FRANKLIN GOLD FUND
ANNUAL REPORT
JULY 31, 1999
SHAREHOLDER LETTER
Your Fund's Goal: 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 12 months ended July 31,
1999. During this time, oversupply drove gold prices lower, despite increasing
Asian demand. This oversupply resulted from increased production, significant
central bank sales, and hedging activities by many producers who borrowed gold
from central banks and promptly sold it on the market. On the other hand, demand
for platinum, palladium and diamonds increased significantly, and their prices
rose during the period. Within this environment, the fund's Class A shares
posted a +11.51% cumulative total return for the reporting period, as shown in
the Performance Summary on page 7. The Standard & Poor's 500(R) Composite Index
delivered a +21.26% return for the same period, while the Financial Times Gold
Index(R) delivered a -6.22% return.(1)
Throughout the year, we maintained our conservative investment strategy,
focusing on gold mining companies as long-term growth vehicles. We continued to
invest in quality firms with attractive reserve and production growth profiles,
such as Barrick Gold Corp., Newmont Mining Corp., and AngloGold Ltd. In our
opinion, these large cap, low-cost producers had solid management, established
production histories, and were uniquely positioned to take advantage of low gold
prices and opportunities to acquire small- to mid-size companies. For example,
Barrick Gold Corp. acquired Sutton Resources during the period and established
an operations center in Tanzania.
1. Source: Standard & Poor's(R) Micropal. The Financial Times Gold Index is
compiled by the Financial Times, Goldman Sachs & Co., and Wood Mackenzie & Co.,
Ltd. in conjunction with the Institute of Actuaries and the Faculty of
Actuaries. Indices include reinvested dividends. One cannot invest directly in
an index, nor is the index representative of the fund's portfolio.
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 14 of
this report.
CONTENTS
Shareholder Letter 1
Performance Summary 6
Financial Highlights & Statement of Investments 10
Financial Statements 16
Notes to Financial Statements 19
Independent Auditors' Report 23
Tax Information 24
FUND CATEGORY
[PYRAMID GRAPHIC]
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
7/31/99
[PIE CHART]
South Africa 32.6%
Canada 22.7%
United States 19.7%
Australia 7.4%
Other 11.3%
Cash & Short-Term Securities 6.3%
INDUSTRY BREAKDOWN
Based on Total Net Assets
7/31/99
[BAR CHART]
Long-Life Gold Mines 41.4%
Platinum 20.8%
Mining Finance Companies 15.5%
Gold & Diversified Resources 8.8%
Medium-Life Gold Mines 7.2%
Cash & Short-Term Securities 6.3%
Reflecting our belief in the importance of diversification across individual
securities, commodity groups and geographic regions, our top 10 holdings
included Anglo American Platinum Corp., Impala Platinum Holdings Ltd. and
Stillwater Mining Co., the dominant players in the platinum group. They also
included De Beers Consolidated Mines, a diamond mining company. These holdings
generally performed well during the period in review, particularly Impala
Platinum Holdings Ltd., which successfully settled a legal dispute with South
Africa's Royal Bafokeng nation, and De Beers Consolidated Mines, which benefited
from increased demand for diamonds.
Looking forward, we believe Franklin Gold Fund continues to have a useful place
in a diversified investment portfolio as potential protection against economic
uncertainty and inflation. Downward pressure on gold bullion prices could cause
companies to look for profitability through downsizing, mergers, increased cost
control, and reduced production. And economic recovery in Asia, fear of
inflation in developed countries, or restrictions on future gold sales by the
central banks of Switzerland and the United Kingdom could contribute to higher
prices. However, as discussed in the prospectus, investing in gold and other
precious metals is subject to special risks, including those related to
fluctuations in their prices and the currency fluctuations and political
uncertainty associated with foreign and developing markets.
Please remember, this discussion reflects our views, opinions, and portfolio
holdings as of July 31, 1999, the end of the reporting period. But market and
economic conditions are changing constantly, which can be expected to affect our
strategies and the fund's portfolio composition. Although past 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.
Sincerely,
/s/ R. Martin Wiskemann
- -----------------------
R. Martin Wiskemann
/s/ Stephen M. Land
- -----------------------
Stephen M. Land
Portfolio Managers
Franklin Gold Fund
STEPHEN M. LAND
Steve Land is a research analyst for Franklin Advisers, Inc. and a portfolio
manager of Franklin Natural Resources Fund, Franklin Gold Fund and Franklin
Valuemark Natural Resources Fund. He specializes in research analysis of
precious metals and oil and gas exploration and production industries for
Franklin Gold Fund and Franklin Natural Resources Fund.
Mr. Land joined Franklin Templeton in 1997 and worked as a research analyst
specializing in gold and precious metals before becoming portfolio manager of
the fund.
He received a bachelor of science degree in managerial economics from University
of California at Davis.
TOP 10 HOLDINGS
7/31/99
COMPANY, % OF TOTAL
COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Barrick Gold Corp.
Canada 10.2%
Newmont Mining Corp.
United States 8.6%
Anglo American Platinum Corp. Ltd., ADR
South Africa 8.5%
De Beers Consolidated Mines, AG, ADR
South Africa 7.8%
Impala Platinum Holdings Ltd.
South Africa 6.9%
Stillwater Mining Co.
United States 5.3%
Rio Tinto PLC
United Kingdom 5.1%
AngloGold Ltd.
South Africa 4.8%
Placer Dome Inc.
Canada 4.1%
Homestake Mining Co.
United States 3.7%
THE PRICE OF GOLD
[SPECIAL UPDATE GRAPHIC]
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 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.
CLASS A (formerly Class I):
Subject to the current, maximum 5.75% initial sales charge. Prior to August 3,
1998, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund implemented a Rule
12b-1 plan, which affects subsequent performance. (Past expense reductions by
the fund's manager increased these shares' total returns.)
CLASS B:
Subject to no initial sales charge, but subject to a contingent deferred sales
charge (CDSC) declining from 4% to 0% over six years. These shares have higher
annual fees and expenses than Class A shares.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18
months of investment. These shares have higher annual fees and expenses than
Class A shares.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
PERFORMANCE SUMMARY AS OF 7/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of each class's operating expenses. Past distributions are not indicative
of future trends. All total returns include reinvested distributions at net
asset value.
PRICE AND DISTRIBUTION INFORMATION
CLASS A CHANGE 7/31/99 7/31/98
- ---------------------------------------------------------------
Net Asset Value +$0.82 $8.30 $7.48
DISTRIBUTIONS (8/1/98 - 7/31/99)
---------------------------------
Dividend Income $0.0405
CLASS B CHANGE 7/31/99 1/1/99
- ---------------------------------------------------------------
Net Asset Value +$0.54 $8.26 $7.72
CLASS C CHANGE 7/31/99 7/31/98
- ---------------------------------------------------------------
Net Asset Value +$0.80 $8.23 $7.43
DISTRIBUTIONS (8/1/98 - 7/31/99)
---------------------------------
Dividend Income $0.0063
ADVISOR CLASS CHANGE 7/31/99 7/31/98
- ---------------------------------------------------------------
Net Asset Value +$0.88 $8.49 $7.61
DISTRIBUTIONS (8/1/98 - 7/31/99)
---------------------------------
Dividend Income $0.0547
Past performance is not predictive of future results.
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (5/19/69)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +11.51% -35.37% -9.32% +148.93%
Average Annual Total Return(2) +5.05% -9.44% -1.56% +2.86%
Value of $10,000 Investment(3) $ 10,505 $ 6,090 $ 8,549 $ 23,454
</TABLE>
<TABLE>
<CAPTION>
7/31/95 7/31/96 7/31/97 7/31/98 7/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) +3.14% +1.65% -16.45% -33.83% +11.51%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B (1/1/99)
- --------------------------------------------------------------------------------
<S> <C>
Cumulative Total Return(1) +6.99%
Aggregate Total Return(2) +2.99%
Value of $10,000 Investment(3) $ 10,299
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +10.85% -39.68% -38.31%
Average Annual Total Return(2) +8.68% -15.80% -10.95%
Value of $10,000 Investment(3) $ 10,868 $ 5,971 $ 6,108
</TABLE>
<TABLE>
<CAPTION>
7/31/96 7/31/97 7/31/98 7/31/99
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One-Year Total Return(4) +0.81% -17.12% -34.35% +10.85%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(5) 1-YEAR 5-YEAR 10-YEAR (5/19/69)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +12.30% -32.67% -5.53% +159.33%
Average Annual Total Return(2) +12.30% -7.61% -0.57% +3.21%
Value of $10,000 Investment(3) $ 11,230 $ 6,733 $ 9,447 $ 25,933
</TABLE>
<TABLE>
<CAPTION>
7/31/95 7/31/96 7/31/97 7/31/98 7/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) +3.14% +1.65% -16.35% -32.46% +12.30%
</TABLE>
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 current, applicable,
maximum sales charge(s) for that class. Since Class B shares have existed for
less than one year, the figures for that class represent aggregate total return
from inception; therefore, average annual total returns are not provided.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
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 sales
charges.
5. On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the 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
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; 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 and average annual
total returns of Advisor Class shares were -33.43% and -14.59%, respectively.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares.
Past performance is not predictive of future results.
AVERAGE ANNUAL TOTAL RETURN
7/31/99
CLASS A
- ---------------------------
1-Year +5.05
5-Year -9.44%
10-Year -1.56%
Since Inception
(5/19/69) +2.86%
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
The unmanaged index differs from the fund in composition, does not pay
management fees or expenses and includes reinvested dividends. One cannot invest
directly in an index. Total return represents the change in value of an
investment over the periods shown. It includes the share class's current,
applicable, maximum sales charge(s), fund expenses, account fees, and reinvested
distributions.
CLASS A
Growth of $10,000 Investment
(8/1/89-7/31/99)
The following line graph compares the performance of Franklin Gold Fund's Class
A shares to that of the Standard and Poor's 500 Composite Index and Financial
Times Gold Index based on a $10,000 investment from 8/1/89 to 7/31/99.
DATE FRANKLIN GOLD FUND S&P 500 FINANCIAL TIMES
- CLASS A GOLD INDEX
08/01/1989 $9,427 $10,000 $10,000
08/31/1989 $9,675 $10,196 $10,592
09/30/1989 $10,029 $10,154 $11,307
10/31/1989 $10,139 $9,919 $11,707
11/30/1989 $11,527 $10,121 $14,960
12/31/1989 $11,933 $10,364 $16,485
01/31/1990 $12,601 $9,668 $19,093
02/28/1990 $11,480 $9,793 $15,344
03/31/1990 $11,132 $10,053 $14,651
04/30/1990 $10,206 $9,802 $11,813
05/31/1990 $10,957 $10,758 $11,376
06/30/1990 $10,310 $10,686 $9,429
07/31/1990 $11,033 $10,652 $9,872
08/31/1990 $10,712 $9,689 $10,347
09/30/1990 $10,391 $9,217 $10,704
10/31/1990 $9,387 $9,177 $9,152
11/30/1990 $9,114 $9,770 $8,544
12/31/1990 $9,607 $10,043 $8,245
01/31/1991 $8,734 $10,481 $7,264
02/28/1991 $9,665 $11,230 $7,344
03/31/1991 $9,482 $11,502 $7,381
04/30/1991 $9,540 $11,529 $7,579
05/31/1991 $9,897 $12,026 $9,440
06/30/1991 $10,361 $11,476 $11,035
07/31/1991 $10,603 $12,010 $9,920
08/31/1991 $9,577 $12,295 $7,973
09/30/1991 $9,844 $12,090 $8,299
10/31/1991 $10,503 $12,252 $8,768
11/30/1991 $10,753 $11,758 $9,141
12/31/1991 $10,173 $13,103 $7,472
01/31/1992 $10,216 $12,859 $7,696
02/29/1992 $9,850 $13,025 $6,944
03/31/1992 $9,578 $12,771 $6,448
04/30/1992 $9,383 $13,147 $5,755
05/31/1992 $9,961 $13,211 $5,776
06/30/1992 $9,990 $13,014 $4,912
07/31/1992 $9,887 $13,547 $4,848
08/31/1992 $9,423 $13,269 $4,235
09/30/1992 $9,113 $13,424 $3,957
10/31/1992 $8,374 $13,470 $3,904
11/30/1992 $7,832 $13,928 $3,755
12/31/1992 $8,104 $14,099 $3,408
01/31/1993 $8,139 $14,217 $3,984
02/28/1993 $8,791 $14,411 $6,271
03/31/1993 $9,800 $14,715 $6,782
04/30/1993 $10,965 $14,359 $7,981
05/31/1993 $12,330 $14,742 $9,825
06/30/1993 $12,473 $14,785 $10,155
07/31/1993 $13,710 $14,726 $10,797
08/31/1993 $12,315 $15,284 $10,028
09/30/1993 $11,228 $15,166 $8,946
10/31/1993 $12,552 $15,480 $10,523
11/30/1993 $12,324 $15,333 $10,291
12/31/1993 $14,078 $15,519 $11,869
01/31/1994 $13,831 $16,046 $11,544
02/28/1994 $13,194 $15,611 $10,790
03/31/1994 $13,336 $14,931 $10,856
04/30/1994 $12,743 $15,122 $10,114
05/31/1994 $13,017 $15,370 $10,424
06/30/1994 $12,898 $14,993 $10,186
07/31/1994 $13,227 $15,485 $10,461
08/31/1994 $13,903 $16,120 $11,106
09/30/1994 $15,032 $15,727 $12,396
10/31/1994 $14,312 $16,080 $11,498
11/30/1994 $12,863 $15,495 $10,077
12/31/1994 $13,412 $15,724 $10,538
01/31/1995 $11,411 $16,132 $8,736
02/28/1995 $12,054 $16,761 $9,229
03/31/1995 $13,243 $17,255 $10,292
04/30/1995 $13,350 $17,763 $10,290
05/31/1995 $13,180 $18,473 $10,139
06/30/1995 $13,271 $18,902 $10,280
07/31/1995 $13,642 $19,529 $10,400
08/31/1995 $13,660 $19,578 $10,520
09/30/1995 $13,723 $20,404 $10,591
10/31/1995 $12,194 $20,331 $9,189
11/30/1995 $13,090 $21,223 $10,066
12/31/1995 $13,241 $21,633 $10,205
01/31/1996 $15,352 $22,368 $12,297
02/29/1996 $15,389 $22,576 $12,481
03/31/1996 $15,436 $22,793 $12,448
04/30/1996 $15,625 $23,128 $12,409
05/31/1996 $16,219 $23,725 $12,677
06/30/1996 $14,179 $23,815 $10,756
07/31/1996 $13,867 $22,763 $10,644
08/31/1996 $14,416 $23,243 $10,834
09/30/1996 $13,554 $24,551 $9,876
10/31/1996 $13,592 $25,229 $10,015
11/30/1996 $13,488 $27,136 $10,001
12/31/1996 $13,379 $26,599 $9,726
01/31/1997 $12,784 $28,261 $9,058
02/28/1997 $14,326 $28,482 $10,173
03/31/1997 $12,754 $27,311 $8,730
04/30/1997 $11,948 $28,942 $7,833
05/31/1997 $12,563 $30,704 $8,373
06/30/1997 $11,788 $32,080 $7,428
07/31/1997 $11,585 $34,633 $7,542
08/31/1997 $11,423 $32,694 $7,530
09/30/1997 $11,939 $34,486 $8,134
10/31/1997 $10,056 $33,334 $6,622
11/30/1997 $8,395 $34,877 $5,214
12/31/1997 $8,602 $35,477 $5,644
01/31/1998 $9,080 $35,871 $5,962
02/28/1998 $9,040 $38,457 $5,744
03/31/1998 $9,579 $40,426 $6,107
04/30/1998 $10,241 $40,834 $6,925
05/31/1998 $8,826 $40,132 $5,798
06/30/1998 $8,158 $41,761 $5,301
07/31/1998 $7,666 $41,315 $4,803
08/31/1998 $6,129 $35,340 $3,742
09/30/1998 $8,568 $37,606 $5,872
10/31/1998 $8,588 $40,663 $5,937
11/30/1998 $8,424 $43,127 $5,627
12/31/1998 $7,951 $45,611 $4,984
01/31/1999 $7,931 $47,518 $4,971
02/28/1999 $7,766 $46,040 $4,648
03/31/1999 $7,910 $47,882 $4,635
04/30/1999 $9,373 $49,735 $5,429
05/31/1999 $8,178 $48,561 $4,418
06/30/1999 $8,816 $51,256 $4,720
07/31/1999 $8,549 $49,657 $4,505
Past performance is not predictive of future results.
CLASS C
Growth of $10,000 Investment
(5/1/95-7/31/99)
The following line graph compares the performance of Franklin Gold Fund's Class
C shares to that of the Standard and Poor's 500 Composite Index and Financial
Times Gold Index based on a $10,000 investment from 8/1/95 to 7/31/99.
DATE FRANKLIN GOLD S&P 500 FINANCIAL TIMES
FUND - CLASS C GOLD INDEX
05/01/1995 $9,901 $10,000 $10,000
05/31/1995 $9,717 $10,400 $9,853
06/30/1995 $9,777 $10,641 $9,990
07/31/1995 $10,044 $10,995 $10,107
08/31/1995 $10,051 $11,022 $10,224
09/30/1995 $10,091 $11,487 $10,292
10/31/1995 $8,963 $11,446 $8,930
11/30/1995 $9,617 $11,948 $9,782
12/31/1995 $9,715 $12,179 $9,917
01/31/1996 $11,253 $12,593 $11,951
02/29/1996 $11,280 $12,710 $12,129
03/31/1996 $11,301 $12,832 $12,097
04/30/1996 $11,433 $13,021 $12,059
05/31/1996 $11,855 $13,357 $12,320
06/30/1996 $10,362 $13,407 $10,453
07/31/1996 $10,126 $12,815 $10,344
08/31/1996 $10,521 $13,085 $10,529
09/30/1996 $9,890 $13,822 $9,598
10/31/1996 $9,911 $14,203 $9,732
11/30/1996 $9,828 $15,277 $9,719
12/31/1996 $9,743 $14,975 $9,451
01/31/1997 $9,307 $15,911 $8,802
02/28/1997 $10,415 $16,035 $9,887
03/31/1997 $9,263 $15,376 $8,484
04/30/1997 $8,673 $16,294 $7,612
05/31/1997 $9,116 $17,286 $8,137
06/30/1997 $8,540 $18,060 $7,219
07/31/1997 $8,392 $19,498 $7,330
08/31/1997 $8,267 $18,406 $7,318
09/30/1997 $8,643 $19,415 $7,904
10/31/1997 $7,256 $18,766 $6,435
11/30/1997 $6,067 $19,635 $5,067
12/31/1997 $6,207 $19,973 $5,485
01/31/1998 $6,554 $20,195 $5,794
02/28/1998 $6,525 $21,651 $5,583
03/31/1998 $6,916 $22,759 $5,935
04/30/1998 $7,396 $22,989 $6,730
05/31/1998 $6,377 $22,594 $5,635
06/30/1998 $5,888 $23,511 $5,151
07/31/1998 $5,510 $23,259 $4,668
08/31/1998 $4,405 $19,896 $3,636
09/30/1998 $6,155 $21,171 $5,706
10/31/1998 $6,170 $22,893 $5,769
11/30/1998 $6,044 $24,280 $5,469
12/31/1998 $5,707 $25,678 $4,843
01/31/1999 $5,685 $26,752 $4,831
02/28/1999 $5,566 $25,920 $4,517
03/31/1999 $5,670 $26,956 $4,504
04/30/1999 $6,716 $28,000 $5,276
05/31/1999 $5,855 $27,339 $4,293
06/30/1999 $6,308 $28,856 $4,587
07/31/1999 $6,108 $27,956 $4,378
ADVISOR CLASS**
Growth of $10,000 Investment
(8/1/89-7/31/99)
<TABLE>
<CAPTION>
DATE FRANKLIN GOLD FUND - S&P 500 FINANCIAL TIMES
ADVISOR CLASS GOLD INDEX
<S> <C> <C> <C>
08/01/1989 $10,000 $10,000 $10,000
08/31/1989 $10,263 $10,196 $10,592
09/30/1989 $10,638 $10,154 $11,307
10/31/1989 $10,756 $9,919 $11,707
11/30/1989 $12,227 $10,121 $14,960
12/31/1989 $12,659 $10,364 $16,485
01/31/1990 $13,367 $9,668 $19,093
02/28/1990 $12,178 $9,793 $15,344
03/31/1990 $11,809 $10,053 $14,651
04/30/1990 $10,827 $9,802 $11,813
05/31/1990 $11,623 $10,758 $11,376
06/30/1990 $10,937 $10,686 $9,429
07/31/1990 $11,704 $10,652 $9,872
08/31/1990 $11,363 $9,689 $10,347
09/30/1990 $11,022 $9,217 $10,704
10/31/1990 $9,958 $9,177 $9,152
11/30/1990 $9,668 $9,770 $8,544
12/31/1990 $10,191 $10,043 $8,245
01/31/1991 $9,265 $10,481 $7,264
02/28/1991 $10,252 $11,230 $7,344
03/31/1991 $10,058 $11,502 $7,381
04/30/1991 $10,120 $11,529 $7,579
05/31/1991 $10,499 $12,026 $9,440
06/30/1991 $10,991 $11,476 $11,035
07/31/1991 $11,248 $12,010 $9,920
08/31/1991 $10,159 $12,295 $7,973
09/30/1991 $10,442 $12,090 $8,299
10/31/1991 $11,141 $12,252 $8,768
11/30/1991 $11,407 $11,758 $9,141
12/31/1991 $10,792 $13,103 $7,472
01/31/1992 $10,837 $12,859 $7,696
02/29/1992 $10,449 $13,025 $6,944
03/31/1992 $10,161 $12,771 $6,448
04/30/1992 $9,953 $13,147 $5,755
05/31/1992 $10,566 $13,211 $5,776
06/30/1992 $10,597 $13,014 $4,912
07/31/1992 $10,488 $13,547 $4,848
08/31/1992 $9,996 $13,269 $4,235
09/30/1992 $9,667 $13,424 $3,957
10/31/1992 $8,883 $13,470 $3,904
11/30/1992 $8,308 $13,928 $3,755
12/31/1992 $8,597 $14,099 $3,408
01/31/1993 $8,634 $14,217 $3,984
02/28/1993 $9,325 $14,411 $6,271
03/31/1993 $10,395 $14,715 $6,782
04/30/1993 $11,631 $14,359 $7,981
05/31/1993 $13,080 $14,742 $9,825
06/30/1993 $13,232 $14,785 $10,155
07/31/1993 $14,544 $14,726 $10,797
08/31/1993 $13,064 $15,284 $10,028
09/30/1993 $11,910 $15,166 $8,946
10/31/1993 $13,315 $15,480 $10,523
11/30/1993 $13,074 $15,333 $10,291
12/31/1993 $14,934 $15,519 $11,869
01/31/1994 $14,672 $16,046 $11,544
02/28/1994 $13,996 $15,611 $10,790
03/31/1994 $14,146 $14,931 $10,856
04/30/1994 $13,518 $15,122 $10,114
05/31/1994 $13,809 $15,370 $10,424
06/30/1994 $13,683 $14,993 $10,186
07/31/1994 $14,032 $15,485 $10,461
08/31/1994 $14,748 $16,120 $11,106
09/30/1994 $15,946 $15,727 $12,396
10/31/1994 $15,182 $16,080 $11,498
11/30/1994 $13,645 $15,495 $10,077
12/31/1994 $14,228 $15,724 $10,538
01/31/1995 $12,105 $16,132 $8,736
02/28/1995 $12,787 $16,761 $9,229
03/31/1995 $14,048 $17,255 $10,292
04/30/1995 $14,162 $17,763 $10,290
05/31/1995 $13,982 $18,473 $10,139
06/30/1995 $14,078 $18,902 $10,280
07/31/1995 $14,472 $19,529 $10,400
08/31/1995 $14,491 $19,578 $10,520
09/30/1995 $14,558 $20,404 $10,591
10/31/1995 $12,935 $20,331 $9,189
11/30/1995 $13,886 $21,223 $10,066
12/31/1995 $14,046 $21,633 $10,205
01/31/1996 $16,285 $22,368 $12,297
02/29/1996 $16,325 $22,576 $12,481
03/31/1996 $16,375 $22,793 $12,448
04/30/1996 $16,575 $23,128 $12,409
05/31/1996 $17,205 $23,725 $12,677
06/30/1996 $15,041 $23,815 $10,756
07/31/1996 $14,710 $22,763 $10,644
08/31/1996 $15,292 $23,243 $10,834
09/30/1996 $14,378 $24,551 $9,876
10/31/1996 $14,419 $25,229 $10,015
11/30/1996 $14,308 $27,136 $10,001
12/31/1996 $14,192 $26,599 $9,726
01/31/1997 $13,572 $28,261 $9,058
02/28/1997 $15,207 $28,482 $10,173
03/31/1997 $13,540 $27,311 $8,730
04/30/1997 $12,685 $28,942 $7,833
05/31/1997 $13,348 $30,704 $8,373
06/30/1997 $12,510 $32,080 $7,428
07/31/1997 $12,306 $34,633 $7,542
08/31/1997 $12,133 $32,694 $7,530
09/30/1997 $12,693 $34,486 $8,134
10/31/1997 $10,669 $33,334 $6,622
11/30/1997 $8,936 $34,877 $5,214
12/31/1997 $9,148 $35,477 $5,644
01/31/1998 $9,669 $35,871 $5,962
02/28/1998 $9,636 $38,457 $5,744
03/31/1998 $10,210 $40,426 $6,107
04/30/1998 $10,926 $40,834 $6,925
05/31/1998 $9,430 $40,132 $5,798
06/30/1998 $8,715 $41,761 $5,301
07/31/1998 $8,311 $41,315 $4,803
08/31/1998 $6,651 $35,340 $3,742
09/30/1998 $9,305 $37,606 $5,872
10/31/1998 $9,338 $40,663 $5,937
11/30/1998 $9,152 $43,127 $5,627
12/31/1998 $8,652 $45,611 $4,984
01/31/1999 $8,630 $47,518 $4,971
02/28/1999 $8,454 $46,040 $4,648
03/31/1999 $8,619 $47,882 $4,635
04/30/1999 $10,213 $49,735 $5,429
05/31/1999 $8,916 $48,561 $4,418
06/30/1999 $9,619 $51,256 $4,720
07/31/1999 $9,447 $49,657 $4,505
</TABLE>
*Source: Standard and Poor's(R) Micropal. We are adding the Financial Times Gold
Index as a narrow benchmark because we believe its composition provides a more
appropriate comparison to the fund's current and past portfolio. It is intended
to illustrate the trend or "mood" of this market sector, not measure long-term
market levels or total return performance. The Financial Times Gold Index, a
price index, is compiled by the Financial Times, Goldman Sachs & Co., and Wood
Mackenzie & Co., Ltd. in conjunction with the Institute of Actuaries and the
Faculty of Actuaries.
**On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the 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
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable to that class.
Past performance is not predictive of future results.
AVERAGE ANNUAL TOTAL RETURN
7/31/99
CLASS C
- ----------------------------------
1-Year +8.68%
3-Year -15.80%
Since Inception (5/01/95) -10.95%
AVERAGE ANNUAL TOTAL RETURN
7/31/99
ADVISOR CLASS**
- ----------------------------------
1-Year +12.30%
5-Year -7.61%
10-Year -0.57%
Since Inception (5/19/69) +3.21%
Past performance is not predictive of future results.
FRANKLIN GOLD FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------
1999(2) 1998 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 7.48 $ 11.44 $ 14.65 $ 15.07 $ 14.88
--------------------------------------------------
Income from investment operations:
Net investment income ...................... .07 .10 .07 .21 .18
Net realized and unrealized gains (losses) . .79 (3.96) (2.37) .01 .27
--------------------------------------------------
Total from investment operations ............ .86 (3.86) (2.30) .22 .45
--------------------------------------------------
Less distributions from:
Net investment income ...................... (.04) (.10) (.09) (.13) (.20)
In excess of net investment income ......... -- -- -- -- (.06)
Net realized gains ......................... -- -- (.82) (.51) --
--------------------------------------------------
Total distributions ......................... (.04) (.10) (.91) (.64) (.26)
--------------------------------------------------
Net asset value, end of year ................ $ 8.30 $ 7.48 $ 11.44 $ 14.65 $ 15.07
==================================================
Total return* ............................... 11.51% (33.83)% (16.45)% 1.65% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's).............. $205,889 $189,591 $291,544 $364,032 $391,966
Ratios to average net assets:
Expenses ................................... 1.31% 1.19% 1.05% .95% .95%
Net investment income ...................... .85% 1.05% .55% .99% 1.20%
Portfolio turnover rate ..................... 4.29% 6.09% 16.05% 28.74% 6.36%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(2)Based on average shares outstanding.
FRANKLIN GOLD FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
--------------------
PERIOD ENDED
JULY 31, 1999(1),(2)
--------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................................. $ 7.72
--------
Income from investment operations:
Net investment loss ................................................. (.04)
Net realized and unrealized gains ................................... .58
--------
Total from investment operations ..................................... .54
--------
Net asset value, end of period ....................................... $ 8.26
========
Total return* ........................................................ 6.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $1,217
Ratios to average net assets:
Expenses ............................................................ 2.10%**
Net investment income ............................................... (.84)%**
Portfolio turnover rate .............................................. 4.29%
</TABLE>
*Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
**Annualized
(1)For the period January 1, 1999 (effective date) to July 31, 1999.
(2)Based on average shares outstanding.
FRANKLIN GOLD FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------------------
1999(2) 1998 1997 1996 1995(1),(2)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 7.43 $ 11.37 $ 14.61 $ 15.05 $ 15.02
----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ............... .01 .03 (.02) .12 .12
Net realized and unrealized gains (losses) . .80 (3.93) (2.38) (.02) .09
----------------------------------------------------------------------
Total from investment operations ............ .81 (3.90) (2.40) .10 .21
----------------------------------------------------------------------
Less distributions from:
Net investment income ...................... (.01) (.04) (.02) (.03) (.12)
In excess of net investment income ......... -- -- -- -- (.06)
Net realized gains ......................... -- -- (.82) (.51) --
----------------------------------------------------------------------
Total distributions ......................... (.01) (.04) (.84) (.54) (.18)
----------------------------------------------------------------------
Net asset value, end of year ................ $ 8.23 $ 7.43 $ 11.37 $ 14.61 $ 15.05
======================================================================
Total return* ............................... 10.85% (34.35)% (17.18)% .81% 1.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 23,473 $ 20,353 $ 20,783 $ 12,977 $ 3,104
Ratios to average net assets:
Expenses ................................... 2.07% 1.96% 1.83% 1.74% 1.73%**
Net investment income (loss) ............... .08% .25% (.16)% .16% .33%**
Portfolio turnover rate ..................... 4.29% 6.09% 16.05% 28.74% 6.36%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
**Annualized
(1)For the period May 1,1995 (effective date) to July 31, 1995.
(2)Based on average shares outstanding.
FRANKLIN GOLD FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------------------------
YEAR ENDED JULY 31,
----------------------------------------
1999(2) 1998 1997(1)
----------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 7.61 $ 11.43 $ 13.12
----------------------------------------
Income from investment operations:
Net investment income ...................... .08 .14 .07
Net realized and unrealized gains (losses) . .85 (3.84) (1.67)
----------------------------------------
Total from investment operations ............ .93 (3.70) (1.60)
Less distributions from net investment income (.05) (.12) (.09)
----------------------------------------
Net asset value, end of year ................ $ 8.49 $ 7.61 $ 11.43
========================================
Total return* ............................... 12.30% (32.46)% (12.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 3,204 $ 2,207 $ 3,211
Ratios to average net assets:
Expenses ................................... 1.08% .96% .83%**
Net investment income ...................... .98% 1.30% .80%**
Portfolio turnover rate ..................... 4.29% 6.09% 16.05%
</TABLE>
*Total return is not annualized for periods less than one year.
**Annualized
(1)For the period January 2, 1997 (effective date) to July 31, 1997.
(2)Based on average shares outstanding.
See notes to financial statements.
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
----------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 93.7%
GOLD & DIVERSIFIED RESOURCES 8.8%
Freeport-McMoRan Copper & Gold Inc., A United States 308,011 $ 4,889,675
Orogen Minerals Ltd. .................. Australia 54,000 684,083
Rio Tinto PLC ......................... United Kingdom 627,401 11,927,022
Teck Corp., B ......................... Canada 382,100 3,017,182
-----------
20,517,962
-----------
LONG LIFE GOLD MINES 41.4%
AngloGold Ltd. ........................ South Africa 91,265 3,891,367
AngloGold Ltd., ADR ................... South Africa 351,822 7,432,240
Ashanti Goldfields Co. Ltd., GDR ...... Ghana 1,133,050 7,152,378
Barrick Gold Corp. .................... Canada 1,282,249 23,801,747
Compania de Minas Buenaventura SA, ADR Peru 426,993 6,725,140
Compania de Minas Buenaventura SA, B .. Peru 100,593 754,297
Gold Fields Ltd. ...................... South Africa 775,000 2,244,463
Gold Fields Ltd., ADR ................. South Africa 639,528 1,918,584
Harmony Gold Mining Co. Ltd. .......... South Africa 473,000 1,891,693
Homestake Mining Co. .................. United States 1,074,194 8,593,552
(a)Lihir Gold Ltd. ..................... Australia 1,049,600 822,468
Newmont Mining Corp. .................. United States 1,087,745 20,123,283
Placer Dome Inc. ...................... Canada 938,820 9,564,229
(a)TVX Gold Inc. ....................... Canada 997,000 777,297
(a)Western Areas Ltd. .................. South Africa 357,979 1,045,449
(a)Western Areas Ltd., ADR ............. South Africa 23,523 68,697
-----------
96,806,884
-----------
MEDIUM LIFE GOLD MINES 7.2%
Acacia Resources Ltd. ................. Australia 4,122,000 4,898,844
Battle Mountain Canada Inc. ........... Canada 583,600 1,186,100
(a)Newcrest Mining Ltd. ................ Australia 865,050 2,069,152
(a)Niugini Mining Ltd. ................. Australia 133,750 143,236
(a)Niugini Mining Ltd., ADR ............ Australia 610,000 653,249
Normandy Mining Ltd. .................. Australia 5,352,451 3,879,626
Sons of Gwalia Ltd. ................... Australia 1,575,500 4,115,216
-----------
16,945,423
-----------
MINING FINANCE COMPANIES 15.5%
Anglo American PLC .................... South Africa 65,000 3,331,250
De Beers Consolidated Mines, AG, ADR .. South Africa 736,000 18,216,000
Euro-Nevada Mining Corp. .............. Canada 658,200 7,258,753
Franco-Nevada Mining Corp. Ltd. ....... Canada 526,800 7,424,415
-----------
36,230,418
-----------
PLATINUM 20.8%
Anglo American Platinum Corp. Ltd., ADR South Africa 840,138 19,928,325
Impala Platinum Holdings Ltd. ......... South Africa 240,000 7,639,815
</TABLE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
PLATINUM (CONT.)
Impala Platinum Holdings Ltd., ADR ..... South Africa 267,800 $8,524,770
(a)Stillwater Mining Co. ............... United States 550,050 12,444,879
-----------
48,537,789
-----------
TOTAL COMMON STOCKS (COST $259,212,014) 219,038,476
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
(b)REPURCHASE AGREEMENT 9.6%
Joint Repurchase Agreement, 5.044%, 8/02/99
Maturity Value $22,493,677) (COST $22,484,226) $ 22,484,226 22,484,226
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
Credit Suisse First Boston Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
NationsBanc Montgomery Securities LLC
Paine Webber Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes
--------------
TOTAL INVESTMENTS (COST $281,696,240) 103.3% 241,522,702
OTHER ASSETS, LESS LIABILITIES (3.3)% ...... (7,739,503)
--------------
NET ASSETS 100.0% .......................... $ 233,783,199
--------------
</TABLE>
(a)Non-income producing
(b)Investment is through participation in a joint account with other funds
managed by the investment advisor. At July 31, 1999, all repurchase
agreements had been entered into on July 30, 1999.
See notes to financial statements.
FRANKLIN GOLD FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in securities, at value (cost $281,696,240) ....................................... $ 241,522,702
Receivables:
Investment securities sold ..................................................................... 274,075
Capital shares sold ............................................................................ 864,411
Dividends ...................................................................................... 31,860
-------------
Total assets .................................................................................. 242,693,048
-------------
Liabilities:
Payables:
Capital shares redeemed ........................................................................ 8,384,227
Affiliates ..................................................................................... 384,811
Shareholders ................................................................................... 70,818
Other liabilities ............................................................................. 69,993
-------------
Total liabilities ............................................................................. 8,909,849
-------------
Net assets, at value ........................................................................... $233,783,199
=============
Net assets consist of:
Undistributed net investment income ........................................................... $ 754,124
Net unrealized depreciation ................................................................... (40,172,251)
Accumulated net realized loss ................................................................. (46,422,755)
Capital shares ................................................................................ 319,624,081
-------------
Net assets, at value ........................................................................... $ 233,783,199
=============
CLASS A:
Net asset value per share ($205,888,716 / 24,818,229 shares outstanding)* ..................... $ 8.30
=============
Maximum offering price per share ($8.30 / 94.25%) ............................................. $ 8.81
=============
CLASS B:
Net asset value and maximum offering price per share ($1,217,103 / 147,347 shares outstanding)* $ 8.26
=============
CLASS C:
Net asset value per share ($23,473,445 / 2,851,218 shares outstanding)* ....................... $ 8.23
=============
Maximum offering price per share ($8.23 / 99.00%) ............................................. $ 8.31
=============
ADVISOR CLASS:
Net asset value and maximum offering price per share ($3,203,935 / 377,397 shares outstanding) $ 8.49
=============
</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)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
Investment income:
(net of foreign taxes and fees of $246,445)
<S> <C>
Dividends ................................................................................ $ 3,895,981
Interest ................................................................................ 1,017,444
-------------
Total investment income ................................................................. 4,913,425
-------------
Expenses:
Management fees (Note 3).................................................................. 1,255,216
Distribution fees (Note 3)
Class A ................................................................................. 460,207
Class B ................................................................................. 2,992
Class C ................................................................................. 239,429
Transfer agent fees (Note 3)............................................................... 893,753
Custodian fees ............................................................................ 54,951
Reports to shareholders ................................................................... 123,996
Registration and filing fees .............................................................. 63,897
Professional fees ......................................................................... 41,414
Directors' fees and expenses .............................................................. 11,910
Other ..................................................................................... 21,285
-------------
Total expenses .......................................................................... 3,169,050
-------------
Net investment income ................................................................. 1,744,375
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................................. (13,409,131)
Foreign currency transactions ........................................................... 3,562
-------------
Net realized loss ....................................................................... (13,405,569)
Net unrealized appreciation on:
Investments .............................................................................. 37,356,543
Translation of assets and liabilities denominated in foreign currencies .................. 1,287
-------------
Net unrealized appreciation ............................................................. 37,357,830
-------------
Net realized and unrealized gain .......................................................... 23,952,261
-------------
Net increase in net assets resulting from operations ...................................... $ 25,696,636
=============
</TABLE>
See notes to financial statements.
FRANKLIN GOLD FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
Increase (decrease) in net assets: 1999 1998
------------------------------
Operations:
<S> <C> <C>
Net investment income .................................................. $ 1,744,375 $ 2,588,383
Net realized loss from investments and foreign currency transactions .... (13,405,569) (24,125,933)
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies 37,357,830 (83,348,247)
------------------------------
Net increase (decrease) in net assets resulting from operations ...... 25,696,636 (104,885,797)
Distributions to shareholders from:
Net investment income:
Class A ................................................................. (994,385) (2,450,206)
Class C ................................................................. (19,664) (100,018)
Advisor Class ........................................................... (17,446) (47,704)
-------------------------------
Total distributions to shareholders ....................................... (1,031,495) (2,597,928)
Capital share transactions: (Note 2)
Class A ................................................................. (5,492,992) (5,299,204)
Class B ................................................................. 1,189,301 --
Class C ................................................................. 795,260 8,809,758
Advisor Class ........................................................... 475,000 585,881
------------------------------
Total capital share transactions .......................................... (3,033,431) 4,096,435
Net increase (decrease) in net assets .................................... 21,631,710 (103,387,290)
Net assets
Beginning of year ........................................................ 212,151,489 315,538,779
------------------------------
End of year .............................................................. $ 233,783,199 $ 212,151,489
==============================
Undistributed net investment income included in net assets:
End of year .............................................................. $ 754,124 $ 37,682
==============================
</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. 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 substantially all of its taxable income.
d. 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.
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. Effective January 1, 1999, Class I and Class II were renamed Class A and
Class C, respectively, and the fund began offering a new class of shares, Class
B. Each class of shares differs by its initial sales load, distribution fees,
voting rights on matters affecting a single class and its exchange privilege.
At July 31, 1999, there were 100 million shares authorized ($.10 par value), of
which 45 million shares were designated as Class A, 20 million as Class B, 25
million as Class C, and 10 million as Advisor Class. Transactions in the Fund's
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------
1999 1998
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
CLASS A SHARES
<S> <C> <C> <C> <C>
Shares sold .................................... 71,612,581 $ 581,834,944 57,684,355 $ 528,508,829
Shares issued in reinvestment of distributions . 103,621 845,529 249,615 2,059,834
Shares redeemed ................................ (72,253,290) (588,173,465) (58,064,574) (535,867,867)
------------------------------------------------------------
Net decrease .................................. (537,088) $ (5,492,992) (130,604) $ (5,299,204)
============================================================
CLASS B SHARES*
Shares sold ................................... 172,893 $ 1,399,669
Shares redeemed ............................... (25,546) . (210,368)
---------------------------
Net increase ................................. 147,347 $ 1,189,301
============================
CLASS C SHARES
Shares sold .................................. 2,001,528 $ 15,981,839 1,899,675 $ 17,713,130
Shares issued in reinvestment of distributions 2,095 17,030 10,632 88,159
Shares redeemed .............................. (1,892,631) (15,203,609) (997,164) (8,991,531)
------------------------------------------------------------
Net increase ................................. 110,992 $ 795,260 913,143 $ 8,809,758
============================================================
ADVISOR CLASS SHARES
Shares sold .................................. 1,513,061 $ 2,233,785 3,101,828 $ 29,749,285
Shares issued in reinvestment of distributions 1,703 14,155 3,197 26,417
Shares redeemed .............................. (1,427,475) (11,772,940) (3,095,800) (29,189,821)
------------------------------------------------------------
Net increase ................................. 87,289 $ 475,000 9,225 $ 585,881
============================================================
</TABLE>
*Effective date of Class B shares was January 1, 1999.
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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%, 1.00%, and 1.00% per year of the
average daily net assets of Class A, Class B, and Class C, 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 $108,240 and $39,241,
respectively.
The Fund paid transfer agent fees of $893,753, of which $806,353 was paid to
Investor Services.
4. INCOME TAXES
At July 31, 1999, the Fund had tax basis capital losses of $43,942,389, 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
2007 ............................. 28,763,977
-----------
$43,942,389
===========
FRANKLIN GOLD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (cont.)
At July 31, 1999, the Fund has deferred capital losses and deferred currency
losses occurring subsequent to October 31, 1998 of $2,480,366 and $2,421,
respectively. For tax purposes, such losses will be reflected in the year ending
July 31, 2000.
At July 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $281,696,240 was as follows:
Unrealized appreciation ......... $ 54,864,444
Unrealized depreciation ......... (95,037,982)
--------------
Net unrealized depreciation ..... $ (40,173,538)
==============
Net investment income and net realized capital losses differ for financial
statement and tax purposes primarily due to differing treatment of foreign
currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 1999 aggregated $20,027,174 and $8,828,794,
respectively.
FRANKLIN GOLD FUND
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF FRANKLIN GOLD FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Gold Fund (the "Fund") at
July 31, 1999, 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
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
September 3, 1999
FRANKLIN GOLD FUND
TAX INFORMATION
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
20.52% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended July 31, 1999.
At July 31, 1999, 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 2000, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid to Class A, Class C and Advisor Class shareholders in
December 1998:
<TABLE>
<CAPTION>
CLASS A CLASS C 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 .......... $-0.000100 $0.000000 $-0.000100 $0.000000 $-0.000100 $0.000000
Canada ............. 0.000700 0.000300 0.000700 0.000000 0.000700 0.001100
South Africa ....... -0.000200 0.000100 -0.000200 0.000000 -0.000200 0.000400
--------------------------------------------------------------------------------------------
Total .............. $ 0.000400 $0.000400 $ 0.000400 $0.000000 $ 0.000400 $0.001500
============================================================================================
</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.
