ANNUAL
REPORT
July 31, 1998
Franklin Gold Fund
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
Shareholder Letter................................... 1
Special Update....................................... 5
Performance Summaries
Class I ............................................ 7
Class II ........................................... 10
Advisor Class ...................................... 12
Financial Highlights &
Statement of Investments ............................ 16
Financial Statements ................................ 21
Notes to
Financial Statements ................................ 24
Independent
Auditor's Report..................................... 28
Tax Information...................................... 29
SHAREHOLDER LETTER
CONTENTS
Your Fund's Objective: 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 annual report of Franklin Gold Fund covers the fiscal year ended July 31,
1998. During the reporting period, commodity prices in general fell
significantly, with the Goldman Sachs Commodity Index (GSCI) declining from
3,369.67 on July 31, 1997, to 2,303.62 on July 31, 1998.1 Gold bullion prices
declined 11.7%, from $324 per ounce to $286, during the period. This decline was
due partly to demand for gold bullion being negatively affected by the Asian
turmoil and a strong U.S. dollar. However, most of the decline was due to an
oversupply in the market due to increased production, substantial producer
hedging, and significant sales by central banks. Currency fluctuations also
affected the supply of gold. During the period, South Africa's rand fell 24.72%
against the U.S. dollar and Australia's dollar dropped 19.03%. This relative
strength of the U.S. dollar allowed producers in these countries to realize
higher profits and remain in operation, which delayed the downsizing, cost
control, and merger activity which might otherwise have improved the oversupply
outlook. Within this environment, the fund's Class I shares produced a -33.83%
cumulative total return for the fiscal year, as discussed in the Performance
Summary on page 7. During the same time period, the Financial Times Gold Mines
Index returned -36.31%. We always maintain a long-term perspective when managing
the fund, and encourage our shareholders to view their investments in a similar
manner. Lipper Analytical Services Inc. ranked Franklin Gold Fund #1 out of 19
gold oriented funds for the ten-year period ended July 31, 1998.2
1. Source: Bloomberg. The GSCI is comprised on the world's major commodities,
including gold bullion.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 19 of
this report.
2. The fund also was ranked #9 of 42 for the one year and #7 of 25 for the five
years ending July 31, 1998. Lipper Analytical Services is a nationally
recognized mutual fund research organization. Lipper rankings do not include
sales charges, and past expense reductions by the fund's manager increased the
fund's total returns. Rankings may have been different if these factors had been
considered. Past performance cannot guarantee future results.
During the 12 months under review, we made no major shifts in industry or
geographic exposure and continued to focus on companies with an emphasis on
low-cost operations, such as Newmont Mining Corp., Barrick Gold Corp.,
Franco-Nevada Mining Corp., Ltd., and Euro-Nevada Mining Corp. Each of these
companies has solid management and an established history of focusing on
low-cost production and long-term growth. Barrick Gold Corp. reduced costs
during the year, and its Pierina project in Chile may help the company continue
this trend. Newmont Mining Corp. and Compania de Minas Buenaventura SA benefited
from a favorable Peruvian court ruling allowing them to increase their holdings
in Yanacocha, one of the world's lowest-cost gold mines. Franco-Nevada Mining
Corp., Ltd. and Euro-Nevada Mining Corp. were on schedule with their low-cost
Ken Snyder mine, expected to begin production in late 1999. The only changes
that occurred in our portfolio holdings were the result of industry
consolidation. For example, our large position in Anglogold, Ltd. came about
because of the consolidation of five South African companies.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we view long-term supply stability and physical demand growth
for gold as attractive and remain optimistic about its future. In preparation
for the upcoming European Economic Union, the European Central Bank (ECB)
announced in July that it would hold approximately 15% of its reserves in gold.
This should leave large amounts of gold in the hands of individual European
central banks. In our opinion, gold bullion prices may be in a holding pattern
until the ECB clarifies its regulation of sales and lending policies of these
banks. In addition, production that is uneconomic will hopefully be shut down
and new projects held to higher economic scrutiny. Two other potential issues
could also provide a catalyst for gold bullion prices. First, the ongoing
currency pressures in emerging markets may renew interest in gold as a hard
asset or global currency. Second, any problems with the rollout of the European
Economic Union could trigger a renewed commitment by individual European central
banks to gold as a credible reserve component. With our focus on gold mining
companies as long-term growth vehicles, we intend to invest in quality mining
stocks with positive reserve and production-growth profiles. We also continue to
recognize the importance of diversification among individual securities,
geographic regions, and other precious metals.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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. Please remember that
this discussion reflects our views, opinions, and portfolio holdings as of July
31, 1998, the end of the reporting period. However, market and economic
conditions are changing constantly which can be expected to affect our
strategies and the fund's portfolio composition. Although historic performance
is not predictive of future results, these insights may help you understand our
investment and management philosophy. We appreciate your participation in
Franklin Gold Fund and welcome any comments or suggestions you may have.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Sincerely,
R. Martin Wiskemann
Suzanne Willoughby Killea
Portfolio Managers
Franklin Gold Fund
THE PRICE OF GOLD
Our reports on Franklin Gold Fund often refer to the price of gold bullion and
its effects upon the value of the fund. But what affects the price of gold?
The Economy
In times of significant inflation or great economic uncertainty, traditional
investments such as bonds and stocks may not perform well. In such times, gold
has historically maintained its value as a hard asset, and has often
outperformed traditional investments. However, in times of stable economic
growth, traditional investments could offer greater appreciation potential.
Politics
Gold also tends to maintain or rise in value during times of heightened
political instability. People looking for a "safe" place to store their money
often choose gold based on its value as a global currency and on its
portability.
Supply
Supply affects the price of gold, and gold mining companies can impact the
supply of gold by increasing or decreasing production. For example, when gold
prices are relatively low, mining companies may close high-cost mines because
production is not profitable. By decreasing gold production, these companies
would curtail supply, which might lead to higher prices for the metal. Supply is
also affected by the amount of gold bullion held in reserve by the central banks
of many countries. When one or more of these banks sell a portion of their
holdings, current supply increases, which in turn can lead to lower bullion
prices.
Demand
Demand also impacts the price of gold. At least two-thirds of the gold produced
is consumed in jewelry. An increase in worldwide demand for jewelry could lead
to an increase in the price of gold bullion, while economic weakness such as
recession may result in lower demand for jewelry. Industrial consumption
(electronics) and investor hoarding also affect demand, and a weaker U.S. dollar
could increase demand for gold bullion in other countries.
During the past year, many of these factors influenced the price of gold, which
the following graph illustrates:
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
Class I
Franklin Gold Fund - Class I produced a -33.83% cumulative total return for the
one-year period ended July 31, 1998. Cumulative total return measures the change
in value of an investment, assuming reinvestment of all distributions, 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 $3.96, from
$11.44 on July 31, 1997, to $7.48 on July 31, 1998. During the reporting period,
shareholders received per-share distributions of 9.9 cents ($0.099) 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.
The graph below compares the performance of Franklin Gold Fund - Class I over
the past 10 years with the performance of the Standard & Poor's 500(R) Stock
Index (S&P 500(R)). Please note that this index differs from the fund since it
does not emphasize gold stocks, and on July 31, 1998, contained only 1.0% gold
stocks. Of course, an unmanaged index has an inherent performance differential
over any fund. It does not pay management fees to cover salaries of securities
analysts or portfolio managers, or pay commissions or market spreads to buy and
sell securities. Unlike indices, mutual funds are never fully invested because
they need cash on hand to redeem shares or pay for upcoming investments. In
addition, the fund's performance includes the maximum initial sales charge, all
fund expenses, and account fees. If the fund's costs had been applied to the
index, its performance would have been lower. Please remember that an index is
simply a measure of performance and cannot be invested in directly.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The historical performance data shown pertains only to the fund's Class I
shares. The fund offers other share classes subject to different fees and
expenses, which affect their performance. Please see the prospectus for more
details. *Includes the sales charge and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of dividends
and capital gains at net asset value. **Source: Standard and Poor's Micropal.
Index is unmanaged and includes reinvested dividends. One cannot invest directly
in an index.
Class I
Periods ended 7/31/98
Since
Inception
1-Year 5-Year 10-Year (5/19/69)
- --------------------------------------------------------------------------------
Cumulative Total Return1 -33.83% -44.09% -13.08% +123.23%
Average Annual Total Return2 -36.81% -11.80% -1.85% +2.63%
Value of $10,000 Investment3 $6,319 $5,339 $8,298 $21,381
7/31/94 7/31/95 7/31/96 7/31/97 7/31/98
- --------------------------------------------------------------------------------
One-Year Total Return4 -3.52% +3.14% +1.65% -16.45% -33.83%
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.
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. 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. Since markets can go down as well as up, 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 -34.35% cumulative total return for the
one-year period ended July 31, 1998. Cumulative total return measures the change
in value of an investment, assuming reinvestment of all distributions and does
not include sales charges.
The fund's share price, as measured by net asset value, decreased $3.94, from
$11.37 on July 31, 1997, to $7.43 on July 31, 1998. During the reporting period,
shareholders received per-share distributions of 3.89 cents ($0.0389) in income
dividends. Distributions will vary depending on income earned by the fund, as
well as any profits realized from the sale of securities inthe portfolio.
The graph on page 11 compares the performance of Franklin Gold Fund - Class II
since inception with the performance of the Standard & Poor's 500 Stock Index
(S&P 500). Please note that this index differs from the fund since it does not
emphasize gold stocks, and on July 31, 1998, contained only 1.0% gold stocks. Of
course, an unmanaged index has an inherent performance differential over any
fund. It does not pay management fees to cover salaries of securities analysts
or portfolio managers, or pay commissions or market spreads to buy and sell
securities. Unlike indices, mutual funds are never fully invested because they
need cash on hand to redeem shares or pay for upcoming investments. In addition,
the fund's performance includes sales charges, all fund expenses, and account
fees. If the fund's costs had been applied to the index, its performance would
have been lower. Please remember that an index is simply a measure of
performance and cannot be invested in directly.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The historical performance data shown pertains only to the fund's Class II
shares. The fund offers other share classes subject to different fees and
expenses, which affect their performance. Please see the prospectus for more
details. *Includes all sales charges as applicable, and represents the change in
value of an investment over the period shown. Total return assumes reinvestment
of dividends and capital gains at net asset value. **Source: Standard and Poor's
Micropal. Index is unmanaged and includes reinvested dividends. One cannot
invest directly in an index.
Class II
Periods ended 7/31/98
Since
Inception
1-Year (5/1/95)
- -----------------------------------------------------------------
Cumulative Total Return1 -34.35% -44.35%
Average Annual Total Return2 -35.62% -16.76%
Value of $10,000 Investment3 $6,438 $5,510
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. Since markets can go down as well as up, 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 -32.46% cumulative total return
for the one-year period ended July 31, 1998. Cumulative total return measures
the change in value of an investment, assuming reinvestment of all
distributions.
The fund's share price, as measured by net asset value, decreased $3.82, from
$11.43 on July 31, 1997, to $7.61 on July 31, 1998. During the reporting period,
shareholders received per-share distributions of 11.89 cents ($0.1189) 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.
The graph on page 14 compares the performance of Franklin Gold Fund - Advisor
Class over the past 10 years with the performance of the Standard & Poor's 500
Stock Index (S&P 500). Please note that this index differs from the fund since
it does not emphasize gold stocks, and on July 31, 1998, contained only 1.0%
gold stocks. Of course, an unmanaged index has an inherent performance
differential over any fund. It does not pay management fees to cover salaries of
securities analysts or portfolio managers, or pay commissions or market spreads
to buy and sell securities. Unlike indices, mutual funds are never fully
invested because they need cash on hand to redeem shares or pay for upcoming
investments. In addition, the fund's performance includes all fund expenses and
account fees. If the fund's costs had been applied to the index, its performance
would have been lower. Please remember that an index is simply a measure of
performance and cannot be invested in directly.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The historical performance data shown pertains only to the fund's Advisor Class
shares. The fund offers other share classes subject to different fees and
expenses, which affect their performance. Please see the prospectus for more
details.
*Represents the change in value of an investment over the period shown. Total
return assumes reinvestment of dividends and capital gains at net asset value.
**Source: Standard and Poor's Micropal. Index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index.
Advisor Class
Periods ended 7/31/98
Since
Inception
of the Fund
1-Year* 5-Year* 10-Year* (5/19/69)*
- --------------------------------------------------------------------------------
Cumulative Total Return1 -32.46% -42.85% -11.16% +128.15%
Average Annual Total Return1 -32.46% -10.59% -1.18% +2.87%
Value of $10,000 Investment2 $6,754 $5,715 $8,884 $22,815
7/31/94 7/31/95 7/31/96 7/31/97 7/31/98
- --------------------------------------------------------------------------------
One-Year Total Return3,* -3.52% +3.14% +1.65% -12.24% -32.46%
*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, and 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 -40.72%.
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. Since
markets can go down as well as up, 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
-----------------------------------------------------
YEAR ENDED JULY 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $11.44 $14.65 $15.07 $14.88 $15.63
-----------------------------------------------------
Income from investment operations:
Net investment income ................................ .10 .07 .21 .18 .19
Net realized and unrealized gains (losses) ........... (3.96) (2.37) .01 .27 (.75)
------------------------------------------------------
Total from investment operations ...................... (3.86) (2.30) .22 .45 (.56)
------------------------------------------------------
Less distributions from:
Net investment income ................................ (.10) (.09) (.13) (.20) (.19)
In excess of net investment income ................... -- -- -- (.06) --
Net realized gains ................................... -- (.82) (.51) -- --
------------------------------------------------------
Total distributions ................................... (.10) (.91) (.64) (.26) (.19)
------------------------------------------------------
Net asset value, end of year .......................... $ 7.48 $11.44 $14.65 $15.07 $14.88
======================================================
Total return* ......................................... (33.83)% (16.45)% 1.65% 3.14% (3.52)%
Ratios/supplemental data
Net assets, end of year (000's) ....................... $189,591 $291,544 $364,032 $391,966 $418,698
Ratios to average net assets:
Expenses ............................................. 1.19% 1.05% .95% .95% .81%
Net investment income ................................ 1.05% .55% .99% 1.20% 1.30%
Portfolio turnover rate ............................... 6.09% 16.05% 28.74% 6.36% 1.46%
*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.
FRANKLIN GOLD FUND
Financial Highlights (continued)
CLASS II
-----------------------------------------
YEAR ENDED JULY 31,
-----------------------------------------
1998 1997 1996 1995+***
-----------------------------------------
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year............................ $11.37 $14.61 $15.05 $15.02
-------------------------------------------
Income from investment operations:
Net investment income (loss)................................. .03 (.02) .12 .12
Net realized and unrealized gains (losses)................... (3.93) (2.38) (.02) .09
-------------------------------------------
Total from investment operations.............................. (3.90) (2.40) .10 .21
-------------------------------------------
Less distributions from:
Net investment income........................................ (.04) (.02) (.03) (.12)
In excess of net investment income........................... -- -- -- (.06)
Net realized gains........................................... -- (.82) (.51) --
----------------------------------------
Total distributions........................................... (.04) (.84) (.54) (.18)
--------------------------------------------
Net asset value, end of year.................................. $ 7.43 $11.37 $14.61 $15.05
===========================================
Total return*................................................. (34.35)% (17.18)% .81% 1.45%
Ratios/supplemental data
Net assets, end of year (000's)............................... $20,353 $20,783 $12,977 $3,104
Ratios to average net assets:
Expenses..................................................... 1.96% 1.83% 1.74% 1.73%**
Net investment income (loss)................................. .25% (.16%) .16% .33%**
Portfolio turnover rate....................................... 6.09% 16.05% 28.74% 6.36%
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized.
**Annualized
***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.
FRANKLIN GOLD FUND
Financial Highlights (continued)
ADVISOR CLASS
------------------------
YEAR ENDED JULY 31,
------------------------
1998 1997***
------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................. $11.43 $13.12
------------------------
Income from investment operations:
Net investment income............................................................. .14 .07
Net realized and unrealized losses................................................ (3.84) (1.67)
------------------------
Total from investment operations................................................... (3.70) (1.60)
------------------------
Less distribution from net investment income....................................... (.12) (.09)
------------------------
Net asset value, end of year....................................................... $ 7.61 $11.43
=======================
Total return*...................................................................... (32.46)% (12.24)%
Ratios/supplemental data
Net assets, end of year (000's).................................................... $2,207 $3,211
Ratios to average net assets:
Expenses.......................................................................... .96% .83%**
Net investment income............................................................. 1.30% .80%**
Portfolio turnover rate............................................................ 6.09% 16.05%
*Total return is not annualized.
**Annualized
***For the period January 2, 1997 (effective date) to July 31, 1997.
See notes to financial statements.
FRANKLIN GOLD FUND
Statement of Investments, July 31, 1998
SHARES/
COUNTRY WARRANTS VALUE
<S> <C> <C> <C>
Common Stocks and Warrants 86.1%
Gold & Diversified Resources 8.2%
Freeport-McMoRan Copper & Gold, Inc., Class A............................... United States 308,011 $ 4,369,906
Freeport-McMoRan Copper & Gold, Inc., Class B............................. United States 131,000 1,940,438
Orogen Minerals, Ltd. .................................................... Australia 720,000 983,744
Orogen Minerals, Ltd., GDR................................................ Australia 54,000 737,807
Rio Tinto, Plc. .......................................................... United Kingdom 522,401 5,888,303
Teck Corp., Class B ...................................................... Canada 382,100 3,549,113
---------------
17,469,311
---------------
Long Life Gold Mines 42.7%
Anglogold, Ltd. .......................................................... South Africa 91,265 3,849,778
Anglogold, Ltd., Sponsored ADR............................................ South Africa 351,822 7,420,348
Ashanti Goldfields Co., Ltd., Sponsored GDR............................... South Africa 689,050 4,909,481
Barrick Gold Corp. ...................................................... Canada 1,282,249 20,996,827
Compania de Minas Buenaventura, SA........................................ Peru 100,593 578,792
Compania de Minas Buenaventura, SA, Sponsored ADR......................... Peru 426,993 4,857,045
Driefontein Consolidated, Ltd., Sponsored ADR ............................ South Africa 580,000 2,718,750
a Gold Fields, Ltd., Sponsored ADR ......................................... South Africa 67,631 300,958
a Harmony Gold Mining Co., Ltd. ............................................ South Africa 273,000 1,144,910
Homestake Mining Co. ..................................................... United States 874,194 9,015,126
a Lihir Gold, Ltd. ......................................................... Australia 1,049,600 1,242,869
Newmont Gold Co. ......................................................... United States 255,000 4,940,625
Newmont Mining Corp. ..................................................... United States 826,370 15,597,734
Placer Dome, Inc. ........................................................ Canada 938,820 9,740,258
a Randfontein Estates Gold Mining Co., warrants............................. South Africa 46,537 27,286
a TVX Gold, Inc. ........................................................... Canada 997,000 2,282,070
a Western Areas Gold Mining Co., Ltd. ...................................... South Africa 357,979 985,317
Western Areas Gold Mining Co., Ltd., ADR ................................. South Africa 23,523 64,745
---------------
90,672,919
---------------
Medium Life Gold Mines 8.8%
Acacia Resources, Ltd. ................................................... Australia 4,122,000 5,006,164
Battle Mountain Canada, Inc. ............................................. Canada 583,600 2,787,806
a Campbell Resources, Inc., warrants........................................ Canada 722,000 22,599
a Canyon Resources Corp., warrants ......................................... United States 339,000 --
Great Central Mines, Ltd. ................................................ Australia 658,375 599,697
a Greenstone Resources, Ltd. ............................................... Canada 568,900 1,396,537
a Newcrest Mining, Ltd. .................................................... Australia 865,050 966,554
a Niugini Mining, Ltd. ..................................................... Australia 133,750 190,866
a Niugini Mining, Ltd., Sponsored ADR....................................... Australia 610,000 870,470
Normandy Mining, Ltd. .................................................... Australia 3,852,451 2,971,036
Sons of Gwalia, Ltd. ..................................................... Australia 1,575,500 3,939,778
---------------
18,751,507
---------------
Mining Finance Companies 13.6%
Anglo American Corp. of South Africa, Ltd., ADR .......................... South Africa 65,000 2,242,500
De Beers Centenary, AG, ADR............................................... South Africa 672,200 10,996,789
Euro-Nevada Mining Corp. ................................................. Canada 604,200 7,435,999
Franco-Nevada Mining Corp., Ltd. ......................................... Canada 483,200 8,158,859
---------------
28,834,147
---------------
Platinum 11.6%
Anglo American Platinum Corp., ADR........................................ South Africa 840,138 $ 11,425,289
Impala Platinum Holdings, Ltd., ADR....................................... South Africa 267,800 3,009,483
a Stillwater Mining Co. .................................................... United States 100,000 2,737,500
a Stillwater Mining Co., 144A............................................... United States 266,700 7,300,913
---------------
24,473,185
---------------
Diamond & Gold Exploration 1.2%
a Aber Resources, Ltd. ..................................................... Canada 247,000 2,097,595
a Equinox Resources, NL..................................................... Australia 1,589,047 106,144
a Helix Resources, NL....................................................... Australia 1,590,000 270,344
---------------
2,474,083
---------------
Total Common Stocks and Warrants (Cost $257,934,508)...................... 182,675,152
---------------
PRINCIPAL
AMOUNT*
Convertible Bonds .6%
Dayton Mining Corp., cvt. sub. deb., 144A, 7.00%, 4/01/02................. Canada $ 2,700,000 810,000
Randgold & Exploration Co., Ltd., cvt. notes, 144A, 7.50%, 9/30/01........ South Africa 785,000 404,275
---------------
Total Convertible Bonds (Cost $3,485,000)................................. 1,214,275
---------------
Total Long-Term Investments (Cost $261,419,508)........................... 183,889,427
---------------
b Repurchase Agreement 14.4%
Joint Repurchase Agreement, 5.602%, 8/03/98, (Maturity Value $30,513,835)
(Cost $30,499,596)....................................................... 30,499,596 30,499,596
BancAmerica Robertson Stephens (Maturity Value $493,847)
Barclays Capital Group, Inc. (Maturity Value $2,846,723)
Bear, Stearns Securities Corp. (Maturity Value $1,552,758)
BT Alex Brown, Inc. (Maturity Value $2,846,723)
Chase Securities, Inc. (Maturity Value $2,846,723)
CIBC Wood Gundy Securities Corp. (Maturity Value $2,846,723)
Deutsche Morgan Grenfell/C.J. Lawrence, Inc. (Maturity Value $2,846,723)
Donaldson, Lufkin & Jenrette Securities Corp. (Maturity Value $2,846,723)
Dresdner Kleinwort Benson, North America, L.L.C. (Maturity Value $2,846,723)
Greenwich Capital Markets, Inc. (Maturity Value $2,846,723)
Paribas Corp. (Maturity Value $2,846,723)
SBC Warburg Dillon Read, Inc. (Maturity Value $2,846,723)
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $291,919,104) 101.1%.............................. 214,389,023
Other Assets, less Liabilities (1.1)%..................................... (2,237,534)
---------------
Net Assets 100.0% ........................................................ $212,151,489
===============
*Securities traded in U.S dollars unless otherwise indicated.
aNon-income producing.
bSee Note 1(c) regarding joint repurchase agreement.
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements
Statement of Assets and Liabilities
July 31, 1998
<S> <C>
Assets:
Investments in securities, at value (cost $261,419,508).................................... $183,889,427
Repurchase agreements, at value and cost................................................... 30,499,596
Receivables:
Capital shares sold......................................................................... 534,525
Dividends and interest...................................................................... 204,306
-------------
Total assets................................................................................ 215,127,854
-------------
Liabilities:
Payables:
Capital shares redeemed .................................................................... 2,081,681
Affiliates.................................................................................. 355,409
Shareholders................................................................................ 459,157
Other liabilities.......................................................................... 80,118
-------------
Total liabilities........................................................................... 2,976,365
-------------
Net assets, at value ...................................................................... $212,151,489
=============
Net assets consist of:
Undistributed net investment income ....................................................... $ 37,682
Net unrealized depreciation................................................................ (77,530,081)
Accumulated net realized loss.............................................................. (33,013,624)
Capital shares............................................................................. 322,657,512
Net assets, at value ...................................................................... $212,151,489
=============
Class I:
Net asset value per share ($189,591,368 / 25,355,317 shares outstanding)*.................. $7.48
-------------
Maximum offering price per share ($7.48 / 95.5%)........................................... $7.83
-------------
Class II:
Net asset value per share ($20,352,891 / 2,740,226 shares outstanding)*.................... $7.43
-------------
Maximum offering price per share ($7.43 / 99%)............................................. $7.51
-------------
Advisor Class:
Net asset value and maximum offering price per share ($2,207,230 / 290,108 shares outstanding) $7.61
-------------
*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) Statement of Operations for
the year ended July 31, 1998
<S> <C> <C>
Investment income:
(net of foreign taxes and fees of $207,611)
Dividends................................................................... $ 4,034,938
Interest ................................................................... 1,811,277
-------------
Total investment income ..................................................... $ 5,846,215
Expenses:
Management fees (Note 3).................................................... 1,416,311
Distribution fees (Note 3)
Class I...................................................................... 552,027
Class II..................................................................... 203,577
Transfer agent fees (Note 3)................................................ 718,944
Custodian fees.............................................................. 62,991
Reports to shareholders..................................................... 170,126
Registration and filing fees ............................................... 62,016
Professional fees........................................................... 37,345
Directors' fees and expenses................................................ 16,565
Other....................................................................... 17,930
-------------
Total expenses .............................................................. 3,257,832
---------------
Net investment income ...................................................... 2,588,383
---------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments.................................................................. (24,030,213)
Foreign currency transactions................................................ (95,720)
--------------
Net realized loss............................................................ (24,125,933)
Net unrealized appreciation (depreciation) on:
Investments................................................................ (83,348,261)
Translation of assets and liabilities denominated in foreign currencies.... 14
--------------
Net unrealized depreciation.................................................. (83,348,247)
----------------
Net realized and unrealized loss............................................. (107,474,180)
----------------
Net decrease in net assets resulting from operations......................... $(104,885,797)
================
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended July 31, 1998 and 1997
1998 1997
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ...................................................... $ 2,588,383 $ 1,827,886
Net realized loss from investments and foreign currency transactions ....... (24,125,933) (8,975,698)
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies ............................. (83,348,247) (52,315,743)
------------------------------
Net decrease in net assets resulting from operations ....................... (104,885,797) (59,463,555)
Distributions to shareholders from:
Net investment income:
Class I..................................................................... (2,450,206) (2,234,184)
Class II.................................................................... (100,018) (21,024)
Advisor Class............................................................... (47,704) (14,937)
Net realized gains:
Class I..................................................................... -- (20,163,382)
Class II.................................................................... -- (911,251)
------------------------------
Total distributions to shareholders......................................... (2,597,928) (23,344,778)
------------------------------
Capital share transactions: (Note 2)
Class I.................................................................... (5,299,204) 5,704,541
Class II................................................................... 8,809,758 12,219,430
Advisor Class.............................................................. 585,881 3,414,037
-----------------------------
Total capital share transactions ........................................... 4,096,435 21,338,008
Net decrease in net assets.................................................. (103,387,290) (61,470,325)
Net assets
Beginning of year.......................................................... 315,538,779 377,009,104
-----------------------------
End of year ............................................................... $212,151,489 $315,538,779
=============================
Undistributed net investment income included in net assets:
End of year ............................................................... $ 37,682 $ 142,947
=============================
</TABLE>
See notes to financial statements.
FRANKLIN GOLD FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Gold Fund (the Fund) is registered under the Investment Company Act of
1940 as a diversified, open-end investment company. The Fund seeks capital
growth. 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 July 31, 1998, all outstanding repurchase agreements held by the Fund
had been entered into on that date.
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 to
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 July 31, 1998, there were 100 million
shares authorized ($.10 par value), of which 45 million shares each were
designated as Class I and Class II, and 10 million shares were designated as
Advisor Class. Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------
1998 1997
-------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I Shares
Shares sold....................................... 57,684,355 $528,508,829 37,310,473 $487,562,871
Shares issued on reinvestment of distributions.... 249,615 2,059,834 1,410,265 18,492,485
Shares redeemed...................................(58,064,574) (535,867,867) (38,082,550) (500,350,815)
-------------------------------------------------------
Net increase (decrease)........................... (130,604) $ (5,299,204) 638,188 $ 5,704,541
=======================================================
Class II Shares
Shares sold....................................... 1,899,675 $ 17,713,130 1,412,506 $ 18,343,389
Shares issued on reinvestment of distributions.... 10,632 88,159 56,807 744,729
Shares redeemed................................... (997,164) (8,991,531) (530,783) (6,868,688)
--------------------------------------------------------
Net increase...................................... 913,143 $ 8,809,758 938,530 $ 12,219,430
=======================================================
Advisor Class*
Shares sold....................................... 3,101,828 $ 29,749,285 429,697 $ 5,074,980
Shares issued on reinvestment of distributions.... 3,197 26,417 1,042 12,789
Shares redeemed................................... (3,095,800) (29,189,821) (149,856) (1,673,732)
--------------------------------------------------------
Net increase...................................... 9,225 $ 585,881 280,883 $ 3,414,037
=======================================================
*Effective date of Advisor Class shares was January 2, 1997.
</TABLE>
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
---------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $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 year of $101,148 and $24,246,
respectively.
4. INCOME TAXES
At July 31, 1998, the Fund had tax basis capital losses of $15,178,412 which may
be carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2005 ........................... $ 6,513,315
2006............................ 8,665,097
-------------
$15,178,412
=============
At July 31, 1998, the Fund has deferred capital losses occurring subsequent to
October 31, 1997 of $17,835,212. For tax purposes, such losses will be reflected
in the year ending July 31, 1999.
4. INCOME TAXES (cont.)
At July 31, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes of $291,919,104 was as follows:
Unrealized appreciation......... $18,623,793
Unrealized depreciation......... (96,153,874)
-------------
Net unrealized depreciation .... $(77,530,081)
=============
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 year
ended July 31, 1998 aggregated $14,766,572 and $14,303,526, respectively.
FRANKLIN GOLD FUND
Independent Auditor's Report
To the Shareholders and Board of Directors
of the Franklin Gold Fund:
We have audited the accompanying statement of assets and liabilities of the
Franklin Gold Fund (the Fund), including the Fund's statement of investments, as
of July 31, 1998, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Gold Fund as of July 31, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
September 4, 1998
FRANKLIN GOLD FUND
Tax Information
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
12.16% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended July 31, 1998.
At July 31, 1998, more than 50% of the Franklin Gold Fund's total assets were
invested in securities of foreign issuers. In most instances, foreign taxes were
withheld from dividends paid to the fund on these investments. As in prior
years, the Fund intends to make an election under Section 853 of the Internal
Revenue Code. This election will allow shareholders to treat their proportionate
share of foreign taxes paid by the Fund as having been paid directly by them.
In January 1999, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1998.
a. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I and Advisor Class shareholders in December
1997:
<TABLE>
<CAPTION>
CLASS I ADVISOR CLASS
---------------------------------------------------------------------
FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE
COUNTRY WITHHELD PER SHARE INCOME PER SHARE WITHHELD PER SHARE INCOME PER SHARE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australia .............................. $0.000000 $0.002500 $0.000000 $0.003000
Canada ................................. 0.001600 0.005300 0.001600 0.006600
Peru.................................... 0.000000 0.000300 0.000000 0.000400
South Africa............................ -0.000200 0.016400 -0.000200 0.020100
United Kingdom.......................... 0.000000 0.001300 0.000000 0.001600
---------------------------------------------------------------------
Total .................................. $0.001400 $0.025800 $0.001400 $0.031700
=====================================================================
b. The following table provides a breakdown by country of foreign source income
and foreign taxes paid to Class I, Class II, and Advisor Class shareholders in
June 1998:
CLASS I CLASS II ADVISOR CLASS
---------------------------------------------------------------------------------------
FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE
WITHHELD INCOME WITHHELD INCOME WITHHELD INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia $0.000600 $0.010000 $0.000600 $0.006600 $0.000600 $0.011000
Canada 0.001500 0.006300 0.001500 0.005600 0.001500 0.005800
Peru 0.000000 0.001000 0.000000 0.000700 0.000000 0.001100
South Africa 0.000600 0.026000 0.000600 0.020900 0.000600 0.025500
United Kingdom -0.000100 0.003600 -0.000100 0.002500 -0.000100 0.003800
----------------------------------------------------------------------------------------
Total $0.002600 $0.046900 $0.002600 $0.036300 $0.002600 $0.047200
========================================================================================
</TABLE>
The Fund hereby designates the total foreign taxes paid and foreign source
income received, on a per share basis as detailed above, as payments qualifying
under Section 853 of the Internal Revenue Code. Shareholders are advised to
check with their tax advisors for information on the treatment of these amounts
on their individual income tax returns.
Franklin Gold Fund
Annual Report
July 31, 1998
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304(a) OF REGULATION S-T)
[BAR CHART]
GRAPHIC MATERIAL (1)
This chart compares, in bar chart format, the total return performance of
Franklin Gold Fund - Class I with the Financial Times Gold Index for the
one-year period ended July 31, 1998.
Franklin Gold Fund - Class I -33.83%
Financial Times Gold Index -36.31%
[PIE CHART]
GRAPHIC MATERIAL (2)
This chart shows in pie format the geographic distribution of Franklin Gold
Fund, based on total net assets as of July 31, 1998.
Canada 28.0%
South Africa 23.3%
United States 21.6%
Australia 8.4%
Other 5.4%
Cash & Short-Term Securities 13.3%
[BAR CHART]
GRAPHIC MATERIAL (3)
This chart shows in bar format the industry breakdown of Franklin Gold Fund,
based on total net assets as of July 31, 1998.
Long-Life Gold Mines 42.9%
Mining Finance Companies 13.6%
Platinum 11.6%
Medium-Life Gold Mines 9.2%
Gold & Diversified Resources 8.2%
Diamond & Gold Exploration 1.2%
Cash & Short-Term Securities 13.3%
[TOP HOLDINGS]
GRAPHIC MATERIAL (4)
This chart lists the top 10 holdings, including country, of Franklin Gold Fund,
based on total net assets as of July 31, 1998.
Barrick Gold Corp., Canada 9.9%
Newmont Mining Corp., United States 7.4%
Anglo American Platinum Corp., South Africa 5.4%
DeBeers Centenary, AG, South Africa 5.2%
Placer Dome Mining, Inc., Canada 4.6%
Homestake Mining Co., United States 4.3%
Franco-Nevada Mining Corp., Ltd., Canada 3.9%
Euro-Nevada Mining Corp., Canada 3.5%
Anglogold, Ltd., South Africa 3.5%
Stillwater Mining Co., United States 3.4%
[LINE CHART]
GRAPHIC MATERIAL (5)
This chart shows in line format the price of gold per ounce for the one-year
period ended July 31, 1998.
SPOT GOLD PRICE*
7/31/97 - 7/31/98
DATE SPOT GOLD
7/31/97 $324.55
8/31/97 $324.15
9/30/97 $334.45
10/31/97 $311.45
11/30/97 $297.00
12/31/97 $289.05
1/31/98 $302.45
2/28/98 $299.15
3/31/98 $300.95
4/30/98 $306.65
5/31/98 $292.95
6/30/98 $296.95
7/31/98 $286.45
*U.S. DOLLARS PER TROY OZ.
[INDEX COMPARISON CHART]
GRAPHIC MATERIAL (6)
The following line graph compares the performance of Franklin Gold Fund's Class
I shares to that of the Standard & Poor's 500 Stock Index based on a
hypothetical $10,000 investment in the fund from 8/1/88 to 7/31/98.
DATE FRANKLIN GOLD FUND S&P 500 S&P 500 COMPOSITE
-CLASS I TOTAL
8/1/88 $9,547 $10,000
8/31/88 $9,061 $9,660 -3.40%
9/30/88 $8,743 $10,072 4.26%
10/31/88 $9,097 $10,352 2.78%
11/30/88 $9,427 $10,203 -1.43%
12/31/88 $9,104 $10,382 1.75%
1/31/89 $9,470 $11,142 7.32%
2/28/89 $9,861 $10,865 -2.49%
3/31/89 $9,911 $11,118 2.33%
4/30/89 $9,844 $11,695 5.19%
5/31/89 $9,332 $12,168 4.05%
6/30/89 $10,028 $12,099 -0.57%
7/31/89 $10,204 $13,192 9.03%
8/31/89 $10,472 $13,450 1.96%
9/30/89 $10,856 $13,395 -0.41%
10/31/89 $10,975 $13,084 -2.32%
11/30/89 $12,477 $13,351 2.04%
12/31/89 $12,917 $13,672 2.40%
1/31/90 $13,640 $12,754 -6.71%
2/28/90 $12,427 $12,919 1.29%
3/31/90 $12,050 $13,261 2.65%
4/30/90 $11,048 $12,931 -2.49%
5/31/90 $11,860 $14,192 9.75%
6/30/90 $11,160 $14,097 -0.67%
7/31/90 $11,943 $14,051 -0.32%
8/31/90 $11,595 $12,781 -9.04%
9/30/90 $11,247 $12,159 -4.87%
10/31/90 $10,161 $12,106 -0.43%
11/30/90 $9,865 $12,889 6.46%
12/31/90 $10,399 $13,248 2.79%
1/31/91 $9,454 $13,826 4.36%
2/28/91 $10,462 $14,814 7.15%
3/31/91 $10,264 $15,173 2.42%
4/30/91 $10,327 $15,209 0.24%
5/31/91 $10,713 $15,865 4.31%
6/30/91 $11,215 $15,138 -4.58%
7/31/91 $11,477 $15,844 4.66%
8/31/91 $10,367 $16,219 2.37%
9/30/91 $10,655 $15,948 -1.67%
10/31/91 $11,369 $16,162 1.34%
11/30/91 $11,640 $15,511 -4.03%
12/31/91 $11,012 $17,285 11.44%
1/31/92 $11,058 $16,963 -1.86%
2/29/92 $10,662 $17,182 1.29%
3/31/92 $10,368 $16,847 -1.95%
4/30/92 $10,156 $17,343 2.94%
5/31/92 $10,782 $17,428 0.49%
6/30/92 $10,814 $17,168 -1.49%
7/31/92 $10,702 $17,870 4.09%
8/31/92 $10,200 $17,504 -2.05%
9/30/92 $9,865 $17,708 1.17%
10/31/92 $9,064 $17,769 0.34%
11/30/92 $8,478 $18,373 3.40%
12/31/92 $8,772 $18,599 1.23%
1/31/93 $8,810 $18,755 0.84%
2/28/93 $9,516 $19,010 1.36%
3/31/93 $10,608 $19,411 2.11%
4/30/93 $11,869 $18,941 -2.42%
5/31/93 $13,347 $19,447 2.67%
6/30/93 $13,502 $19,504 0.29%
7/31/93 $14,841 $19,426 -0.40%
8/31/93 $13,331 $20,162 3.79%
9/30/93 $12,154 $20,007 -0.77%
10/31/93 $13,587 $20,421 2.07%
11/30/93 $13,340 $20,227 -0.95%
12/31/93 $15,239 $20,471 1.21%
1/31/94 $14,971 $21,167 3.40%
2/28/94 $14,282 $20,594 -2.71%
3/31/94 $14,435 $19,696 -4.36%
4/30/94 $13,794 $19,948 1.28%
5/31/94 $14,091 $20,275 1.64%
6/30/94 $13,962 $19,778 -2.45%
7/31/94 $14,318 $20,427 3.28%
8/31/94 $15,049 $21,265 4.10%
9/30/94 $16,271 $20,746 -2.44%
10/31/94 $15,492 $21,213 2.25%
11/30/94 $13,923 $20,440 -3.64%
12/31/94 $14,518 $20,743 1.48%
1/31/95 $12,352 $21,280 2.59%
2/28/95 $13,048 $22,110 3.90%
3/31/95 $14,335 $22,762 2.95%
4/30/95 $14,451 $23,432 2.94%
5/31/95 $14,267 $24,369 4.00%
6/30/95 $14,365 $24,934 2.32%
7/31/95 $14,767 $25,762 3.32%
8/31/95 $14,786 $25,826 0.25%
9/30/95 $14,855 $26,916 4.22%
10/31/95 $13,199 $26,819 -0.36%
11/30/95 $14,169 $27,997 4.39%
12/31/95 $14,332 $28,537 1.93%
1/31/96 $16,617 $29,507 3.40%
2/29/96 $16,658 $29,782 0.93%
3/31/96 $16,709 $30,068 0.96%
4/30/96 $16,913 $30,510 1.47%
5/31/96 $17,556 $31,297 2.58%
6/30/96 $15,348 $31,416 0.38%
7/31/96 $15,010 $30,027 -4.42%
8/31/96 $15,604 $30,661 2.11%
9/30/96 $14,672 $32,387 5.63%
10/31/96 $14,713 $33,281 2.76%
11/30/96 $14,600 $35,797 7.56%
12/31/96 $14,482 $35,088 -1.98%
1/31/97 $13,838 $37,281 6.25%
2/28/97 $15,507 $37,572 0.78%
3/31/97 $13,806 $36,028 -4.11%
4/30/97 $12,933 $38,179 5.97%
5/31/97 $13,599 $40,504 6.09%
6/30/97 $12,759 $42,318 4.48%
7/31/97 $12,540 $45,687 7.96%
8/31/97 $12,365 $43,128 -5.60%
9/30/97 $12,924 $45,492 5.48%
10/31/97 $10,885 $43,972 -3.34%
11/30/97 $9,087 $46,008 4.63%
12/31/97 $9,311 $46,800 1.72%
1/31/98 $9,829 $47,319 1.11%
2/28/98 $9,785 $50,731 7.21%
3/31/98 $10,369 $53,328 5.12%
4/30/98 $11,085 $53,867 1.01%
5/31/98 $9,554 $52,940 -1.72%
6/30/98 $8,831 $55,090 4.06%
7/31/98 $8,298 $54,500 -1.07%
[INDEX COMPARISON CHART]
GRAPHIC MATERIAL (7)
The following line graph compares the performance of Franklin Gold Fund's Class
II shares to that of the Standard & Poor's 500 Stock Index based on a
hypothetical $10,000 investment in the fund from 5/1/95 to 7/31/98.
DATE FRANKLIN GOLD S&P 500 S&P 500 COMPOSITE
FUND - CLASS II TOTAL
--------------- -----
5/1/95 $9,901 $10,000
5/31/95 $9,717 $10,400 4.00%
6/30/95 $9,777 $10,641 2.32%
7/31/95 $10,044 $10,995 3.32%
8/31/95 $10,051 $11,022 0.25%
9/30/95 $10,091 $11,487 4.22%
10/31/95 $8,963 $11,446 -0.36%
11/30/95 $9,617 $11,948 4.39%
12/31/95 $9,715 $12,179 1.93%
1/31/96 $11,253 $12,593 3.40%
2/29/96 $11,280 $12,710 0.93%
3/31/96 $11,301 $12,832 0.96%
4/30/96 $11,433 $13,021 1.47%
5/31/96 $11,855 $13,357 2.58%
6/30/96 $10,362 $13,407 0.38%
7/31/96 $10,126 $12,815 -4.42%
8/31/96 $10,521 $13,085 2.11%
9/30/96 $9,890 $13,822 5.63%
10/31/96 $9,911 $14,203 2.76%
11/30/96 $9,828 $15,277 7.56%
12/31/96 $9,743 $14,975 -1.98%
1/31/97 $9,307 $15,911 6.25%
2/28/97 $10,415 $16,035 0.78%
3/31/97 $9,263 $15,376 -4.11%
4/30/97 $8,673 $16,294 5.97%
5/31/97 $9,116 $17,286 6.09%
6/30/97 $8,540 $18,060 4.48%
7/31/97 $8,392 $19,498 7.96%
8/31/97 $8,267 $18,406 -5.60%
9/30/97 $8,643 $19,415 5.48%
10/31/97 $7,256 $18,766 -3.34%
11/30/97 $6,067 $19,635 4.63%
12/31/97 $6,207 $19,973 1.72%
1/31/98 $6,554 $20,195 1.11%
2/28/98 $6,525 $21,651 7.21%
3/31/98 $6,916 $22,759 5.12%
4/30/98 $7,396 $22,989 1.01%
5/31/98 $6,377 $22,594 -1.72%
6/30/98 $5,888 $23,511 4.06%
7/31/98 $5,510 $23,259 -1.07%
[INDEX COMPARISON CHART]
GRAPHIC MATERIAL (8)
The following line graph compares the performance of Franklin Gold Fund's
Advisor Class shares with that of the Standard & Poor's 500 Stock Index based on
a hypothetical $10,000 investment in the fund from 8/1/88 to 7/31/98.
DATE FRANKLIN GOLD FUND - S&P 500 S&P 500 COMPOSITE
ADVISOR CLASS TOTAL
8/1/88 $10,000 $10,000
8/31/88 $9,491 $9,660 -3.40%
9/30/88 $9,158 $10,072 4.26%
10/31/88 $9,529 $10,352 2.78%
11/30/88 $9,875 $10,203 -1.43%
12/31/88 $9,536 $10,382 1.75%
1/31/89 $9,919 $11,142 7.32%
2/28/89 $10,329 $10,865 -2.49%
3/31/89 $10,381 $11,118 2.33%
4/30/89 $10,311 $11,695 5.19%
5/31/89 $9,775 $12,168 4.05%
6/30/89 $10,504 $12,099 -0.57%
7/31/89 $10,689 $13,192 9.03%
8/31/89 $10,970 $13,450 1.96%
9/30/89 $11,371 $13,395 -0.41%
10/31/89 $11,496 $13,084 -2.32%
11/30/89 $13,070 $13,351 2.04%
12/31/89 $13,531 $13,672 2.40%
1/31/90 $14,288 $12,754 -6.71%
2/28/90 $13,017 $12,919 1.29%
3/31/90 $12,623 $13,261 2.65%
4/30/90 $11,572 $12,931 -2.49%
5/31/90 $12,424 $14,192 9.75%
6/30/90 $11,691 $14,097 -0.67%
7/31/90 $12,510 $14,051 -0.32%
8/31/90 $12,146 $12,781 -9.04%
9/30/90 $11,782 $12,159 -4.87%
10/31/90 $10,643 $12,106 -0.43%
11/30/90 $10,334 $12,889 6.46%
12/31/90 $10,893 $13,248 2.79%
1/31/91 $9,903 $13,826 4.36%
2/28/91 $10,958 $14,814 7.15%
3/31/91 $10,751 $15,173 2.42%
4/30/91 $10,817 $15,209 0.24%
5/31/91 $11,222 $15,865 4.31%
6/30/91 $11,748 $15,138 -4.58%
7/31/91 $12,022 $15,844 4.66%
8/31/91 $10,859 $16,219 2.37%
9/30/91 $11,162 $15,948 -1.67%
10/31/91 $11,909 $16,162 1.34%
11/30/91 $12,193 $15,511 -4.03%
12/31/91 $11,535 $17,285 11.44%
1/31/92 $11,583 $16,963 -1.86%
2/29/92 $11,169 $17,182 1.29%
3/31/92 $10,860 $16,847 -1.95%
4/30/92 $10,639 $17,343 2.94%
5/31/92 $11,294 $17,428 0.49%
6/30/92 $11,327 $17,168 -1.49%
7/31/92 $11,210 $17,870 4.09%
8/31/92 $10,684 $17,504 -2.05%
9/30/92 $10,333 $17,708 1.17%
10/31/92 $9,495 $17,769 0.34%
11/30/92 $8,881 $18,373 3.40%
12/31/92 $9,189 $18,599 1.23%
1/31/93 $9,228 $18,755 0.84%
2/28/93 $9,968 $19,010 1.36%
3/31/93 $11,111 $19,411 2.11%
4/30/93 $12,433 $18,941 -2.42%
5/31/93 $13,980 $19,447 2.67%
6/30/93 $14,143 $19,504 0.29%
7/31/93 $15,545 $19,426 -0.40%
8/31/93 $13,964 $20,162 3.79%
9/30/93 $12,731 $20,007 -0.77%
10/31/93 $14,233 $20,421 2.07%
11/30/93 $13,974 $20,227 -0.95%
12/31/93 $15,963 $20,471 1.21%
1/31/94 $15,682 $21,167 3.40%
2/28/94 $14,960 $20,594 -2.71%
3/31/94 $15,121 $19,696 -4.36%
4/30/94 $14,449 $19,948 1.28%
5/31/94 $14,760 $20,275 1.64%
6/30/94 $14,625 $19,778 -2.45%
7/31/94 $14,998 $20,427 3.28%
8/31/94 $15,764 $21,265 4.10%
9/30/94 $17,044 $20,746 -2.44%
10/31/94 $16,228 $21,213 2.25%
11/30/94 $14,585 $20,440 -3.64%
12/31/94 $15,208 $20,743 1.48%
1/31/95 $12,938 $21,280 2.59%
2/28/95 $13,668 $22,110 3.90%
3/31/95 $15,015 $22,762 2.95%
4/30/95 $15,137 $23,432 2.94%
5/31/95 $14,945 $24,369 4.00%
6/30/95 $15,047 $24,934 2.32%
7/31/95 $15,468 $25,762 3.32%
8/31/95 $15,489 $25,826 0.25%
9/30/95 $15,561 $26,916 4.22%
10/31/95 $13,826 $26,819 -0.36%
11/30/95 $14,842 $27,997 4.39%
12/31/95 $15,013 $28,537 1.93%
1/31/96 $17,407 $29,507 3.40%
2/29/96 $17,449 $29,782 0.93%
3/31/96 $17,503 $30,068 0.96%
4/30/96 $17,717 $30,510 1.47%
5/31/96 $18,390 $31,297 2.58%
6/30/96 $16,077 $31,416 0.38%
7/31/96 $15,723 $30,027 -4.42%
8/31/96 $16,345 $30,661 2.11%
9/30/96 $15,369 $32,387 5.63%
10/31/96 $15,412 $33,281 2.76%
11/30/96 $15,294 $35,797 7.56%
12/31/96 $15,170 $35,088 -1.98%
1/31/97 $14,507 $37,281 6.25%
2/28/97 $16,255 $37,572 0.78%
3/31/97 $14,473 $36,028 -4.11%
4/30/97 $13,559 $38,179 5.97%
5/31/97 $14,267 $40,504 6.09%
6/30/97 $13,372 $42,318 4.48%
7/31/97 $13,153 $45,687 7.96%
8/31/97 $12,969 $43,128 -5.60%
9/30/97 $13,567 $45,492 5.48%
10/31/97 $11,404 $43,972 -3.34%
11/30/97 $9,551 $46,008 4.63%
12/31/97 $9,778 $46,800 1.72%
1/31/98 $10,334 $47,319 1.11%
2/28/98 $10,300 $50,731 7.21%
3/31/98 $10,914 $53,328 5.12%
4/30/98 $11,678 $53,867 1.01%
5/31/98 $10,080 $52,940 -1.72%
6/30/98 $9,316 $55,090 4.06%
7/31/98 $8,884 $54,500 -1.07%
