus on gold mining companies as long-term growth
vehicles, we continued to invest in quality mining companies with attractive
reserve and production growth profiles. This conservative strategy is clearly
demonstrated by three of the fund's top holdings: Newmont Mining Corp., Barrick
Gold Corp., and Placer Dome, Inc. These companies are large capitalization,
low-cost producers with established production histories and solid management.
Reflecting the importance we assign to diversification, other top holdings at
the end of the reporting period included poly-metallic producer Rio Tinto, Plc.;
diversified holding companies Franco-Nevada Mining Corp., Ltd. and Euro-Nevada
Mining Corp.; diamond producer De Beers Centenary, AG; and Anglo American
Platinum Corp. of South Africa, Ltd.
Looking forward, we believe that the formation of the European Central Bank,
Southeast Asian economic recovery, a weakening U.S. dollar, and a return to gold
as a safe haven during times of political and economic uncertainty could spark
renewed interest in gold.
Since we continue to view physical demand growth and long-term supply stability
as possibilities, we are optimistic that gold may appreciate in value. However,
the greater the downward pressure on gold bullion prices, the greater the
emphasis will be on companies to achieve profitability through downsizing,
mergers, increased cost control, and reduced production. We therefore believe
that the longer gold prices remain depressed, the healthier the industry will be
in the long run.
In our opinion, 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 our views and opinions as of January 31, 1998, the end
of the reporting period. Market and economic conditions are changing constantly,
which may affect our strategies and portfolio holdings. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
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
1. Source: Bloomberg. Measured in U.S. dollars and includes reinvested
dividends.
2. Source: Bloomberg. Measured in U.S. dollars. Represents change in price only.
Indices are unmanaged. One cannot invest directly in an index.
You may find a complete listing of the fund's portfolio holdings, including the
number of shares and dollar values, beginning on page 13 of this report.
Top 10 Holdings
1/31/98
Company, % of Total
COUNTRY Net Assets
Barrick Gold Corp.,
CANADA 9.92%
NEWMONT MINING CORP.,
U.S. 9.40%
DE BEERS CENTENARY, AG,
SOUTH AFRICA 4.84%
PLACER DOME, INC.,
CANADA 4.82%
ANGLO AMERICAN PLATINUM CORP.,
SOUTH AFRICA 4.58%
FRANCO-NEVADA MINING CORP., LTD., CANADA 4.24%
EURO-NEVADA MINING CORP.,
CANADA 3.88%
NEWMONT GOLD CO.,
U.S. 2.96%
ASHANTI GOLDFIELDS CO., LTD.,
SOUTH AFRICA 2.66%
RIO TINTO, PLC.,
UNITED KINGDOM 2.66%
PERFORMANCE SUMMARY
CLASS I
Franklin Gold Fund - Class I produced a -21.62% cumulative total return for the
six-month period ended January 31, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains, if any, 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.
The fund's share price, as measured by net asset value, decreased $2.52, from
$11.44 on July 31, 1997, to $8.92 on January 31, 1998. During the reporting
period, shareholders received per-share distributions of 4.3 cents ($0.043) in
income dividends. Distributions will vary depending on income earned by the
fund, as well as any profits realized from the sale of securities in the
portfolio.
Class I
Periods ended 1/31/98
Since
Inception
1-Year 5-Year 10-Year (5/19/69)
Cumulative Total Return1 -28.97% 11.57% 13.81% 164.42%
Average Annual Total Return2 -32.18% 1.28% 0.83% 3.28%
Value of $10,000 Investment3 $6,782 $10,656 $10,865 $25,251
1/31/94 1/31/95 1/31/96 1/31/97 1/31/98
One-Year Total Return4 69.94% -17.50% 34.53% -16.72% -28.97%
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, 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 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 would differ. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a Rule 12b-1 plan, which affects
subsequent performance.
All calculations 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, currency volatility, and the social, economic and political climates
of countries where investments are made. You may have a gain or loss when you
sell your shares.
CLASS II
Franklin Gold Fund - Class II produced a -21.90% cumulative total return for the
six-month period ended January 31, 1998. Cumulative total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains, if any, and does not include sales charges.
The fund's share price, as measured by net asset value, decreased $2.49, from
$11.37 on July 31, 1997, to $8.88 on January 31, 1998. During the reporting
period, shareholders did not receive distributions. Distributions will vary
depending on income earned by the fund, as well as any profits realized from the
sale of securities in the portfolio.
Class II
Periods ended 1/31/98
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 -29.58% -33.80%
Average Annual Total Return2 -31.00% -14.22%
Value of $10,000 Investment3 $6,900 $6,554
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge applicable to shares redeemed
within 18 months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include sales charges.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions, currency volatility, and the social, economic and political climates
of countries where investments are made. You may have a gain or loss when you
sell your shares.
ADVISOR CLASS
Franklin Gold Fund - Advisor Class produced a -21.43% cumulative total return
for the six-month period ended January 31, 1998. Cumulative total return
measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any.
The fund's share price, as measured by net asset value, decreased $2.51, from
$11.43 on July 31, 1997, to $8.92 on January 31, 1998. During the reporting
period, shareholders received per-share distributions of 5.56 cents ($0.0556) in
income dividends. Distributions will vary depending on income earned by the
fund, as well as any profits realized from the sale of securities in the
portfolio.
Advisor Class
Periods ended 1/31/98
Since
Inception
of the Fund
1-Year* 5-Year* 10-Year* (5/19/69)*
Cumulative Total Return1 -28.76% 11.99% 14.23% 165.41%
Average Annual Total Return1 -28.76% 2.29% 1.34% 3.46%
Value of $10,000 Investment2 $7,124 $11,199 $11,423 $26,541
1/31/94 1/31/95 1/31/96 1/31/97 1/31/98
One-Year Total Return3,* 69.94% -17.50% 34.53% -16.66% -28.76%
*On January 2, 1997, the fund began offering Advisor Class shares to certain
eligible investors as described in its prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
the fund's Class I performance, excluding the effect of the Class I sales
charge, but including the effect of Class I expenses, including 12b-1 fees; and
(b) for periods after January 1, 1997, figures reflect actual Advisor Class
performance, including the deduction of all fees and expenses applicable only to
that class. Since January 2, 1997 (commencement of sales), the cumulative total
return of Advisor Class shares was -31.04%.
1. Cumulative total return represents the change in value of an investment over
the periods indicated. Average annual total return represents the average annual
change in value of an investment over the periods indicated.
2. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated.
3. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates.
All calculations assume reinvestment of dividends and capital gains. Investment
return and principal value will fluctuate with market conditions, currency
volatility, and the social, economic and political climates of countries where
investments are made. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN GOLD FUND
Financial Highlights
<TABLE>
<CAPTION>
Class I
---------------------------------------------------------------------
SIX MONTHS ENDED
January 31, 1998 YEAR ENDED JULY 31,----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period .... $11.44 $14.65 $15.07 $14.88 $15.63 $11.50
-------------------------------------------------------------------
Income from investment operations:
Net investment income .................. .03 .07 .21 .18 .19 .21
Net realized and unrealized gains (losses) (2.51) (2.37) .01 .27 (.75) 4.15
-------------------------------------------------------------------
Total from investment operations ........ (2.48) (2.30) .22 .45 (.56) 4.36
-------------------------------------------------------------------
Less distributions from:
Net investment income .................. (.04) (.09) (.13) (.20) (.19) (.23)
In excess of net investment income ..... -- -- -- (.06) -- --
Net realized gains ..................... -- (.82) (.51) -- -- --
-------------------------------------------------------------------
Total distributions ..................... (.04) (.91) (.64) (.26) (.19) (.23)
-------------------------------------------------------------------
Net asset value, end of period .......... $8.92 $11.44 $14.65 $15.07 $14.88 $15.63
===================================================================
Total return* ........................... (21.62)% (16.45)% 1.65% 3.14% (3.52)% 38.56%
Ratios/supplemental data
Net assets, end of period (000's) ....... $228,346 $291,544 $364,032 $391,966 $418,698 $394,704
Ratios to average net assets:
Expenses ............................... 1.18%** 1.05% .95% .95% .81% .62%
Expenses excluding waiver
and payments by affiliate .............. 1.18%** 1.05% .95% .95% .81% .75%
Net investment income .................. .64%** .55% .99% 1.20% 1.30% 1.89%
Portfolio turnover rate ................. 2.72% 16.05% 28.74% 6.36% 1.46% 1.62%
Average commission rate paid*** ......... $.0113 $.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.
**Annualized
***Relates to purchases and sales of equity securities. Prior to fiscal year
1996 disclosure of average commission rate was not required.
+Includes distributions in excess of net investment income in the amount of
$.004.
<TABLE>
<CAPTION>
CLASS II
----------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 1998 YEAR ENDED JULY 31,
---------------------------
(UNAUDITED) 1997 1996 1995+****
----------------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................ $11.37 $14.61 $15.05 $15.02
----------------------------------------------
Income from investment operations:
Net investment income (loss) ............................... (.01) (.02) .12 .12
Net realized and unrealized gains (losses) ................. (2.48) (2.38) (.02) .09
----------------------------------------------
Total from investment operations ............................ (2.49) (2.40) .10 .21
----------------------------------------------
Less distributions from:
Net investment income ...................................... -- (.02) (.03) (.12)
In excess of net investment income ......................... -- -- -- (.06)
Net realized gains ......................................... -- (.82) (.51) --
Total distributions ......................................... -- (.84) (.54) (.18)
----------------------------------------------
Net asset value, end of period .............................. $8.88 $11.37 $14.61 $15.05
----------------------------------------------
Total return* ............................................... (21.90)% (17.18)% .81% 1.45%
==============================================
Ratios/supplemental data
Net assets, end of period (000's) ........................... $18,645 $20,783 $12,977 $3,104
Ratios to average net assets:
Expenses ................................................... 1.98%** 1.83% 1.74% 1.73%**
Net investment income (loss) ................................ (.16)%** (.16)% .16% .33%**
Portfolio turnover rate ..................................... 2.72% 16.05% 28.74% 6.36%
Average commission rate paid*** ............................. $.0113 $.0156 $.0308 --
</TABLE>
*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.
<TABLE>
<CAPTION>
ADVISOR CLASS
--------------------------
SIX MONTHS ENDED
JANUARY 31, 1998
(UNAUDITED) 1997****
--------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period............................................. $11.43 $13.12
--------------------------
Income from investment operations:
Net investment income .......................................................... .04 .07
Net realized and unrealized losses ............................................. (2.49) (1.67)
--------------------------
Total from investment operations ................................................ (2.45) (1.60)
--------------------------
Less distributions from:
Net Investment income .......................................................... (.02) (.09)
In excess of net investment income ............................................. (.04) --
--------------------------
Net asset value, end of period .................................................. $8.92 $11.43
==========================
Total return* ................................................................... (21.43)% (12.24)%
Ratios/supplemental data
Net assets, end of period (000's) ............................................... $3,544 $3,211
Ratios to average net assets:
Expenses** ..................................................................... .98% .83%
Net investment income** ........................................................ .76% .80%
Portfolio turnover rate ......................................................... 2.72% 16.05%
Average commission rate paid*** ................................................. $.0113 $.0156
</TABLE>
*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.
+Ratios have been calculated using the daily average net assets during the
period.
See notes to financial statements.
FRANKLIN GOLD FUND
Statement of Investments, January 31, 1998 (unaudited)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
<S> <C> <C> <C>
Long-Term Investments 86.9%
Common Stocks and Warrants 85.9%
Gold & Diversified Resources 8.6%
Freeport-McMoRan Copper & Gold, Inc., Class A ............. United States 308,011 $ 4,543,162
Freeport-McMoRan Copper & Gold, Inc., Class B ............. United States 131,000 1,924,063
Orogen Minerals, Ltd. ..................................... Australia 720,000 1,613,819
Orogen Minerals, Ltd., ADR, 144A .......................... Australia 54,000 1,210,361
Rio Tinto, Plc. ........................................... United Kingdom 522,401 6,663,627
Teck Corp., Class B ...................................... Canada 382,100 5,512,004
--------------
21,467,036
--------------
Long Life Gold Mines 41.5%
Ashanti Goldfields Co., Ltd., Sponsored GDR, 144A ......... South Africa 684,106 6,670,034
Barrick Gold Corp. ........................................ Canada 1,282,249 24,843,574
Compania de Minas Buenaventura, SA, 144A .................. Peru 100,592 590,014
Compania de Minas Buenaventura, SA, Sponsored ADR, 144A ... Peru 426,993 5,070,542
Driefontein Consolidated, Ltd., Sponsored ADR ............ South Africa 580,000 3,878,750
Free State Consolidated Gold Mines, Ltd., ADR ............ South Africa 433,401 2,112,830
a Harmony Gold Mining Co., Ltd. ............................. South Africa 273,000 884,479
Kloof Gold Mining Co., Ltd., Sponsored ADR ............... South Africa 142,503 480,948
a Lihir Gold, Ltd. .......................................... Australia 1,049,600 1,309,392
Newmont Gold Co. .......................................... United States 255,000 7,426,875
Newmont Mining Corp. ...................................... United States 826,370 23,551,545
Placer Dome, Inc. ........................................ Canada 938,820 12,087,308
Southvaal Holdings, Ltd. .................................. South Africa 144,400 2,719,287
a TVX Gold, Inc. ........................................... Canada 997,000 3,095,614
Vaal Reefs Exploration & Mining Co., Ltd., ADR ........... South Africa 1,175,000 5,562,920
a Western Areas Gold Mining Co., Ltd. ...................... South Africa 357,979 2,116,632
a Western Areas Gold Mining Co., Ltd., ADR .................. South Africa 23,523 139,084
Western Deep Levels, Ltd. ................................. South Africa 63,000 1,398,157
Western Deep Levels, Ltd., ADR ............................ South Africa 5,000 111,875
--------------
104,049,860
--------------
Medium Life Gold Mines 12.7%
a Acacia Resources, Ltd. ................................... Australia 4,122,000 5,509,562
Battle Mountain Canada, Inc. .............................. Canada 583,600 3,367,501
a Campbell Resources, Inc., warrants ....................... Canada 722,000 33,862
a Canyon Resources Corp. .................................... United States 678,000 762,750
a Canyon Resources Corp., warrants .......................... United States 339,000 --
East Rand Gold and Uranium Co., Ltd., ADR ................ South Africa 197,500 273,952
Great Central Mines, Ltd. ................................. Australia 658,375 906,625
a Greenstone Resources, Ltd. ................................ Canada 568,900 3,614,855
Newcrest Mining, Ltd. .................................... Australia 865,050 1,096,951
a Niugini Mining, Ltd. ..................................... Australia 133,750 189,775
a Niugini Mining, Ltd., Sponsored ADR ...................... Australia 610,000 865,529
Normandy Mining, Ltd. ..................................... Australia 3,784,865 4,436,301
Plutonic Resources, Ltd. ................................. Australia 1,874,100 6,037,611
Sons of Gwalia, Ltd. ...................................... Australia 1,575,500 4,697,666
--------------
31,792,940
--------------
Common Stocks and Warrants (cont.)
Mining Finance Companies 14.1%
Anglo American Corp. of South Africa, Ltd., ADR ........... South Africa 65,000 $ 2,876,250
De Beers Centenary, AG, ADR .............................. South Africa 559,200 12,127,650
Euro-Nevada Mining Corp. .................................. Canada 604,200 9,712,025
Franco-Nevada Mining Corp., Ltd. .......................... Canada 483,200 10,621,604
--------------
35,337,529
--------------
Platinum 7.7%
Anglo American Platinum Corp., ADR ........................ South Africa 840,138 11,483,090
Impala Platinum Holdings, Ltd., ADR ...................... South Africa 267,800 2,548,679
a Stillwater Mining Co., 144A .............................. United States 266,700 5,200,650
--------------
19,232,419
--------------
Diamond & Gold Exploration 1.3%
a Aber Resources, Ltd. ...................................... Canada 247,000 2,629,916
a Equinox Resources, NL ..................................... Australia 2,759,100 312,051
a Helix Resources, NL ....................................... Australia 1,590,000 479,539
--------------
3,421,506
--------------
Total Common Stocks and Warrants (Cost $252,361,923)....... 215,301,290
==============
PRINCIPAL
AMOUNT*
Convertible Bonds 1.0%
Dayton Mining Corp., cvt. sub. deb., 144A, 7.00%, 4/01/02 . Canada $ 2,700,000 1,782,000
Randgold & Exploration Co., Ltd., cvt. sub. notes, 144A, 7.00%, 9/30/01 South Africa 785,000 412,125
William Resources, Inc., cvt. sub. deb., 8.00%, 1/23/02 ... Canada 700,000 CAD 168,298
Total Convertible Bonds (Cost $4,009,089) ................. 2,362,423
--------------
Total Long-Term Investments (Cost $256,371,012) ........... 217,663,713
--------------
b Repurchase Agreement 13.3%
Joint Repurchase Agreement, 5.578%, 2/02/98, (Maturity Value $33,413,388)
(Cost $33,397,864) ....................................... 33,397,864 33,397,864
BancAmerica Robertson Stephens (Maturity Value $2,606,542)
Barclays Capital Group, Inc. (Maturity Value $2,606,542)
Bear, Stearns & Co., Inc. (Maturity Value $1,563,925)
BT Alex Brown, Inc. (Maturity Value $2,606,542)
Chase Securities, Inc. (Maturity Value $521,308)
CIBC Wood Gundy Securities Corp. (Maturity Value $2,606,542)
Deutsche Morgan Grenfell/C.J. Lawrence, Inc. (Maturity Value $2,606,542)
Donaldson, Lufkin & Jenrette Securities Corp. (Maturity Value $2,606,542)
Dresdner Kleinwort Benson, North America, L.L.C. (Maturity Value $2,606,541)
Greenwich Capital Markets, Inc. (Maturity Value $2,606,541)
Lehman Gov't. Securities (Maturity Value $2,656,198)
Paribas Corp. (Maturity Value $2,606,541)
SBC Warburg Dillon Read, Inc. (Maturity Value $2,606,541)
UBS Securities, L.L.C. (Maturity Value $2,606,541)
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $289,768,876) 100.2% .............. $251,061,577
Other Assets, less Liabilities (.2)% ...................... (526,047)
--------------
Net Assets 100.0% ......................................... $250,535,530
==============
</TABLE>
CURRENCY ABBREVIATIONS:
CAD - Canadian dollar
* Securities traded in U.S. dollars unless otherwise indicated.
a Non-income producing.
b See Note 1(c) regarding joint repurchase agreement.
FRANKLIN GOLD FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
January 31, 1998 (unaudited)
<S> <C>
Assets:
Investments in securities, at value (cost $256,371,012) .................................. $217,663,713
Repurchase agreements, at value and cost ................................................. 33,397,864
Cash ..................................................................................... 14,749
Receivables:
Investment securities sold .............................................................. 76,696
Capital shares sold ..................................................................... 1,706,160
Dividends and interest .................................................................. 166,777
-------------
Total assets ............................................................................ 253,025,959
-------------
Liabilities:
Payables:
Investment securities purchased ......................................................... 155,516
Capital shares redeemed ................................................................. 1,293,261
Affiliates .............................................................................. 357,911
Shareholders ............................................................................ 339,944
Other liabilities ........................................................................ 343,797
-------------
Total liabilities ....................................................................... 2,490,429
-------------
Net assets, at value ................................................................... $250,535,530
=============
Net assets consist of:
Accumulated distributions in excess of net investment income ............................. $ (120,104)
Net unrealized depreciation .............................................................. (38,707,486)
Accumulated net realized loss ............................................................ (30,662,324)
Capital shares ........................................................................... 320,025,444
-------------
Net assets, at value ...................................................................... $250,535,530
=============
Class I:
Net asset value per share ($228,346,035 O 25,600,729 shares outstanding)* ................ $8.92
=============
Maximum offering price per share ($8.92 O 95.5%).......................................... $9.34
=============
Class II:
Net asset value per share ($18,645,296 O 2,100,647 shares outstanding)* .................. $8.88
=============
Maximum offering price per share ($8.88 O 99%) ........................................... $8.97
=============
Advisor class:
Net asset value and maximum offering price per share
($3,544,199 O 397,220 shares outstanding) ................................................ $8.92
=============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements (continued)
<TABLE>
<CAPTION>
Statement of Operations
for the six months ended January 31, 1998 (unaudited)
<S> <C> <C>
Investment income:
(net of foreign taxes of $80,064)
Dividends.................................................................... $ 1,762,872
Interest..................................................................... 740,569
------------
Total investment income....................................................... $2,503,441
Expenses:
Management fees (Note 3)..................................................... 730,460
Distribution fees (Note 3)
Class I..................................................................... 262,275
Class II.................................................................... 97,806
Transfer agent fees (Note 3)................................................. 379,478
Custodian fees............................................................... 46,643
Reports to shareholders...................................................... 115,402
Registration and filing fees................................................. 31,225
Professional fees............................................................ 18,008
Directors' fees and expenses................................................. 9,093
Other........................................................................ 12,029
------------
Total expenses................................................................ 1,702,419
------------
Net investment income........................................................ 801,022
------------
Realized and unrealized losses:
Net realized loss from:
Investments................................................................. (21,624,916)
Foreign currency transactions............................................... (53,997)
------------
Net realized loss............................................................. (21,678,913)
------------
Net unrealized depreciation on:
Investments................................................................. (44,525,478)
Translation of assets and liabilities denominated in foreign currencies..... (174)
------------
Net unrealized depreciation................................................... (44,525,652)
------------
Net realized and unrealized loss............................................. (66,204,565)
============
Net decrease in net assets resulting from operations......................... $(65,403,543)
============
See notes to financial statements.
</TABLE>
FRANKLIN GOLD FUND
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the six months ended January 31, 1998 (unaudited)
and the year ended July 31, 1997
Six Months Ended Year Ended
January 31, 1998 July 31, 1997
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income...................................................... $ 801,022 $ 1,827,886
Net realized loss from investments and foreign
currency transactions....................................................... (21,678,913) (8,975,698)
Net unrealized depreciation on investments and
translation of assets and liabilities
denominated in foreign currencies......................................... (44,525,652) (52,315,743)
----------------------------
Net decrease in net assets resulting from operations...................... (65,403,543) (59,463,555)
Distributions to shareholders from:
Net investment income:
Class I................................................................... (934,646) (2,234,184)
Class II.................................................................. -- (21,024)
Advisor Class............................................................. (9,305) (14,937)
In excess of net investment income:
Class I................................................................... (105,391) --
Advisor Class............................................................. (14,731) --
Net realized gains:
Class I................................................................... -- (20,163,382)
Class II.................................................................. -- (911,251)
----------------------------
Total distributions to shareholders......................................... (1,064,073) (23,344,778)
Capital share transactions (Note 2)
Class I.................................................................... (2,906,271) 5,704,541
Class II................................................................... 3,015,302 12,219,430
Advisor Class.............................................................. 1,355,336 3,414,037
----------------------------
Total capital share transactions............................................ 1,464,367 21,338,008
Net decrease in net assets................................................... (65,003,249) (61,470,325)
Net assets:
Beginning of period......................................................... 315,538,779 377,009,104
----------------------------
End of period............................................................... $250,535,530 $315,538,779
============================
Undistributed net investment income (accumulated
distributions in excess of net investment income)
included in net assets:
End of period.............................................................. $ (120,104) $ 142,947
============================
</TABLE>
See notes to financial statements.
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
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. 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 denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. Joint Repurchase Agreement:
The Fund may enter into a joint repurchase agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements. 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 securities which are delivered to the Fund's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Funds, with the value of the
underlying securities marked to market daily to maintain coverage of at least
100%. At January 31, 1998, all outstanding repurchase agreements held by the
Fund had been entered into on January 30, 1998.
d. 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 all of its taxable income.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. 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.
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.
f. 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 January 31, 1998, 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>
SIX MONTHS YEAR ENDED
ENDED JANUARY 31, 1998 JULY 31, 1997
---------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares:
Shares sold ........................................... 22,272,460 $212,209,131 37,310,473 $487,562,871
Shares issued in reinvestment of distributions ........ 105,415 863,013 1,410,265 18,492,485
Shares redeemed ....................................... (22,263,067)(215,978,415) (38,082,550)(500,350,815)
---------------------------------------------------
Net increase (decrease) ............................... 114,808 $ (2,906,271) 638,188 $ 5,704,541
===================================================
Class II Shares:.......................................
Shares sold ........................................... 992,868 $ 9,593,287 1,412,506 $ 18,343,389
Shares issued in reinvestment of distributions ........ -- -- 56,807 744,729
Shares redeemed ....................................... (719,304) (6,577,985) (530,783) (6,868,688)
---------------------------------------------------
Net increase .......................................... 273,564 $ 3,015,302 938,530 $ 12,219,430
===================================================
2. CAPITAL STOCK (cont.)
SIX MONTHS PERIOD ENDED
ENDED JANUARY 31, 1998 JULY 31, 1997*
---------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------
Advisor Class Shares:
Shares sold ........................................... 1,999,848 $ 19,796,916 429,697 $ 5,074,980
Shares issued in reinvestment of distributions ........ 1,444 11,813 1,042 12,789
Shares redeemed ....................................... (1,884,955) (18,453,393) (149,856) (1,673,732)
---------------------------------------------------
Net increase .......................................... 116,337 $ 1,355,336 280,883 $ 3,414,037
===================================================
</TABLE>
*Effective date of Advisor Class shares was January 2, 1997.
3. TRANSACTIONS WITH AFFILIATES
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 .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 period of $39,328 and $12,112,
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.
4. INCOME TAXES (cont.)
At January 31, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes of $256,371,012 was as follows:
Unrealized appreciation $34,763,505
Unrealized depreciation (73,470,804)
Net unrealized depreciation $(38,707,299)
Net investment income and net realized capital losses differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended January 31, 1998 aggregated $6,809,927 and $13,800,673,
respectively.
Franklin Gold Fund Semi-Annual Report January 31, 1998.
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 Franklin
Gold Fund based on Total Net Assets as of 1/31/98.
Canada 31.0%
South Africa 22.3%
United States 17.3%
Australia 11.4%
Other 4.9%
Cash & Short-Term
Securities 13.1%
GRAPHIC MATERIAL (2)
This chart shows in bar format the Industry Breakdown of Franklin Gold Fund
based on total Net Assets as of 1/31/98.
Long-Life Gold Mines 41.5%
Mining Finance Companies 14.1%
Medium-Life Gold Mines 12.7%
Gold & Diversified Resources 8.6%
Platinum 7.7%
Diamond & Gold Exploration 1.3%
Short-Term Obligations &
Other Net Assets 14.1%
